The Financial Conduct Authority (FCA) is understood to have been steered away from introducing a cap on fund charges as part of its probe into value in the sector, according to The Sunday Times.
The paper reports the regulator was expected to examine placing a ceiling on annual charges, and forcing fund managers to be more transparent on fees, as part of its Asset Management Market Study.
However, The Sunday Times quotes City sources, who have had discussions with the FCA, saying it has been steered away from capping fees.
The watchdog is understood to believe that fee caps alone cannot prevent investors from paying over the odds for investment products.
But insiders said the FCA has not yet reached any firm conclusions, according to the report.
Following the UK's decision to leave the EU in June, the FCA delayed the release of its Asset Management Market Study, from an initial planned date of summer 2016. First announced in November 2015, the interim report will now be released in Q4, with a final report due in early 2017.
It will look at whether competition is working effectively among asset managers to enable investors to get value for money. If it finds failings, the regulator said it may intervene with firm-specific remedies or enforcement action.
It was reported by the Financial Times earlier this summer that absolute return funds will come under the scope of the review, but Investment Week understands from industry sources that the sector does not appear to be receiving particular attention from the regulator in work carried out so far with providers.
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