The Financial Conduct Authority (FCA) has released its 2025 Asset Management & Alternatives Supervisory Strategy is important, due to the sheer size of the market it regulates. This strategy sets priorities for firms managing £14.3 trillion in assets, commanding a significant share of global market in asset management and alternatives.
This year’s focus includes private market governance, resilience against disruptions, consumer protections, and financial crime prevention, with additional emphasis on sustainable finance disclosures. These measures aim to enhance market transparency and stability, ensuring UK asset managers maintain their global competitiveness.
Private markets have seen rapid growth, particularly in private credit and infrastructure, yet pose valuation risks due to their illiquidity and lack of price transparency. The FCA strategy is designed to is address conflicts of interest, valuation integrity, and investor fairness. The FCA also seeks to facilitate retail investment access to private assets, requiring firms to uphold Consumer Duty standards in product development and disclosures.
Financial market volatility remains a top concern, with recent crises highlighting risks from liquidity shocks, margin calls, and external disruptions. The FCA urges firms to enhance liquidity risk management and stress-testing frameworks, drawing insights from the Bank of England’s SWES report. Firms must improve operational resilience, ensuring robust risk mitigation strategies and oversight of third-party service providers.
Consumer protection remains central to the FCA’s agenda. The regulator is reviewing Model Portfolio Services (MPS) and unit-linked funds to ensure fair pricing and transparency. The Advice-Guidance Boundary Review (AGBR) will help retail investors receive better financial advice, while the Consumer Duty framework enforces stronger investor protections across asset management products.
The FCA is also intensifying scrutiny on financial crime and market abuse, particularly in private markets. With complex investment structures increasing money laundering and fraud risks, firms must strengthen Know Your Client (KYC) and Anti-Money Laundering (AML) controls. The FCA will review AML compliance in private funds and enforce market abuse regulations to uphold integrity.
Sustainable finance is another priority, with new Sustainability Disclosure Requirements (SDR) and Investment Labels aimed at preventing greenwashing. Firms marketing ESG-related products must ensure transparent disclosures, and the FCA will actively monitor compliance. These efforts seek to enhance trust and accountability in the sustainable investment sector.
Relevance for Emerging Markets
The FCA’s 2025 Supervisory Strategy has significant implications for emerging markets, which are increasingly integrated into global financial systems. As investors seek private credit, infrastructure, and ESG opportunities, developing economies must strengthen regulatory frameworks to mitigate valuation risks, enhance financial stability, and prevent financial crime.
One major concern for emerging markets is asset valuation transparency. Many economies rely on private equity and venture capital, but inconsistent valuation standards can undermine investor confidence. By aligning with FCA valuation governance best practices, emerging markets can attract institutional investment and improve market stability.
Financial market resilience is another priority. Capital flight, liquidity crises, and geopolitical risks pose systemic vulnerabilities. The FCA’s liquidity stress-testing approach offers a model for emerging markets to improve risk management and crisis response. Strengthening operational resilience and third-party oversight can also help mitigate financial shocks.
Financial crime remains a pressing challenge and FCA’s approach to market abuse monitoring and AML oversight provides a blueprint for safeguarding financial markets.
Sustainable finance is an area of growing importance for emerging markets. As climate-related investments rise, greenwashing risks are increasing. The FCA’s SDR and ESG labeling framework offers a guide for enhancing transparency and ensuring credibility in sustainable investment markets.
In conclusion, the FCA’s 2025 Supervisory Strategy serves as a guidepost for regulatory oversight. While focused on the UK, its principles in valuation integrity, financial resilience, consumer protection, and sustainable finance are highly relevant for emerging markets. By adopting these best practices, developing economies can enhance financial governance, attract global investment, and strengthen financial stability.
Reference
Financial Conduct Authority, Asset Management & Alternatives – Supervisory Strategy, February 26, 2025).
Leave a Reply