Shining a light on private markets

Private markets in the spotlight

Let’s start with the obvious: private markets are more important than ever.

Once seen as more of a niche, they are now a core part of the financial system. Today’s Summit is proof of that.

The numbers really are striking: global private markets assets under management (AUM) hit $15.5 trillion at the end of last year - triple just a decade ago.

In the UK alone, it’s £1.2 trillion - over half of all European private market AUM.

And beneath those headline figures lies a deeper shift: a fundamental change in how capital is formed, how long-term finance is raised, and how investors are thinking about diversification.

We’re seeing increasing numbers of asset managers investing in private markets to meet demand.  

That has real economic significance – not just for the financial services industry, but for the UK’s long-term growth story too.

The Prime Minister has said economic growth is his number one mission (PDF)[2].  

And last week the Government published its Industrial Strategy[3], with the ambition for the UK to be the world’s most innovative full-service financial centre by 2035.

Private markets have a key role to play in helping achieve both of those aims...

Channelling patient capital into parts of the economy that need it most – infrastructure, innovation, growth-stage businesses – and driving innovation and productivity.

Some still position public and private markets as binary options.  

As if we must choose between transparency or flexibility, scale or specialism, liquidity or long-term commitment.

That split feels outdated to me.  

The boundaries are blurring. More and more we see the two working together – through listed funds, hybrid structures and evolving investment models.

That creates complexity, yes. But also opportunity.  

Opportunity to move beyond silos, and to design a system that works as a continuum – delivering growth, resilience and better outcomes across the board.

Turning on the lights

Former SEC Commissioner Allison Herren Lee observed how private markets have been ‘going dark’ – growing rapidly in scale and influence, but without the visibility that underpins confident investing.

As regulators, and as an industry, we need to address that.  

Not by dimming the opportunity, but by bringing the risks out from the shadows.

Let me share some examples of how the FCA is doing that.

First, valuations.

Infrequent trading in private markets requires firms to estimate asset values.  

This introduces a risk of firms inappropriately valuing private assets, potentially causing harm to both investors and market integrity.

So the FCA recently completed a review of valuation practices[4] – looking across private equity, venture capital, private debt and infrastructure assets.

There was a lot to be encouraged by: quality reporting to investors, firms using third party advisers, documenting assumptions, and applying valuation methods consistently.

Of course, there are areas for improvement: ensuring functional independence, managing conflicts, and defined processes for handling ad hoc valuations.

But generally, we found firms recognised the importance of getting this right. They understood that strong valuations build investor trust, in turn supporting the sustainable growth of private markets.

We know some people expected a sledgehammer.

But the review wasn’t about finger pointing and lights shone directly into eyes. It was about genuine illumination – to highlight risks, yes, but also to share examples of good practices.

So that together, we can raise standards across the board.

This is important work, which we are happy is feeding into IOSCO’s review of valuation principles, and to the Bank of England’s broader work on financial stability.

Next up, we will be reviewing conflicts of interest at firms managing private assets.

And this is alongside actively shaping the future of AIFMD in the UK.

Earlier this year, the FCA published a Call for Input about how we might regulate AIFMs[5] if the Government makes its proposed changes to the scope and perimeter of the regime.  

We see a strong case for retaining, but substantially improving, the existing framework.  

In particular, to create a more effective and proportionate regime - especially for smaller and mid-sized firms – that is tailored to the UK market and enhances growth.  

We’re currently exploring how thresholds are set, how risk management applies differently across models, and how to encourage growth without exposing investors to avoidable harm.

Those are some examples of the domestic work underway.

On the international side, we’ve been looking closely at leverage.

Leverage is of course not inherently a risk.

Used well, it fuels growth. But too much, or poorly timed, and leverage turns into fragility. Threatening both firms and the stability of the wider market.

This is a particular concern in core markets, where we see concentrated or crowded leverage, or when a leveraged NFBI is heavily interlinked with a systemically important institution.  

The gilts/LDI dislocation of 2022, and the nickel crisis the same year, being prime examples.

The comparatively opaque nature of private markets can make risk identification and management tricky, both for firms and regulators.

So I’m really pleased to have co-chaired the Financial Stability Board (FSB)’s Working Group on Leverage in NBFI[6], to understand how leverage moves through the system, where leverage may cause financial stability risks, and to build a stronger international framework.

The FSB will publish its final recommendations later this month.

What is very clear, is that good data isn’t just a nice-to-have. It’s a necessity.

It’s how firms can spot build-ups of concentrated or crowded leverage early, and manage their risk appropriately.  

And it’s how we as regulators can get the visibility we need to act proportionately and effectively.

The first stage of the international leverage work I just mentioned was focused on establishing a baseline: identifying what data is already available across jurisdictions.  

We found that although data and reporting already exists, it isn’t always timely. It is sometimes fragmented across jurisdictions, and it isn’t always comparable.

This exercise has given us valuable insights on how we can improve going forwards – and is part of our wider efforts to strengthen our global network and international reputation.  

Just yesterday, the FCA’s new Asia-Pacific director[7] started in post, helping local firms navigate entry into the UK market, and supporting UK firms expanding into the APAC region.

