The COLL deferral power
COLL 6.2.21R is the only deferral mechanism the rulebook supplies. FUND contains no gating rule, so for an unauthorised AIF the power lives in the instrument constituting the fund and the offering documents, exercised within FUND 3.6.
Three limits sit inside that: both the instrument and the prospectus must provide for the power; it reaches only a fund dealing at least daily; and deferral runs to the next valuation point, so the queue moves in days. A FAIF deferral is subject to the limits on payments to unitholders in COLL 6.2.16R(5A), and a regulated money market fund must stay consistent with the Money Market Funds Regulation.
Ranking of deferred redemptions
That is first in, first out, imposed rather than chosen, so a prospectus under which carried-forward orders rejoin the pool and are scaled again conflicts with limb (b). COLL 6.2.22G states the purpose: deferral lets the manager protect continuing unitholders by matching the sale of scheme property to the level of redemptions, which should reduce dilution. For an unauthorised AIF nothing decides the ranking, so the offering documents have to.
The scaleback calculation
A fund operating a 10% cap that receives requests totalling 25% of net asset value scales back at 10 divided by 25: an investor redeeming £1,000,000 is met for £400,000 and carries £600,000 forward. Four choices behind that ratio have to be settled in the documents, because a challenge tests the calculation against the disclosed method.
- Whether the cap is measured against net asset value or net flow, which diverge whenever subscriptions are also arriving.
- Whether the cap applies fund-wide or to each investor's holding. A fund-level cap rations total outflow pro rata; an investor-level cap stops one large holder consuming the fund's liquidity but not a broad-based run.
- How partial units round, and in whose favour.
- Whether a carried-forward order can be withdrawn, and by when.
Deferral outside COLL
Without a COLL mechanism a scaleback rests on the documents and the record. FUND 3.2.2R(8) requires the redemption rights in normal and exceptional circumstances, and the existing redemption arrangements, to be described before investors invest, so a restriction never described is imposed on terms they did not accept. The decision then needs a date, a named person or committee, and a basis expressed as the interests of the body of investors rather than the commercial case for avoiding a forced sale.
Notice periods and the long-term asset fund
A notice period changes when the promise is made; a gate changes how much of a valid request is honoured on the date. A long-term asset fund combines both.
Ninety days of notice on a monthly cycle commits an investor to a price they will not see for at least three months and cannot withdraw from.