Britain proposes ring-fencing fund assets hit by Ukraine war

LONDON, Apr 28 (Reuters): Fund managers could ring-fence assets that have become untradable due to sanctions over Russia's invasion of Ukraine in "side pockets", Britain's Financial Conduct Authority said on Thursday.

The FCA set out its proposals in a public consultation aimed at dealing with Russian and Belarusian assets held by asset managers in UK-authorised retail funds that have become illiquid or untradable due to sanctions imposed on the two countries by Western powers.

Side pockets, commonly used by hedge funds and institutional funds, could allow retail funds that had to suspend dealings to reopen to accept new investors and pay redemptions, the FCA said.

"We want these funds to operate fairly and efficiently in the interests of all investors. So we propose allowing authorised fund managers to use separate new classes of units (side pockets) to hold affected investments," the FCA said in a statement.

Jonathan Lipkin, director of policy at the Investment Association, which represents asset managers, said ensuring that side pockets work appropriately and that all investors are treated fairly will be paramount.