And here at home, we’re also focused on using data smarter. Switching off returns[8] we no longer need, and consulting this summer on retiring more.

But we need data to do our job.  

Firms need to be prepared to report to us, and to invest in their data infrastructure, so that it can be submitted to us in ways that are timely and consistent.  

That’s something we will engage with you on, so that we are collecting data in a way that is cost-effective for firms, but proportionate to our supervisory needs.

Better data will ultimately benefit every person in this room.

This isn’t about de-risking markets. It’s about making sure the risks we run are visible, manageable, and intentional.

That is how we safeguard market integrity and market confidence – the building blocks of growth.

Illuminating risk

These examples I’ve shared point to something bigger: the need for a more open national debate around risk.  

That’s something our chief executive Nikhil Rathi has consistently called for, alongside metrics for tolerable failures.

Not only so that we can collectively move forward with a confident consensus, but also so that the stance we shift to endures.

Now is the time to have this debate – particularly as we consider how retail investors might access private markets.  

Many argue that retail participation in our capital markets is too low. A ‘missing ingredient’ for our success compared to other jurisdictions.  

The FCA’s position – in our strategy (PDF)[9] – is that we want to help people navigate their financial lives.  

That means different things for different people. For some, private markets exposure, with the right information and support, might be appropriate. For others, it will not.

So this is less a question of ‘open’ or ‘closed’, and more a question of how access is enabled, and for whom.  

When we introduced long-term asset funds (LTAFs) into UK retail markets, we took a considered approach and expanded access sensibly.  

Insisting on clear ownership of the risks by product providers and retail investors, and the use of the right fund structures for investments that are inherently illiquid.

We sought views on whether they should be subject to FSCS consumer protection, recognising that LTAFs come with different risks to other investments.  

And when we had strong feedback that they should - in order to build confidence - that is what we decided to do.

It’s important that consumers can make informed decisions based on their own risk appetite.  

The Consumer Duty[10] gives us a strong framework - placing the onus on firms who have a material influence over retail consumers to consider outcomes, not just disclosures.  

That offers opportunities for us to consider whether some of our requirements are unnecessarily restrictive, or not properly calibrated.

At the same time, we’re reforming retail disclosures and through the Advice Guidance Boundary Review[11], exploring what more can be done to support confident investing.  

We have just published our consultation[12] with targeted support proposals for pensions and investments, and are keen to hear your views.  

This is a once-in-a-generation set of reforms, intended to help people make informed decisions about their finances, plan for the long term, and build a more assured retail investment culture.

We are confident that more people could benefit from access to private markets, in time. And we’re open-minded about how retail access could be expanded.  

But only if the right guardrails are in place, and with widespread acceptance that some people may have access to fewer protections than they do today.

Role of the regulator

That’s where we come in.

A regulator cannot – and should not – prescribe every turn these markets make. But we can help set the direction and build those guardrails.

The FCA’s regulatory philosophy is shifting. Moving away from building protections through pre-emptive hard-edged gates and checks, towards a world of transparency and disclosures.

Giving firms more freedom to act, while making sure investors have the clarity they need to make informed decisions.

It means being more focused on outcomes. And open to collaboration and new ideas.  

We used to be seen as the people who said ‘no’ or ‘what if’. I hope that today, we’re more likely to be the people asking or ‘why not?’ and ‘how can we achieve this?’

But this shift in approach requires a shift in industry too.  

A move to outcomes-focused regulation means we will not be writing detailed instructions for how every firm should operate. That is simply not possible given how varied the market is, and how quickly it is changing.  

Innovation is happening everywhere in our wholesale markets – in fund design, in tokenisation, in how data and AI are being used across the value chain.

We want to make it easier to bring those ideas to market safely and confidently. A regulator that enables innovation by design.

Our Innovation Function[13] celebrated its 10th birthday last year, but we’re just getting started.  

We are continuing to invest heavily in those capabilities - from our world-leading Sandboxes, to our early engagement programmes, to our new AI Lab[14] which recently launched AI Live Testing.

But even where our role is not to regulate innovation directly, it often helps to have a regulator in the room.

To spot risks early. To provide clarity. And to create space for safe experimentation.

Regulation doesn’t need to be a brake. Done right, it’s a stabiliser – helping firms go further, faster and with confidence.

Conclusion

I said earlier that stepping into my new role comes with more visibility. But it also comes with greater responsibility.

Responsibility to focus our regulatory beams where they matter most.

Private markets are growing, evolving, becoming more central to how investors diversify and how our economy grows.

So we need a regulatory approach that keeps pace – one that is active, forward-looking, and aligned to the reality of the world we live in.

More light. More clarity. More action.

I hope the examples I’ve shared today show you that the FCA is not standing on the sidelines. We’re shining a light in the areas that matter - making sure both the risks and the opportunities are visible to regulators, firms and investors.  

And we are doing that with a clear philosophy. And a sharp sense of purpose, rooted in partnership and long-term thinking.

That’s how confidence grows, how innovation scales, and how private markets can continue to shine.