Regs Radar
Regs radar: UK pensions, ManCos, and UCITS all in the spotlight
The second quarter of the year brought several interesting regulatory updates for the funds industry, with a flurry of announcements in the UK and Ireland, in particular.
The world of UK pensions was especially busy, with a review, an accord and a highly anticipated bill all promising to reshape the industry and set it up for the future.
Meanwhile the Central Bank of Ireland (CBI) has asked management companies – both proprietary and third-party – to explain how firms are delegating various functions in a knowledge-gathering initiative.
Here is our roundup of the significant regulatory updates over the quarter.
UK’s Mansion House Accord to boost private markets investment
In May, 17 UK pension providers signed the Mansion House Accord, a voluntary agreement in which they pledged to allocate at least 10% of their default funds to private markets by 2030, with 5% going to the UK specifically.
Jointly led by the Association of British Insurers (ABI), the Pensions and Lifetime Savings Association (PLSA) and the City of London Corporation, the initiative claims it will secure better financial outcomes for defined contribution (DC) savers due to the higher potential returns offered by private assets, while also boosting investment in the UK economy.
For UK pension providers, this is a significant – albeit voluntary – development in the broader push to channel pension assets into UK private markets to help drive economic growth.
At Carne, we’ve seen greater demand for funds that can support this goal, such as LTAFs. We have also supported specific providers wishing to launch other fund structures to access private markets. For instance, we recently helped a client launch a NURS FAIF to invest in private assets whilst also being a SDR Impact categorised fund. We are finding that the FCA is open to discussions around innovative fund structures which is hugely important as this market evolves. We’re looking forward to helping other asset owners and managers launch funds that meet their private markets ambitions.
The Mansion House Accord comes alongside a push to grow UK pension providers in pursuit of economies of scale, and we are aware of providers that have committed to scaling up considerably to improve their access to private markets. We expect these providers will target asset accumulation to reach that goal.
Different pension providers will need different levels of support as they navigate the private markets push, ranging from education about the appropriate fund structures, opportunities and ways to scale, through to more knowledgeable players looking for innovative, specific fund solutions. At Carne, we have experts on hand to support providers right across this spectrum.
The Pensions Investment Review pushes for UK assets
In May, the UK government also published its Pensions Investment Review and, shortly after, the Pension Schemes Bill. The bill hasn’t yet passed but both documents strongly signal the government’s expectations for the industry.
The flagged reforms are extremely wide-ranging, but some of the key changes include:
– DC schemes must have one default arrangement with at least £25 billion in AUM by 2030. There will be a transition pathway for schemes that are projected to have £10 billion by 2030, so they can reach the £25 billion target by 2035
– The bill stopped short of mandating a set level of UK investment, but it left open a reserve power for the government to introduce mandates if pension providers do not act of their own accord
– A value for money framework will be introduced, which we expect will increase scrutiny of fees of all kinds, including asset management fees
– Funds in the Local Government Pension Scheme (LGPS) will be required to set out their approach to local investment, meaning assets in their direct local areas, not UK-wide
– The government has promised to build a stronger pipeline for domestic investment opportunities, with support from the National Wealth Fund and British Business Bank, and the Office for Investment acting as a broker between investors and government projects
Similarly to the Mansion House Accord, we expect the review and bill will drive asset accumulation in the pursuit of scale, demand for private markets funds, and demand for investment solutions that can support local investment opportunities.
CBI’s review of third-party governance
The CBI asked management companies to explain the delegation activities of asset managers, as a qualitative follow-up to a survey conducted last year.
The bank is looking to understand delegation to both proprietary and third-party ManCos. It is an information-gathering and knowledge-sharing activity, as the CBI seeks to learn which functions are being retained or delegated and what oversight mechanisms are in place.
We expect the CBI to analyse its data over the summer and may see additional communication later this year.
ESMA sets out UCITS eligible assets framework
In June, ESMA published its final report on the UCITS Eligible Assets Directive, assessing which assets should qualify as eligible investments under the regime.
One of the key recommendations is that at least 90% of a UCITS portfolio should be assessed using a look-through approach. This means assets must be evaluated based on their underlying components to ensure compliance with eligibility criteria. This aims to enhance consistency and investor protection across member states.
ESMA also proposes expanding the existing 10% limit – commonly referred to as the "trash bucket" – to allow indirect exposure to non-eligible assets such as commodities, real estate and crypto assets. The goal is to allow greater diversification while maintaining robust standards around liquidity and risk management.
The report has received a mixed response from the industry. We now wait for the European Commission to decide whether to act on ESMA’s advice and expect there to be a public consultation ahead of any potential legislative changes.
CSSF assesses effectiveness of compliance in UCITS and AIFMs
In parallel with ESMA’s report, the CSSF has launched a Common Supervisory Action (CSA) under ESMA’s direction to assess the extent to which UCITS Managers and Alternative Investment Fund Managers (“AIFMs”) have implemented effective compliance and internal audit functions. The CSA will examine whether these functions are supported by adequate staffing, authority, knowledge, and expertise, to perform their duties under the AIFMD and UCITS Directive.
In this context, a sample of Luxembourg-based UCITS Managers and AIFMs will be asked to complete a questionnaire covering policies, procedures, measures relevant to functions, delegation, reporting to senior management, and internal control plans on the CSSF’s eDesk Portal.
The CSSF will launch the 1st phase of the CSA by mid-June 2025. We expect the ESMA and the CSSF to publish further guidance and the results of the CSA in 2026.
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