During the pandemic, everybody became a home baker. You were either team banana bread or team sourdough. I went for the former.

Now bread-making is trickier than it looks. You balance ingredients, keep a watchful eye on the dough as it rises, adjust for temperature and deal with surprises.

Too much yeast, the bread over-inflates and collapses; too little, and you’ve got a flat, unappetising mess.

That feels like a metaphor for my speech at your annual conference in June; it was the middle of the election, meaning I took out all my juiciest ingredients! I fear my speech ended up like my pandemic banana bread – more of a banana brick than the Bake Off-worthy masterpiece I had envisioned.

But the cooking comparisons demonstrate something important – not just that I am no Paul Hollywood.

Success is a delicate balance between understanding the environment and managing risks, while standing back and giving your efforts room to grow. The same can be said for private markets.

Motor finance
Before saying more on that, I want to touch on an issue that I know will be of significant interest to all of you as investors in UK markets.

Last Friday, the Court of Appeal ruled that it was unlawful for car dealers to receive a commission from a lender providing motor finance to a customer unless it was disclosed to the customer and they gave informed consent to the payment.

The judges’ ruling was rooted, not in the FCA’s rules, but the longstanding common law principle of fiduciary duty which meant that the broker – the car dealer here – must act in the best interests of the customer and not put themselves in a position of conflict.

Since the judgment was issued, we have been in close contact with the firms involved, the wider sector and the Government to monitor the market, analyse the impact on industry and consumers, and identify what action is required.

First and foremost, we need clarity on whether this is the courts’ final word on the issue.

The 2 lenders in the case intend to appeal and it is in everyone’s interest that when they do, the Supreme Court decides quickly whether it will take the appeal and, if it does, whether it agrees with the Court of Appeal.

In the meantime, our focus is on ensuring that customers receive fair treatment in line with the law and that the market for motor finance continues to function well, recognising that over 2 million people rely on it each year to buy a car.

We are encouraging firms to engage with us as they consider the impact the court judgment has on their products and services, and we are grateful for the way firms have acted responsibly so far.

We are working closely with the financial services sector, the Financial Ombudsman Service and the Government to understand any wider consequences and further steps needed.

While the case itself was not focused specifically on discretionary commission, it clearly relates to our work to determine whether motor finance customers have been overcharged because of the past use of discretionary commission agreements.

For such cases, we have paused until December 2025 the 8-week deadline that firms have to respond to complaints.

Some in the industry are asking us to expand that pause to cover complaints relating to other types of commission in motor finance. We are considering this carefully and working at pace through the potential benefits and risks of doing so.

We understand industry’s desire for time to take stock.

Equally, the Court of Appeal has made the law clear and, if that is not challenged further, then firms need to handle any complaints in line with that.

Growth of private markets: big opportunities
Turning back to private markets: as they evolve, the link with public markets is changing.

Our reforms to public markets are well advanced:

biggest listing rule changes for decades
optionality for investment research
major shifts in prospectus rules and a new public offer regime
plans to improve retail access to fixed income markets
These changes involve re-balancing risk and investor protection, and I am grateful for the Investment Association’s (IA) engagement. I know you have faced some hard choices.

But to keep UK markets competitive, the entire continuum must work seamlessly.

Let’s take a few metrics:

estimates of global private capital assets under management (AUM) as high as $14trn plus – triple a decade ago
private assets outperforming public by 2.5 times in Europe
over half of European private markets AUM sitting in the UK
So a real opportunity, particularly for UK investment managers. Recognised in the Mansion House Compact.

My counterpart at the United States (US) Securities and Exchange Commission (SEC), Gary Gensler, recently captured the scale of US capital markets activity. They provide 75% of debt financing for non-financial corporations, an estimated $30trn – including $1.4trn syndicated loans, $1.7trn private credit market – versus $2.8trn commercial and industrial loans by US banks.

In the UK, we have seen significant growth – with private market AUM almost trebling in the decade to 2023. But not to the scale of the US.

You, as investment managers, maintain relationships right across the private market ecosystem – with banks, principal traders, specialist intermediaries and real money accounts.

So an open question to discuss with you is whether we should aim to move sharply in the direction of the US, to deepen financing options for UK corporates. And what such a move would take?

I will focus on 5 themes.

1. Private markets: risk or opportunity?
First, do we approach private markets with a risk or opportunity mindset?

Is our starting point to worry about growing private markets creating risks outside the banking system, or to focus on the opportunity to unlock capital for infrastructure and growth?

International regulatory discourse focuses on the former view – compounded in the UK by scandals such as Woodford.

It is time to reset our narrative. But not in a way that is oblivious to risk.

We need transparency – particularly on data – to build a system-wide picture of risks, and to be clear about who owns them.

