The Financial Conduct Authority wants retail property funds and other open-ended funds that hold mostly hard-to-sell assets to stop offering daily dealing. Under proposals published on 8 October 2026, investors would have to give at least 90 days’ notice to sell, and these funds could pay out no more than once a month. The FCA estimates 17 funds with about £7.22bn of assets would be caught.
The proposals are in consultation paper CP26/35. The consultation closes on 11 December 2026 and the FCA says it expects to publish final rules in the first half of 2027. Existing funds would then have two years to comply.
Which funds are in scope
The rules target non-UCITS retail schemes (NURS) 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, such as property and infrastructure. The FCA expects them to apply mainly to direct property funds and some funds of alternative investment funds. A fund that aims to hold at least 50% in such assets is caught; one that drifts above the line counts only after three continuous months in the last 12, so hybrid property funds that cross it briefly would not be.
Long-term asset funds already have a minimum 90-day notice period, and the new terms would match them.
The numbers behind the proposal
| Measure | FCA estimate |
|---|---|
| Funds in scope (including five feeder funds) | 17 |
| Funds in scope in 2020 | 31 |
| Aggregate net asset value, December 2025 | £7.22bn |
| Held by retail investors | About £3.07bn (43%) |
| Invested through financial advisers | At least £2bn |
| Funds already on a 90-day notice period | Three, with £0.87bn |
| Benefit to investors from less cash drag (10-year present value, central case) | £43.88m |
| Net present value of the package (central case) | £1.95m |
Source: FCA CP26/35, Annex 2 (cost benefit analysis). The FCA calls the quantified analysis “finely balanced” but judges the package net beneficial overall.
What would change for investors
- Notice and dealing: at most one dealing day a month for redemptions, with notice given at least 90 days before it. Managers could set longer terms, up to a maximum redemption period of 185 days.
- Price risk during the notice period: the price is set at the dealing day, not when you ask to sell. Promotions would have to explain that you will not get your money until the notice period ends and that you bear the market risk in the meantime.
- Suspensions: managers would have to accept redemption requests during a suspension unless they had reasonable grounds to refuse, and time spent suspended would count towards the notice period.
- Existing investors: funds would have to give at least one year’s notice of the change. It would be treated as a significant change, so no investor vote would be needed.
The FCA’s case rests partly on cash drag. It found daily-dealt illiquid funds holding cash materially above, and in some cases more than double, the average of around 6% in comparable funds with 90-day notice periods.
ISAs and platforms are the sticking points
A NURS with a notice period would be eligible for the Innovative Finance ISA, the FCA notes. It acknowledges industry pressure for these funds to stay eligible for stocks and shares ISAs, as LTAFs are, and says it will take ISA eligibility into account “when deciding if and when to make final rules”. Its cost benefit analysis assumes the funds stay eligible for stocks and shares ISAs in every scenario.
Platforms are the other hurdle: some have upgraded their systems for notice periods, but others “still have significant challenges”, the FCA says.
Timetable
- 8 October 2026: CP26/35 published.
- 11 December 2026: consultation closes.
- First half of 2027: final rules expected.
- Six months after the rules are made: rules apply to newly launched funds.
- Two years after the rules are made: existing funds must have the new redemption terms.
For professionals
The FCA estimates around 4,490 financial advisers may need to consider the proposals, and that four of the six retail-marketed funds in scope sit in model portfolios. Its first question asks whether two years is long enough. Michelle Beck, the FCA’s director of markets, said in the press release: “Funds should be clear about whether they offer quick access or are built for longer-term investments like property.”
Related: UK REITs, property investment in the UK and investing in private companies.
