Our asset management & alternatives supervisory strategy – interim update

Dear CEO | Release Date: 1st March 2024

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has updated the supervisory strategy for the Asset Management and Alternatives sector, building on earlier communications from August 2022 and February 2023. This update highlights the evolving risk environment and upcoming areas of regulatory focus, acknowledging that adjustments may be needed due to unforeseen events.

In 2023, asset managers faced market challenges, leading to varied responses like cost-cutting and consolidation while exploring new opportunities. Despite some positive signs, the sector continues to operate in a volatile geopolitical and economic landscape, impacting business models and customer outcomes.

The FCA’s key areas of focus include:

Good Governance: Emphasising effective risk management and oversight during times of uncertainty to prevent adverse outcomes for investors and customers.
Assessments of Value and Consumer Duty: Continuing focus on Assessment of Value (AoV) and implementing the Consumer Duty, especially regarding product pricing and value.
Operational Resilience and Change Management: Assessing firms’ preparedness for policy changes, like Sustainability Disclosure Requirements (SDR) and operational resilience guidelines.
Valuation Practices for Private Assets: Reviewing valuation practices in private markets, ensuring robustness and reliability.
Market Integrity and Financial Crime Prevention: Strengthening market surveillance and ensuring compliance with financial crime regulations, including UK sanctions.
Supporting Innovation: Encouraging safe and effective implementation of technological innovations in the sector.

Firms are advised to assess these areas within their operations and take necessary actions to align with the FCA’s expectations. The letter calls for proactive engagement from firms’ Boards and Senior Managers to ensure compliance and mitigate risks, underlining the FCA’s commitment to sector integrity and consumer protection.