The FCA's UK AIFM Overhaul Closes for Comment on 22 October: What Fund Managers With a UK Footprint Should Check

The Financial Conduct Authority published consultation paper CP26/28, "The UK AIFM Regime", on 14 July 2026. It proposes a rewrite of the rules for managers of hedge funds, private equity funds and real asset funds, and the FCA has extended the deadline for responses to the paper and to its prudential discussion chapter to 22 October 2026. The deadline for the other discussion chapters was 18 September 2026. This is a consultation, not a rule. Nothing changes today, but the decisions that matter to a manager, which tier it falls into and whether it must apply for authorisation, are being shaped now. The FCA says UK asset managers oversee almost £2 trillion in alternative assets within over £16 trillion in total, which explains the scale of the exercise.

What the FCA proposes

Much of the current framework comes from the EU AIFMD and was retained in UK law after Brexit, and the FCA says its size thresholds have not kept pace with inflation or market growth. It proposes a three-tier structure based on net asset value: small below £750 million, medium from £750 million to £5 billion, and large above £5 billion. A manager adds up the NAV of all the funds it manages to find its tier, so the test is run on the firm and not on a single fund. Rules apply in a graduated way, and a smaller manager can choose to follow a higher tier's standards by notifying the FCA. A manager that moves between tiers has six months to comply with new obligations, and twelve months to meet the depositary requirement. The FCA would also bring most AIFM rules into a new sourcebook, called ALTS. Two companion consultations, CP26/26 on fund reporting and CP26/27 on remuneration, were published at the same time.

The registered regime would end

HM Treasury proposes removing the AIFM registration regime except for registered venture capital funds and social enterprise funds, and it proposes no grandfathering for managers that are registered today. Unauthorised property fund managers and some internally managed AIFMs outside the proposed exemption would need FCA authorisation, and firms would be given time to apply before the implementation date. The Treasury is running a parallel consultation on the underlying legislation. For a small UK manager this is the most consequential change in the paper.

What it means for closed-ended private equity and real asset funds

For managers of closed-ended, unleveraged funds the proposals are lighter than for open-ended funds. The FCA proposes that no liquidity risk management rules apply to an unleveraged closed-ended fund, and that only baseline risk management rules apply to a manager that runs only such funds. It still expects a manager to consider investor commitments and wind-down risks. Valuation rules apply to all managers, including small ones, with principles for smaller firms and criteria that an independent valuer must meet. The FCA proposes dropping the gross and commitment methods for leverage disclosure, and removing the pre-notification requirement for delegation. The National Private Placement Regime for marketing overseas funds into the UK would be retained, with limited changes, which matters for non-UK managers that raise from UK investors.

What to review before 22 October

This is our practical suggestion, not FCA guidance. First, add up the NAV of every fund you manage and see which tier you would fall into, and how close you are to £750 million or £5 billion. Second, if you are UK-registered today, map an authorisation timetable, because the proposals contain no grandfathering. Third, check whether all your funds are closed-ended and unleveraged, and which parts of the lighter treatment would apply to you. Fourth, read your valuation policy against the proposed independent valuer criteria, and check that your limited partnership agreement allows the valuation approach you would use. Fifth, if you are a management company for several vehicles, decide who in the firm owns the response. Our compliance guide to AIFMD II and the SEC marketing rule is a companion for managers that also market in the EU and the US, and our note on the SEC's custody rule proposal shows another regulator moving on fund-manager rules this autumn.

Timeline and why investors will ask

The FCA says it will publish a policy statement with final rules and a second consultation on remaining areas, and it targets final rules in 2027 and currently envisages 2028 for implementation. A manager that waits for the final rules will have less time to authorise or restructure than one that models its position now. Allocators in the UK investor universe may ask how a manager plans to handle the change, so keep a short summary of your likely tier, your authorisation status and your valuation approach ready for your next due diligence pack.

What to watch next

Watch for the FCA's policy statement and its second consultation paper, for the Treasury's draft legislation, and for the final rules. FundLinx members can see which UK allocators are active this quarter.

This article is general information and is not legal advice, so talk to your counsel about how the proposals affect your funds.

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