The FCA is exploring the use of side pockets for funds, allowing for the disposal of Russian and Belarussian assets.
The UK's Financial Conduct Authority is exploring the use of side pockets for funds, allowing for the disposal of Russian and Belarussian assets.
The regulator is consulting on their "exceptional use" to overcome "significant practical" challenges posed by Russian and Belarussian assets that are hard to value or sell.
Side pockets could allow new investors to enter such funds without risk of Russian exposure, allowing pre-existing investors to redeem while Russian assets are kept separate.
Some suspended funds - like the £236.7m Liontrust Russia Fund - may be able to use side pockets as a way out of suspension.
The regulator is consulting on their use, as well as when they would be available from.
32 UK domiciled ESG funds have minor exposure to Russia
The FCA has also warned they would not be used to encourage speculative new investments at the expense of existing investors.
A statement from the FCA read: "The use of side pockets by the authorised fund manager would be optional, based on acting in the best interests of each fund it manages.
"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 consultation has already been welcomed by Chris Cummings, CEO of the IA.
Cummings said: "Side pockets potentially offer a solution for funds suspended due to the crisis in Ukraine.
"Ensuring they work appropriately and all investors are treated fairly will be paramount and we look forward to participating in this consultation."
