Regulatory frameworks widening access to private markets

UK: LTAF and Consumer Duty

In the UK, the FCA has introduced the Long-Term Asset Fund (LTAF) framework to support wider participation in long-term, illiquid assets while ensuring strong investor protections. Early adoption has been concentrated in the DC pension market but LTAFs are now being launched to attract the wealth management sector.

The FCA’s recent portfolio letter outlines expectations for fund managers, with an emphasis on governance, fair valuations and clear disclosures. While the regulator acknowledged there are currently few opportunities for retail investors to access private markets, it also noted the product development underway in this space. Here, the FCA emphasised the importance of Consumer Duty – demonstrating value and appropriateness for retail clients. Thus, we expect FCA oversight in this area will intensify as private assets reach more retail portfolios.

EU: ELTIF 2.0 and the role of ESMA

In the EU, the updated European Long-Term Investment Fund regime (ELTIF 2.0) aims to broaden access to private markets by introducing greater flexibility in fund structures. The goal is striking a balance between clear rules and product flexibility, and thus attract more capital from semi-professional and wealth investors.

Regulators acknowledge that ELTIF 2.0's commercial viability is still being tested. Illiquidity remains inherent to many private asset classes, and ESMA continues to monitor implementation, with ongoing Q&A guidance expected to shape the market further in 2025.

Ireland & Luxembourg: Region-specific takes on private markets access

In Ireland, the CBI has highlighted governance, valuation and liquidity management as core supervisory priorities as private markets become more accessible. The focus is on ensuring fund structures are sufficiently resilient and transparent for a broader investor cohort.

In Luxembourg, the CSSF points to ELTIFs and Part II funds as potential vehicles to democratise access. The regulator continues to stress the importance of liquidity management and clear disclosures.

Managing valuations and governance in a retail context

FCA’s Valuation Review

The FCA’s multi-firm review identified governance weaknesses in private market valuations, particularly around conflicts of interest. Fund managers are expected to strengthen oversight mechanisms to ensure independent and well-documented valuations, and to enhance board-level engagement with valuation practices, especially for strategies targeting non-institutional capital.

ESMA’s data collection on fund costs & valuation practices

ESMA’s supervisory focus includes improving consistency and transparency in valuation methodologies. It is also scrutinising cost structures to help guard against fees that could unduly erode investor returns.

CBI’s concerns on private credit & liquidity stress

The CBI has warned that the opacity and illiquidity of private credit could pose risks as the market grows. Market volatility may amplify liquidity stress in certain fund structures, requiring strong risk management frameworks.

Regulators’ use of AI and tech

Regulators across jurisdictions are increasingly exploring AI tools to enhance oversight, particularly in reviewing PRIIPs and fund prospectuses. The FCA, CSSF, and ESMA are assessing how AI and natural language processing can improve the speed and accuracy of reviewing fund disclosures, risk statements, and compliance frameworks.

The CBI is considering AI solutions in areas such as ESG fund compliance, aiming to enhancing supervisory understanding of how these funds align with their stated responsible investment goals.

In April, the CSSF implemented a digital e-identification process for fund prospectuses, with the aim of streamlining approvals.