Bluecrest: Key takeaways on managing conflicts and disclosures

The UK’s Financial Conduct Authority (FCA) published an October 2025 final notice (final notice) against BlueCrest Capital Management (UK) LLP (BlueCrest). This was a timely reminder of regulatory expectations in relation to a firm’s systems and controls to manage conflicts and to ensure adequate disclosures to investors. The public censure issued by the FCA was in lieu of a financial penalty, following BlueCrest’s settlement agreement to pay USD $101 million to redress relevant investors in the external fund who were not eligible for redress under a scheme, addressed in the final notice to non-US investors established by the US Securities and Exchange Commission. Investment managers, asset management firms and hedge funds should take note of the importance of managing conflicts of interest and investor disclosures to maintain reputational standing and compliance with regulatory requirements.

Conflicts of interest

During the period from 1 October 2011 to 31 December 2015 (the relevant period), certain asset managers in Bluecrest failed to manage their own interests and those of their customers. The final notice stated Bluecrest breached the FCA’s Principle 8 relating to a firm’s obligation – “to manage conflicts of interest fairly, both between itself and its customers and between a customer and another client”. The conflict arose from the simultaneous management of an external fund that was open to professional investors, and an internal fund, accessible only to BlueCrest’s partners and employees. Bluecrest approved the reallocation of high-performing portfolio managers from the external fund to the internal fund, while allocating significant external fund capital to a semi-systematic trading system to replicate the performance of those reallocated managers. The decisions were made by senior individuals who held financial interests in the internal fund, creating a structural conflict that was not adequately mitigated.

Systems and controls

The FCA found that Bluecrest’s primary control – relying on the fiduciary and regulatory duties of senior staff – was ineffective. Those individuals stood to benefit personally from decisions that disadvantaged external fund investors. Bluecrest failed to assess whether its senior management was sufficiently independent to manage these conflicts. Further, Bluecrest did not implement robust systems and controls to mitigate such risks. The FCA concluded that Bluecrest’s arrangements were not sufficient to ensure, with reasonable confidence, that the interests of its clients would not be damaged.

Disclosure

Furthermore, the FCA notes that Bluecrest’s disclosures to its investors were insufficient and at times, misleading. Bluecrest did not proactively inform investors of the existence of the Internal Fund or its reallocation of portfolio managers from the external fund to the internal fund. Prospectuses and marketing materials referred only to hypothetical conflicts of interests despite the existence of actual and material conflicts. It was highlighted that all external fund prospectuses from July 2013 stated that – “The Investment Manager does not have an obligation to ensure the fair treatment of investors”. The FCA rather expectedly viewed this statement dimly as it is incompatible with an authorised professional firm’s obligations under Principle 8.

The FCA also criticised Bluecrest’s reactive and limited approach to investor communications. The firm’s internal policy instructed staff to avoid discussing the internal fund – “as a conversation topic unless absolutely necessary”. When concerns were raised, particularly following a Bloomberg article in February 2014 that exposed potential conflicts due to the existence of the internal fund— Bluecrest provided partial responses on a reactive basis to queries from some investors and external consultants. As such, investors were not given sufficient detail to scrutinise the substance of the conflict or assess how the external fund was being managed, undermining their ability to make informed decisions.

Takeaways

There are three main takeaways for regulated firms (and their senior management).

First, firms must ensure that conflicts of interest are identified, assessed and managed with genuine independence. Reliance on conflicted individuals to oversee conflict management is problematic. Governance structures must be designed so that those responsible for managing conflicts do not themselves have a financial interest in the outcome.

Second, disclosures to clients or investors must be clear, specific and timely. While it may be obvious that hypothetical references are insufficient where actual conflicts exist, the FCA notes that depicting potential conflicts with – “language which was not clear” is also inadequate. Investors must be given enough information to understand the nature of the conflict, its impact and how it is being managed. This includes disclosures in prospectuses, due diligence questionnaires and investor communications.

Third, the FCA emphasises that market confidence in the asset management sector depends on public trust in effective management and appropriate disclosure of conflicts of interest. Bluecrest’s failure to effectively manage conflicts ultimately led to investor redemptions, reputational damage, and regulatory censure. By December 2015, the total AuM of BlueCrest dropped from a high of US$22.8 billion to US$8 billion. In particular, the AuM of BlueCrest’s External Fund dropped from a high of US$14.5 billion to US$2.2 billion during the Relevant Period.

While the FCA’s decision of a public censure in the form of the final notice is arguably more measured than a financial penalty on BlueCrest, this episode nonetheless serves as a stark reminder to other regulated individuals and firms.

The Birketts view

Investment managers should take this opportunity to review their own conflict management frameworks, disclosure policies and broader governance procedures to ensure they meet the FCA’s standards. For more information on the final notice, click here.