Regulation
Liquidity under a lens
Following its multi-firm review of Authorised Fund Managers (AFMs), the Financial Conduct Authority’s (FCA) most recent Dear CEO letter identifies several areas for improvement in liquidity management including in compliance, frameworks and robust process. Read the overview in the Financial Times (FT).
The FCA has also published its final rules and guidance on the Long-Term Asset Fund structure, opening it to retail investors. Investment Week focuses on the challenges for platforms.
Meanwhile, the Association of British Insurers (ABI), which represents the biggest pension providers, said state backing for riskier, illiquid investments would help make the UK a “more attractive” destination for its members reports the FT.
Internationally, the Financial Stability Board (FSB) consultation and the International Organization of Securities Commissions (IOSCO) consultation have separately proposed policy recommendations to address structural vulnerabilities from liquidity mismatch in open-ended funds and enhance the resilience of non-bank financial intermediation. Both consultations close on 4 September 2023. The European Fund and Asset Management Association (EFAMA) commented that the investment fund sector is “not systemically important” with regards to liquidity risk. Reported in Ignites Europe, however, it does point to “pockets of risk” and has set out several policy recommendations to address these.
For more insight on liquidity management, take a look our podcast in which FBC senior adviser, Brandon Horwitz, discussed with Sebastjan Smodis of State Street Global Advisers, how fund managers reacted to world events and the role of fund boards in overseeing liquidity management activities. The podcast is available on demand on our Product Governance webpage. FBC Corporate Members can also view our ‘liquidity risk playbook’ podcast, with Sebastjan, in the FBC Member Portal.
AI Regulation
With the rapid uptick of the use of Artificial Intelligence (AI), the FCA has announced its intention to regulate AI services, carried in FT Adviser. (More on AI in our Governance and Market News sections below)
Coming up short
In a statement on its 2022 Common Supervisory Action (CSA) and mystery shopping exercise, the European Securities and Markets Authority (ESMA) has identified a number of shortcomings regarding compliance with disclosure requirements for costs and charges under MIFID II. Read the press release for details and Ignites Europe take.
Questioning criticism
Fund firms’ criticism of the European Commission‘s cost and performance benchmark proposals has Better Finance questioning why asset managers haven’t defined how they deliver value for consumers. Read more in the Ignites Europe interview with the consumer rights advocate’s senior adviser, Guillaume Prache.
Governance
Young blood
KPMG looks at the place of younger executives on boards and the benefits of having them in the mix in this article highlighting diversity and challenge.
Artificial alacrity
KPMG also looks specifically at the governance and board oversight implications of using AI, including consideration of rapidly evolving AI legislation, emerging AI risk management frameworks, adversarial threats and AI governance structures and practices.
Sustainable Investment
Reality bites
Former Blackrock CIO for sustainable investing, Tariq Fancy, provides some ‘radical honesty’ in his interview with Sasja Beslik – in particular real world impact vs. greenwashing (or ‘greenwishing’). You can listen to the podcast if you prefer.
Market News
Platform probing
Why are Investment platforms still offering Odey Asset Management funds to retail investors? The Financial Conduct Authority (FCA) asked the same, according to the Financial Times. Read the reasons why.
Smoothly does(n’t do) it
Market volatility has led Santander to stop income ‘smoothing’ on all of its UK-domiciled funds, Ignites Europe reports. The article also refers to a payment error last year after market volatility meant a fund’s entire income was paid out in the first 10 months of the year.
Rise of the machine
Speaking recently at the FundForum conference in Monaco, global head of business development at Amundi, Bertrand Pujol, said artificial intelligence (AI) could mean asset managers will need to change the way they organise their teams. Read more on the impacts he predicts particularly in marketing teams, in Ignites Europe.
And for a wider explainer on how AI could impact the investment world, including the opportunities and risks, take a look at the Enterprising Investor article.
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