FCA consults on a three-tier overhaul of the UK alternative investment fund manager regime, diverging materially from EU rules and raising authorisation obligations for hundreds of smaller managers

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FCA consults on a three-tier overhaul of the UK alternative investment fund manager regime, diverging materially from EU rules and raising authorisation obligations for hundreds of smaller managers | Folio

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Regulation

FCA consults on a three-tier overhaul of the UK alternative investment fund manager regime, diverging materially from EU rules and raising authorisation obligations for hundreds of smaller managers

On 14 July 2026, the Financial Conduct Authority (FCA) and HM Treasury published detailed reform proposals for the UK regime governing alternative investment fund managers (AIFMs), the firms that manage hedge funds, private equity vehicles, real estate funds and other alternative investment funds (AIFs). The FCA published Consultation Paper CP26/28, while HM Treasury published a draft Statutory Instrument (SI) and accompanying Policy Note. The centrepiece of the reform is a move from the existing framework, derived from the EU's Alternative Investment Fund Managers Directive (AIFMD) and implemented in the UK through The Alternative Investment Fund Managers Regulations 2013, to a three-tier proportionate system based on net asset value (NAV). Under the proposed thresholds, AIFMs with NAV below £750 million would be classified as small, those between £750 million and £5 billion as medium, and those above £5 billion as large. Regulatory obligations would scale proportionately across tiers. A critical structural change is the removal of the existing registration regime, which allowed some smaller AIFMs to avoid full FCA authorisation. Under the SI, these firms, including unauthorised property collective investment schemes and internally managed closed-ended funds above the small AIFM threshold, will need to become fully . No grandfathering provisions are proposed, though implementation is expected by . The FCA will also house most requirements in a new consolidated sourcebook called (Alternative Investment Funds sourcebook), replacing the current patchwork of rules. Importantly, the UK reforms do not replicate amendments to the EU's AIFMD made since Brexit, meaning the two regimes will diverge materially when the new UK framework takes effect. Alongside CP26/28, the FCA is also consulting on remuneration reforms under and a new asset manager reporting regime under .