City watchdog outlines plans to open up patient capital
The Financial Conduct Authority is proposing a series of changes to the patient capital market to enable more retail investors to buy into long-term assets.
The City watchdog said it wanted retail investors to be able to invest in a broader range of alternative investment assets though unit-linked funds while “continuing to maintain an appropriate level of protection”.
It continued: “The proposed measures aim to address potential barriers to investment by retail investors in patient capital, and will be beneficial to consumers by allowing funds to choose investment opportunities that match the needs of consumers more effectively.”
It has also launched a discussion paper exploring how UK authorised funds can be used to invest in patient capital.
Traditionally, patient capital – which often involves investing in young companies with no guarantee of success – is seen as a higher-risk form of long-term investment that despite potentially high returns, is not suitable for retail investors.
However, the government wants to open up this long-term investment market, in large part to encourage more people to invest in new British businesses.
The Patient Capital Review was launched by the Department for Business, Energy and Industrial Strategy in 2016 to assess how well the market was working and to boost investment in young British companies. It found that investment in patient capital assets was below its potential.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “We are proposing changes that allow retail investors greater access to long-term investment opportunities.
"We are also seeking views to help us identify any unnecessary barriers to investment in potential capital through authorised funds. We will ensure that any changes continue to provide an appropriate level of protection for consumers.”
The FCA's consultation on the proposals and the discussion paper will remain open until 28 February 2019.