The Financial Conduct Authority is consulting with asset managers about introducing “side pockets” to funds to separate Russian assets.
The “exceptional” measure is intended to limit the damage to investors from Russia’s invasion of Ukraine.
If the FCA goes ahead, the side pockets will make it possible for fund managers to separate out Russian and Belarusian assets they cannot sell or value from their other investments, allowing investors to enter funds without gaining exposure to Russia. Those currently locked in could exit their positions and frozen funds could resume dealing.
The FCA said the use of such facilities would be optional for fund managers. “The side pocket proposals would be limited in scope to assets that are illiquid as a result of the Russia/Ukraine war. The precise scope would be determined as part of the consultation,” the FCA said.
More than two dozen fund managers, including Schroders, Abrdn and Liontrust, have gated Russia and Eastern Europe-focused funds since the invasion of Ukraine began three weeks ago, trapping billions of dollars of investment.
Foreign investors held nearly $170bn in Russian assets at the end of 2021.
