The FCA Proposes 90-Day Notice for UK Retail Funds Holding Illiquid Assets, With Comments Due 11 December: What Fund Managers Should Check

The Financial Conduct Authority opened consultation paper CP26/35, "Fair redemption terms for authorised funds investing in illiquid assets", on 8 October 2026, and responses are due by 11 December 2026. It proposes that a UK non-UCITS retail scheme (NURS) holding at least half of its assets in inherently illiquid assets would be limited to one dealing day a month, with at least 90 days' notice before it. Many private fund managers do not run a NURS, so the paper does not reach them directly. It can still reach a manager that runs, advises or distributes an authorised fund, or whose fund is held by one. This is a consultation, not a rule, and the FCA expects to publish final rules in the first half of 2027.

What the FCA proposes

A NURS would count as a fund investing in inherently illiquid assets, which the paper calls a FIIA, if it aims to hold at least 50% of scheme property in such assets, or has actually held at least 50% for three continuous months in the previous twelve. A FIIA would offer no more than one dealing day a month and require at least 90 days' notice before it. The redemption price would be set at the first valuation point after the notice period ends, with outer limits of 182 days for pricing and 185 days for payment. Other NURS could adopt limited redemption arrangements voluntarily, under new rules on disclosure, deferral, suspension and revocation. A fund could defer requests above 10% of its value, or another level set in its prospectus, to a valuation point at least a month later.

How units in other funds are treated

This is the part most relevant to managers of private and alternative funds. Units in a Long-Term Asset Fund (LTAF) would always be treated as inherently illiquid, whatever the LTAF's own portfolio, so they would count toward a NURS's 50% test. For Qualified Investor Schemes and unregulated collective investment schemes, the 50% test would apply to non-transferable asset types, and master-feeder structures would be captured where the second scheme meets the same tests. The paper says LTAF managers are affected only by targeted changes, mainly on revoking redemption requests: an investor could revoke a request during the notice period if the manager is satisfied this would not be unfair to other investors.

Timing and who is affected

New NURS launched after the rules are made would have six months before the rules apply. Existing funds that become FIIAs under the amended definition would have two years to implement the redemption arrangements. Existing funds newly caught by the definition would have one year for the FIIA governance and depositary requirements and two years for redemption terms. Existing NURS that already use limited redemption arrangements, and relevant UK AIFs, would see the rules take effect six months after they are made, with a further six months to comply. The FCA lists authorised fund managers, depositaries, fund distributors and platforms, financial advisers, SIPP operators and providers of unit-linked life products among those who should read it, and it asks whether two years is enough for implementation, which is an invitation to comment.

What to check before 11 December

This is our practical suggestion, not FCA guidance. First, list every authorised fund you manage, sub-advise or distribute and test it against the 50% rule, including the three-month buffer. Second, if any NURS holds units in a fund you manage, check how those units would be treated under the proposed look-through test and whether the host fund's redemption terms match your own liquidity profile. Third, if you run an LTAF, read the revocation changes against your offering documents. Fourth, ask your distributors and platforms how they plan to describe 90-day notice funds to advisers and savers. Fifth, decide whether your firm will respond, and who owns the response. The paper notes that daily-dealt illiquid NURS often hold far more cash than the roughly 6% average seen in comparable funds with 90-day notice periods. If your fund holds cash to meet redemptions, model what a longer notice period would do to that buffer.

Why investors will ask

The consultation lands as UK defined contribution schemes build their private markets holdings, as our note on the Mansion House Accord's £22.1 billion of private markets holdings shows, and allocators in the UK investor universe may ask how your fund terms would sit inside a wrapper with 90 days' notice. Keep a short answer in your due diligence pack, covering liquidity terms, valuation frequency and how a fund of funds holder would see them. The FCA is also rewriting the manager rules, as we covered in the UK AIFM overhaul that closed for comment on 22 October, so a manager with a UK footprint has two open files to track. For background on the wider framework, see our glossary entry on AIFMD.

What to watch next

Watch for the close of responses on 11 December, the FCA's final rules in the first half of 2027, and any change to the two-year implementation period. FundLinx members can see which UK allocators are active this quarter.

This article is general information and is not legal advice, so talk to your counsel about how the proposals affect your funds.

FundLinx Intelligence | FundLinx.ai