FCA not ruling out future fee rules for hedge funds and private equity

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FCA chief Andrew Bailey

The FCA published its long-awaited interim report into the UK’s investment industry on November 18, in which it mainly focused on the fees and performance of active managers and scrutinised the role of investment consultants.

However, the report also touched on charges and transparency in hedge funds and private equity.

The FCA found that institutional investors felt “some hedge funds can be unclear about the assets in which they are invested” and that information about charges was “not always clear and transparent”.

The regulator added: “Although private equity funds were not in scope of our market study we heard comments that this is a particularly opaque part of the asset management sector, and we will consider whether any remedies should apply in this part of the sector.”

Remedies could include requiring hedge funds and private equity firms to comply with a proposed industry-wide standard template for cost disclosures to institutional investors.

The FCA asked for feedback on whether hedge funds and private equity should be forced to comply with such a disclosure template by February 20, 2017. It plans to publish its final report on the asset management industry in 2017.

The private equity industry recently adopted its own voluntary fee transparency standards, which provide detailed fee and expense disclosures to investors through a template created by Institutional Limited Partners Association.

Trade bodies the British Private Equity & Venture Capital Association and The Alternative Investment Management Association did not respond to requests in time for publication.

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