FCA starts thinking about “side pockets” for Russian-exposed funds

FCA has started discussions in advance of a formal consultation on options that would allow UK authorised retail funds to make exceptional use of “side pockets” so they can separate Russian and Belarussian assets which are hard to sell or value from the other investments of the fund. Allowing this could

  • let new investors into a fund without exposure to Russian assets
  • allow existing investors to redeem the rest of the their investments and keep the rights to any eventual residual value of the Russian assets and
  • mean some funds can end their current suspension on dealing

Use of the side pockets would be optional, and FCA rules would specify that they could only be used for assets that are illiquid as a result of the invasion.

Emma Radmore