Travers Smith's Alternative Insights: A testing moment for private markets regulators

Regulators face a dilemma.  On both sides of the Atlantic, they have started making proposals to deregulate private market rulebooks.  After years of piling on rules, the focus is shifting to burden reduction.  But they also face growing pressure to clamp down.  Some are concerned that the industry is sowing the seeds of widespread investor discontent, even the next financial crisis.

Some of those concerns are over-reactions, arising from unfamiliarity.  But shifting the risk of corporate defaults from banks to private funds, and opening those funds to less sophisticated investors, raises legitimate questions.  Policymakers are right to address them.  They are also right to prioritise burden reduction for an asset class that can deliver significant benefits to the real economy.  Balancing those objectives is not easy.