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FCA to consult on use of 'side pockets' for retail funds with exposure to sanctioned and suspended Russian assets

16 March 2022

The FCA is inviting early discussions with stakeholders about options to allow UK authorised retail funds to make exceptional use of 'side pockets', in light of the significant challenges in disposing of Russian and Belarussian assets in the context of suspensions and extensive global sanctions.

The FCA is considering allowing authorised fund managers to use side pockets 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


Some of the salient elements of the proposed consultation on the use of side pockets would:

  • attempt to ensure that existing investors are treated fairly
  • be optional for authorised fund managers, based on acting in the best interests of each fund they manage
  • be limited in scope to assets that are illiquid as a result of the Russia/Ukraine war
  • not impact the authorised fund managers' duty to ensure that assets are valued fairly and accurately, and subscriptions and redemptions are priced fairly


The FCA is inviting stakeholders for early engagement on the proposed consultation.


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