At Investment Week‘s inaugural Private Markets Summit last week, Alpha FMC director Adam Croutear and Lionpoint Group senior manager Louis de Watteville said semi-liquid funds could intensify existing regulatory pressures on wealth management firms.
Under the Financial Conduct Authority’s Consumer Duty, wealth managers must demonstrate that the products and services they offer to retail customers provide fair value, and act to deliver good outcomes for clients.
Semi-liquid fund structures, such as the UK’s LTAF or the EU’s ELTIF 2.0, have broadened wealth manager access to private assets, which are typically less volatile than assets traded in public markets and can enhance portfolio diversification.
However, adoption of these structures carries significant risks if investors do not fully understand the products or these are not suitable investments, especially considering the inherently complex nature of private assets.
“At the moment, the focus on private markets is how do you access and how do you protect the client, but you are going to end up very quickly rolling that into Consumer Duty,” said Croutear.