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OverviewSide pockets
Side pockets is regulation put in place by the FCA aimed at 'protecting investors in authorised funds following the Russian invasion of Ukraine'. This now means that fund managers can create side pockets and separate suspended assets from non-suspended assets, leaving the non-suspended assets in a fund open and available to be valued and traded as normal.
About side pockets
The creation of a side pocket allows fund managers to continue managing the fund in keeping with its existing investment objective and policy. Customers will benefit from the ongoing performance of the fund's assets that are not suspended, as normal, while still keeping an interest in the suspended assets through the creation of a new side pocket.
Side pockets therefore could allow*:
- new investors to enter the fund without sharing in the exposure to the affected investments
- existing investors to sell the units which relate to assets that are not affected investments
- some funds to end their current suspension of dealing (it is worth noting that the value of the fund, when it reopens, is likely to be less than when it was first suspended due to the assets being moved out of the reopened fund).
Frequently asked questions
When the suspended side pocket assets start to trade more normally, and a value begins to return, the fund manager will inform us of their intentions which will offer the best possible outcome for investors.
The separation of these assets will ensure customers don't lose the tax advantages of their ISA or SIPP, though they should remember that the amount of tax they save will depend on their personal circumstances, and tax rules may change.
As instructed by the fund manager, should the suspended assets start to trade more normally, and a value begin to return, the fund will manage the side pocket in a way which will offer the best possible outcome for investors. This could be a case of redeeming the side pocket assets or another solution. We won't know the process until the fund manager informs us of their intentions.
We will be notified by the fund manager as and when assets in the side pocket can start to be traded.
No, customers cannot remove these assets from their account as the side pocket is suspended from all trading.
This will depend on the fund availability on the platform the assets are moving to or from.
As and when fund managers notify Fidelity, will write to customers who have funds which are impacted by side pockets. This letter will be available to advisers in the client vault. Details of the funds with side pockets can be found here.
For more information, you can refer to the FCA paper here: PS22/8: Protecting investors in authorised funds following the Russian invasion of Ukraine (fca.org.uk).