On November 18, 2016, the FCA published an interim report following its Asset Management Market Study. As per The Terms of Reference, the FCA investigated three core areas: (i) how asset managers compete to deliver value; (ii) whether asset managers are willing and able to control costs and quality along the value chain; and (iii) how investment consultants affect competition for institutional asset management. The FCA also looked at whether there are any barriers to innovation that prevent investors from obtaining better results.

The FCA found that, based on the evidence produced, a weak price competition exists in a number of areas of the asset management industry. The lack of competition has a material impact on the investment returns of investments as a consequence of their payments for asset management services. The FCA reviewed product development and innovation in the asset management market and concluded that there is some evidence of innovation and limited evidence of any significant structural or regulatory barriers to entry. The FCA is of the view that despite the interim finding raising concerns about how effectively competition drives value for investors in the asset management sector, there are also some competitive pressures building in parts of the market and this is likely to continue.

The FCA has identified several ways that asset management products and services could work better for retail and institutional investors. The FCA is proposing, for example, a strengthened duty on asset managers to act in the best interest of investors as well as an "all-in fee" for quoting charges to increase transparency. The FCA is also proposing measures that could help retail investors identify the best fund for them by requiring asset managers to be clear about the objectives of the fund and also clarifying and strengthening the appropriate use of benchmarks. The FCA is seeking views on the findings and potential remedies outlined in the interim Report, with responses due by February 20, 2017.

The consultation paper is available at: http://www.eba.europa.eu/documents/10180/1659311/Consultation+Paper+on+Guidelines+on+PD+LGD+estimation+and+treatment+of+defaulted+assets+%28EBA-CP-2016-21%29.pdf ; and the EBA's Opinion and Report on the implementation of the IRB approach is available at: http://www.eba.europa.eu/-/eba-sets-out-roadmap-for-the-implementation-of-the-regulatory-review-of-internal-models .

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