FCA proposes new rules for long-term funds to boost clarity

The Financial Conduct Authority has proposed new rules for long-term investment funds that aim to give savers a clearer picture of how quickly they can get their money back. The regulator says the changes would make funds that hold assets such as property more upfront about risks and access from the start.

These are proposals rather than final rules. The FCA published them in consultation paper CP26/35, Fair redemption terms for authorised funds investing in illiquid assets, and is asking for feedback by 11 December 2026.

What the FCA’s long-term investment fund proposals would change

The centrepiece is a minimum 90-day notice period for investors who want to withdraw. The FCA said that, in return, investors would be “more certain that they will receive their money”. According to City AM, funds would also be able to process redemptions only once a month, and the combined notice and settlement period could not exceed 185 days.

The FCA said some of these funds currently let people take money out daily with no notice period. In periods of stress or volatility, it said, some may suspend all payments because they lack available cash, while others hold extra cash that leaves less invested in their intended assets. A notice period would give managers time to sell assets in an orderly way and make suspensions driven by a lack of cash less likely.

The detailed paper, as summarised by the law firm publication Global Regulation Tomorrow, goes further on disclosure. The existing risk warning would be replaced by a more prominent one explaining that investors will not receive proceeds until the notice period ends and will stay exposed to market movements in the meantime. Prospectuses would need to give more detail on notice periods, deferrals and suspensions.

The table below sets out how the proposals compare with the position the FCA describes today.

Who is affected by the UK investment fund transparency proposals

The consultation covers authorised fund managers of non-UCITS retail schemes, known as NURS. The mandatory terms would apply to NURS funds with at least 50% of their assets in what the FCA calls inherently illiquid assets, meaning assets that cannot normally be sold quickly without a significant loss in value. The FCA said these can include property and infrastructure.

According to Global Regulation Tomorrow, the FCA would widen this regime beyond real estate funds and remove an exemption for funds already running limited redemption arrangements. It also proposes minor changes to the long-term asset fund regime. Fund managers could set a notice period longer than the minimum where the fund’s assets or strategy require it.

Ordinary savers are affected mainly through funds held in pensions, investment accounts and insurance products. The FCA acknowledges that platforms, advisers, SIPP operators, model portfolio providers and insurers face practical difficulties with transfers, switching and rebalancing when a fund has a notice period. It argues these challenges should not stop action on the mismatch between how quickly investors can withdraw and how quickly assets can be sold.

What the FCA and others say

The FCA’s case rests on fairness between investors. It said rushed sales can lower prices, harm those who stay invested and put pressure on markets. Michelle Beck, director, markets, at the FCA, said:

“Funds should be clear about whether they offer quick access or are built for longer-term investments like property. Our rules will help firms make that clearer and give the market more confidence to invest.”

City AM points to the Woodford Equity Income Fund as the backdrop. The fund was suspended in June 2019, trapping around £3.7bn in hard-to-sell assets, and City AM reported that only 8% of its holdings could be sold within seven days at the time. The FCA said the proposals bring the UK into line with new international liquidity standards for open-ended funds.

This article does not include reaction from investor groups or the fund industry. The nearest thing to a counterpoint is the FCA’s own admission that notice periods create operational difficulties for intermediaries. Investors would also lose the ability to withdraw at short notice from funds that currently offer it, which is the trade the regulator is asking them to accept.

What to do now

Nothing changes for investors yet. The consultation closes on 11 December 2026, and it is not yet clear when final rules will be published. If the proposals go ahead, existing funds would have two years to comply, and investors would get at least one year’s notice before restrictions start.

Savers can check now whether any of their funds hold mainly property or infrastructure, and what the fund’s documents say about dealing and notice. As an illustration only, suppose £10,000 is held in such a fund and the fund’s value falls 5% during a 90-day notice period. The payout would be £9,500, because the FCA says investors stay exposed to market movements until the notice period ends. That is why it wants the warning to be more prominent.

Anyone who may need the money within a year, such as for a house deposit or an emergency, may want to consider whether a fund with a notice period suits their needs. Firms, advisers and platforms can respond to the consultation through the FCA before 11 December 2026.