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'Side pockets' for funds with exposure to sanctioned and suspended Russian assets


An authorised fund manager must ensure that assets are valued fairly and accurately and that subscriptions and redemptions occur at a fair price.

And to assist them, the FCA is to consult on the use of 'side pockets' for retail funds with exposure to sanctioned and suspended Russian assets

The FCA has begun discussions with stakeholders about options to allow the UK authorised retail funds to make exceptional use of 'side pockets' given the significant practical challenges in disposing of Russian and Belarussian assets in the context of suspensions and extensive global sanctions.

Side pockets would potentially give authorised fund managers the option to separate Russian and Belarussian assets that are difficult to sell and/or hard to value from the fund's other core investments.

Side pockets could allow:

  • New investors to enter the fund without getting exposure to Russian assets
  • Existing investors to redeem the rest of their investment, while illiquid Russian assets remain in the separate side pocket (and in many cases marked to zero) while retaining rights to any eventual value
  • Some funds to end their current suspension of dealing

The FCA  will consult on proposals to ensure that

  • Any side pockets that are introduced, and the date on which the side pocket takes effect,
  • Treat existing, redeeming and subscribing investors fairly, and
  • Do not encourage speculative new investment at the expense of existing investors.

The use of side pockets by the authorised fund manager would be optional, based on acting in each fund's best interests.

The side pocket proposals would be limited in scope to illiquid assets as a result of the Russia/Ukraine war.

The precise scope would be determined as part of the consultation.


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