The Financial Conduct Authority has proposed a minimum 90-day notice period for withdrawals from certain retail investment funds holding property and other assets that cannot be sold quickly, seeking to address the mismatch between daily dealing and long-term investment.
The regulator opened consultation CP26/35 on 8 October. Its main proposal applies to non-UCITS retail schemes, known as NURS, with at least half their value invested in inherently illiquid assets such as real estate and infrastructure. It also considers related arrangements affecting investors who hold such products indirectly through savings, pension or insurance structures.
The proposal is not a blanket restriction on all investment funds, nor is it an enacted rule. The FCA is consulting on the design of the requirements, with responses invited until 11 December 2026 and final rules expected in the first half of 2027. Managers could apply notice periods longer than 90 days where the characteristics of their assets justified doing so.
At the centre of the consultation is a practical conflict in open-ended fund design. Investors may expect to redeem their units frequently, sometimes daily, while the fund owns assets that can take months to market, value and sell. Commercial property, for example, cannot normally be converted into cash at the speed of shares traded on a liquid exchange.
When withdrawals accelerate, fund managers can face difficult choices. They may hold substantial cash rather than invest it, sell assets in unfavourable conditions, or suspend dealing until they can establish an orderly process. None is ideal for investors. A large cash buffer can dilute exposure to the intended asset class, while forced sales can leave those remaining in the fund worse off.
A notice requirement would give managers greater visibility over anticipated withdrawals and more time to obtain funds without distressed disposals. The FCA hopes that clearer redemption terms will reduce the likelihood of liquidity-driven suspensions and allow investors to understand the access arrangements before committing money.
That creates a genuine trade-off. The policy would make it harder for affected investors to obtain cash at short notice, even when their circumstances change unexpectedly. Advisers and distributors would need to account for the restriction when assessing product suitability, rather than assuming that an open-ended structure necessarily offers immediate access.
Investment platforms and pension operators may also have to adjust administrative processes. Customer communications, redemption instructions, record-keeping and expected settlement dates must reflect the terms of the underlying fund. Where an investor holds exposure through another wrapper, those arrangements can become more complicated to explain.
The consultation follows years of regulatory attention to the liquidity of property funds. Episodes of heavy withdrawal demand have previously forced managers to suspend dealing, exposing the difficulty of promising frequent access to assets whose values and sale processes cannot be established instantly.
The FCA’s 2019 rules strengthened disclosure, oversight and contingency planning for funds investing in inherently illiquid assets. The latest consultation goes further by examining whether the contractual redemption period itself should reflect the typical time required to realise the underlying investments.
For fund managers, implementation would require consideration of portfolio composition and the relationship between dealing terms, liquidity management and investors’ expectations. It may also alter the appeal of products to customers who value flexibility, even if a longer notice period better matches the investments’ economic characteristics.
The FCA proposes giving existing affected funds two years to comply and requiring at least one year’s notice to investors. That transition is intended to give managers and distributors time to make changes without abruptly revising arrangements for existing holders.
Private markets and infrastructure investment remain potential sources of long-term returns and diversification, but their characteristics differ from securities that trade continuously. The consultation attempts to make that difference explicit in the terms investors accept. Whether the final rules strike the right balance between access and stability will depend on the responses received and the regulator’s subsequent decisions.
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