Funds Congress Highlights

Notwithstanding a backdrop of significant political change, the regulators remain broadly aligned on initiatives and priorities. The evolving geopolitical landscape will undoubtedly have some consequences for regulatory development, although possibly less than may be expected. Most regulatory authorities will aim for an adaptive regulatory approach that maintains investor protection and ensures financial stability amidst geopolitical tensions and market fluctuations, all while balancing international standards with national priorities. 

Key areas of focus for regulators include the retailisation of private markets, data utilisation, liquidity and risk management, andthe development ofadaptive regulatory frameworks. Understanding and keeping pace with these evolving trends will be crucial in helping managers to manage risk and compliance effectively.

Private markets and retailisation: The introduction and subsequent refinements to the ELTIF 2.0 regulation created a solid framework safeguarding the interests of retail investors as they gain greater access to private markets. In the coming year, regulatory authorities at both the EU and national levels can be expected to focus on additional protections for retail investors, with valuation mechanisms, disclosures and governance procedures slated to come under scrutiny. In the UK, the LTAF remains a vehicle of interest for private assets. The regulators plan to support confidence in private markets.

Data utilisation: Data plays a vital role in helping regulators follow risks and equally to see which areas are under control. The increasing volume of data required by regulators has prompted authorities to upgrade their technical capabilities through the application of AI and machine learning tools to a wider range of use cases. Regulators are also looking to use the skills of data scientists to make the most of the data collected. With informed policymaking ever more reliant on effective data management, regulators will continue to devote substantial attention to harnessing and leveraging new technologies to assist in regulatory oversight.

Liquidity and risk management: The focus on liquidity management and risk assessment in the alternative investment fund space is not going away. Regulators plan to apply the lessons of past financial crises to improve resilience for tomorrow. Liquidity risk management remains a global regulatory priority, as does work in the area of non-bank financial intermediation (NBFI).

Future initiatives: Multiple initiatives are slated for implementation later in 2025. Initiatives at the EU level include the ongoing cross-jurisdictional consultation into money market funds, which may result in proposals emphasising greater harmonisation and better data utilisation. Sustainable finance will remain an important focus for the year ahead, with regulators keen to advance further ESG guidelines. Further review of digital operational resilience is also likely, along with on-going work linked to anti-money laundering, and many other initiatives.