As the Financial Conduct Authority (FCA) makes plans for a working group to discuss better ways of disclosing costs and charges to institutional investors, alternative asset managers – such as those focused on private debt – have been urged to make sure they are part of the conversation.
The working group idea arose from the FCA’s final report into the asset management industry which was published earlier this week. The 112-page report by the UK regulator was expected to focus solely on retail investment but unexpectedly brought alternative asset managers into its remit. It called for sweeping reforms to cut costs and improve returns across the asset management industry.
The main focus of the working group, which will be headed by an independent chair, will be to try to produce a standardised template for institutional investors that will bring greater transparency to costs and charges.
“My concern is that if alternative asset classes are not represented in the working group they could well find that the output of this working group is very inappropriate for the asset class. And it’s not impossible that rules, or guidance, based on it might follow later,” said Tamasin Little, a London-based partner and regulatory specialist at law firm Reed Smith.
Little referred to reporting and marketing changes required by the European Union’s MiFiD II regulation as an existing example of “regulation being written for other asset classes nevertheless applying to private equity, debt etc.”
One potentially sensitive area for alternative asset managers could be transaction fees for individually negotiated deals. The FCA report made clear that it is determined to push ahead with proposals for “all-in” fees, a single fee that will replace the current system under which investors are charged a range of fees.