The CBI notice confirms that it will permit a UCITS to implement a side-pocket arrangement only for Russian, Belarusian and Ukrainian assets that are directly and/or indirectly impacted by the Russian invasion into Ukraine and/or impacted by sanctions that have been imposed as a result of Russia's invasion of Ukraine (Affected Securities). The Affected Securities have become illiquid or untradeable as a result of the Russian invasion of Ukraine and at this time, are difficult to value accurately.
The notice suggests that this may be implemented by way of establishment of a clone fund into which the liquid assets may be transferred. This approach would be seen as a "de-merger" of liquid assets to a new sub-fund, as distinct from a traditional side-pocket arrangement. In this publication we take a look at what's in the Notice of Intention.