Assessment of Value - FCA proposes amended and simplified AoV rules

Assessment of Value - FCA proposes amended and simplified AoV rules

On 6 June 2025, the FCA published quarterly consultation paper, No. 48, CP25/16.

In a welcome move Chapter 7 of the CP sets out the FCA’s proposals to amend and simplify the Collective Investment Schemes sourcebook (COLL) in respect of the assessment of value (AoV) reporting requirements.

The FCA believes that a reduction in the level of disclosure which an authorised fund manager (AFM) is required to make will lead to a significant cost saving for it.

These requirements will apply equally to the AFM of a UK UCITS, a Non-UCITS Retail Scheme (NURS), a Qualified Investor Scheme (QIS) and a Long-term Asset Fund (LTAF).

The deadline for comments on these proposals is 14 July 2025.

What is the FCA proposing?

The amendments to the COLL Sourcebook which the FCA is proposing are set out in draft instruments in Appendix 6 to the CP.

These include:

• The removal of many of the detailed reporting requirements in COLL 4.5.7R(8), COLL 8.3.5AR(5) and COLL 15.5.3R(5). These would be replaced with a general requirement that AFMs must
  • include in the annual report a summary of the AoV and the AFM’s conclusion as to whether charges out of scheme property are justified in the context of the overall value delivered by the scheme and
  • set out any remedial action they are taking in the face of poor value.
• Retention of the rule which allows an AFM to publish the information required under COLL in a composite report. AFMs will be free to decide whether to include other AoV-related matters in their annual report or in a composite report.
• Retention, too, of the procedure and governance requirements in COLL 6.6.20R, COLL 8.5.17AR and COLL 15.7.17R - the FCA feels that these are “sufficient in achieving the intended outcome of the AoV rules and ensuring that consumers are appropriately protected from poor value funds”.
• Some level of disclosure would be retained in the annual report, providing information on the outcome of a fund’s AoV. The brief summary of the AoV which the CP proposes is expected to meet the intended outcome of the original public reporting requirement.
• The proposals also allow firms greater flexibility in terms of how to report. Other than the prescribed disclosure, it will be up to an AFM to decide how much information to include.
• Given that firms will still need to undertake the full AoV under COLL and to produce an annual report, requiring them to include a brief disclosure relating to the AoV should involve minimal additional costs. On the other hand, the FCA considers that its proposals to remove the prescriptive requirements should lead to a significant cost saving for firms.

Background to the AoV rules

The AoV rules came about from a 2016/17 competition market study of the asset management sector, which found that asset managers do not typically compete on price, particularly for retail active asset management services – while the pricing of segregated mandates, typically sold to larger institutional investors, usually falls as the size of the mandate increases, there was no corresponding fall as the size of retail funds increase.

This, together with evidence of price clustering on the asset management charge for retail funds, suggested that price competition may not have been working as effectively as it could be.

As a result of these findings, the FCA introduced rules in COLL requiring authorised fund managers (AFMs) to

• carry out an annual AoV and report publicly on their conclusions. As part of that assessment, the AFM must consider a variety of matters including at least (i) quality of service, (ii) performance, (iii) AFM costs, (iv) economies of scale, (v) comparable market rates, (vi) comparable services and (vii) classes of units and
• set out a detailed description of the assessment in the fund’s annual report or in a separate AoV report covering multiple funds.

Following feedback to its July 2024 Call for Input, “Review of FCA requirements following the introduction of the Consumer Duty”, the FCA committed to consulting on proposals to streamline the AoV annual reporting requirement.

Overall, the FCA’s view is that the AoV rules “have had a positive impact for investors in authorised funds”. However, feedback that the prescriptive nature of the reporting requirements creates costs for AFMs has led the FCA to consider that such costs may be disproportionate to the benefit of greater transparency.