FCA chief calls for “proportionate regulatory approach” to private markets
The chief executive of the UK’s Financial Conduct Authority (FCA) has called for an “enabling and proportionate regulatory approach” to private markets.
In a speech at the Investment Association’s annual dinner last night, Nikhil Rathi (pictured) said that private markets present “a real opportunity, particularly for UK investment managers”.
He cited statistics which suggest that global private capital assets under management (AUM) could be as high as $14tn (£10.8tn), with private assets outperforming public by two-and-a-half times in Europe.
While he highlighted potential risks presented by private assets, such as illiquidity for retail investors, he said “we must be open to technological and product innovation”.
He heralded the Long-Term Asset Fund (LTAF) structure, which democratises access to private assets, noting that the City watchdog has authorised nine umbrella LTAFs to date.
Rathi also talked about the potential of tokenisation to democratise the sector, whilst lowering operational costs and enhancing liquidity.
Read more: Fidelity approved to launch first LTAF
The FCA chief called for an “enabling and proportionate regulatory approach” to private markets to avoid missing out on higher returns for savers and pensioners, to support innovative start-ups who need capital to scale, and to encourage innovation and economic growth.
“The SEC recently updated their Form PF reporting for private fund advisers to provide greater transparency,” Rathi said.
“And participants at the FCA’s recent international capital markets conference supported regulators having a whole market view.
“Currently, estimates for even basic metrics like private market AUM vary significantly.
“Next year we will work with you on data collections in our AIFMD review to ensure we do not end up with something half-baked.
Read more: Revised AIFMD could harmonise European lending
“So that we understand the market, not restrict it.
“That is also the driving force for our work on governance, valuations and conflicts of interest in private markets.
“So that as access to these markets expands – potentially quickly – we can provide confidence in the underlying plumbing, and be open about where significant risks remain.”