One risk is illiquidity – a feature of these assets. This needs careful thought in our era of ‘predictable volatility’, where market conditions change rapidly.

Take a leveraged loan being hung up on a bank balance sheet versus stuck in a securitised credit vehicle – should we really care more about one over the other, as long as capital providers can absorb the losses?

Retail investors must understand that investments cannot be redeemed on demand – their dough might need to stay in the oven longer. And industry must be clear-eyed on where costs for potential failures in the supply chain would rest.

In allowing long-term asset funds (LTAFs) into UK retail markets – with the first such move in recent weeks – we have insisted on clear ownership of the risks by product providers and retail investors.

And the clear preference from our consultations on the LTAF was to maintain Financial Services Compensation Scheme (FSCS) cover, even if that means a large industry levy from time to time.

2. Technological and product innovation
Second, we must be open to technological and product innovation.

It’s early days, but we have authorised 9 umbrella LTAFs, and managers continue to innovate. A number support the net zero transition and our Sustainability Disclosure Requirements and labels make special provision for LTAFs.

Product innovation doesn’t stop there.

We see products that bridge private and public markets.

Private market active exchange-traded fund (ETFs), already big in the US, are gaining momentum here, with data infrastructure, such as indexation, also developing.

And we shouldn’t forget investment trusts, a UK success story, channelling capital into infrastructure and growth assets.

We will consult soon on a new disclosure regime for consumer composite investments – including investment trusts.

Until then, the market is relying on industry standards.

We are certainly open to ideas to make the regime more flexible and proportionate than the inherited EU packaged retail investment and insurance products (PRIIPs) regime.

We recognise that some would prefer zero disclosures on costs. Given the potential market impact, such a decision would rightly be for ministers to take as they decide on the legislation.

Technological innovation also matters.

Tokenisation could democratise private assets, whilst lowering operational costs and enhancing liquidity. McKinsey estimates a potential $4trn market by 2030.

Asset managers can right now adopt the blueprint we have worked on with the IA for tokenisation, and the FCA Digital Sandbox supports firms trialling more ambitious, advanced cases.

But to enable distributed ledger technology and tokenisation to really fly, we are collaborating with other regulators on a global approach.

3. Value and fees
Third, the thorny question of value and fees.

In our consultation on the value for money framework for defined contribution (DC) pension funds, we showed we are open to a holistic discussion of what we really mean by assessment of value.

We want sufficient incentives to support investment in higher risk/higher long-term return products that could secure better outcomes.

4. Enabling and proportionate regulation
Fourth, we need an enabling and proportionate regulatory approach.

The SEC recently updated its Form PF reporting for private fund advisers to provide greater transparency. And participants at the FCA’s recent International Capital Markets Conference supported regulators having a whole market view.

Currently, estimates for even basic metrics like private market AUM vary significantly.

Next year, we will work with you on data collections in our Alternative Investment Fund Managers Regulations (AIFMD) review to ensure we do not end up with something half-baked. So that we understand the market, not restrict it.

That is also the driving force for our work on governance, valuations and conflicts of interest in private markets.

So that as access to these markets expands – potentially quickly – we can provide confidence in the underlying plumbing and be open about where significant risks remain.

5. Talent and skills
Finally, talent and skills.

I have just returned from meeting a number of global asset managers in the US. One described the UK as home to a ‘ton of talent’. Another said they nearly always find the talent they need here.

This huge competitive advantage needs nurturing.

A veteran life sciences investor told me that she used to monitor 50 private and 500 public companies. That has become 500 public and 1000 private companies.

Investment houses need to keep investing in capacity and skills to understand private companies in ever greater depth.

And, as you do, think about all the untapped talent in your industry.

We are the second largest international investment management hub. But only an estimated 12% of fund managers are women – a statistic that has barely moved in recent years.

So, I hope we can focus together on harnessing even more of the talent that will sharpen your sector’s competitive edge.

And, of course, skills issues extend beyond the financial sector. Financial education is vital. Instilling healthy financial habits early builds a more financially resilient society. Congratulations to the IA for your great work with the Just Finance Foundation supporting school children.

Conclusion
And as you all open your wallets, digital or otherwise, to donate to meet Chris’ £10k challenge, let me reiterate our openness to work with you on:

re-thinking risk and opportunity in private markets
technology and product innovation
an effective approach to long-term value
an enabling regulatory environment, embracing the role of data
nurturing the skills and talent needed for success
We get that failure to embrace the growth of private markets means we will miss out on significant benefits:

limiting returns for millions of savers and pensioners
writing off innovative start-ups who need capital to scale
stifling innovation, restricting job creation and dampening economic growth
In short: less bread for us all.

Just like baking that elusive perfect loaf, our approach requires balance.

And in the UK, we have all the ingredients.

Together, let’s make sure private markets rise to the occasion.