LONDON (Reuters) - Britain's Financial Conduct Authority is to look into potential conflicts of interest at firms managing private assets and if there is any adverse impact on investors, it said on Wednesday.

Money managers are ramping up activity in private markets, which include funds focused on infrastructure and credit, in response to a shift in investor demand away from actively-managed stocks.

Private market investments, unlike publicly-traded investment assets, such as shares, are less liquid and price movements are less transparent. This can increase risks for investors and make it more difficult for them to get their money out.

The FCA said in a letter to market participants that there was a risk of conflict of interest where firms were operating in overlapping business lines.

"We will assess how firms oversee application of their conflict-of-interest framework through governance bodies ... to ensure investor outcomes are not compromised," the FCA said in its letter.

"With rapid growth in private markets, we expect to see evolving and updated procedures to identify, manage and mitigate conflicts of interest."

Separately on Wednesday, the FCA published a speech given by Sarah Pritchard, its executive director of consumers, competition and international, which outlined the regulator's approach to measuring risk in private markets posed by leverage.

The non-banking sector's use of leverage underpinned well-functioning markets, Pritchard told an Investment Association roundtable on Tuesday, but needed to be managed carefully.

"However, the presence of leverage can create vulnerabilities, especially when it's poorly managed, there's a lack of transparency, or it is concentrated," she said. "In those cases, when a shock occurs, what normally brings benefits to the economy can suddenly become an amplifier of instability and a cause for loss of confidence."

(Reporting by Sinead Cruise and Iain Withers. Editing by Jane Merriman)