The U.K.'s alternative investment fund manager (AIFM) regime is about to change significantly. On July 14, 2026, the U.K. Government and the Financial Conduct Authority (FCA) launched a coordinated package of reforms that will reshape how AIFMs are classified, regulated, and supervised.
The proposed changes represent the most substantial overhaul of the regime since it was introduced in 2013 and are designed to make it more proportionate and competitive.
What’s being proposed?
The package comprises:
-
the government's draft Alternative Investment Fund Managers Regulations 2026 and a related policy note
-
the FCA's main consultation (CP26/28) on the U.K. AIFM Regime
-
the FCA's consultation (CP26/26) on fund reporting for asset management entities (referred to as FRAME)
-
a separate FCA's consultation on remuneration for solo-regulated firms (CP26/27).
Together, the reforms would move most firm-facing AIFM requirements out of assimilated EU law and into FCA rules housed in a new sourcebook for alternative investment funds, to be known as ALTS.
A new three-tier regime
The headline change is a new three-tier classification system for U.K. AIFMs based on net asset value (NAV), with requirements applying proportionately across tiers and the detail to be located in the new ALTS sourcebook.
The proposed tiers are:
-
large AIFMs (over GBP5B NAV)
-
medium AIFMs (GBP750M–GBP5B NAV)
-
small AIFMs (below GBP750M NAV).
While AIFMs moving between tiers would not require a variation of permission, they would be expected to notify the FCA and would generally have six months to comply with new obligations, or 12 months where a depositary appointment becomes required.
AIFMs may also elect to comply with a higher-tier regime without formally entering that classification (e.g. to meet client or counterparty expectations or align with international standards).
Changes to the regulatory perimeter
The government proposes to amend the definition of an alternative investment fund (AIF) to clarify that an investment policy may be implicit and that “raising capital” covers situations where capital has previously been raised or is only intended to be raised in the future. The FCA expects that some vehicles currently operating as residual collective investment schemes will, as a result, fall within scope as AIFs—requiring fresh legal analysis and potentially new FCA permissions.
Perhaps more significantly for smaller managers, the existing small registered AIFM regime would be abolished (save for managers of registered venture capital funds and social enterprise funds), meaning that firms currently relying on registration, such as unauthorized property fund managers, would need to seek FCA authorization. Following industry feedback, the government has proposed a targeted exemption for internally managed listed closed-ended investment companies below the current small AIFM thresholds, provided the fund is admitted to trading on a qualifying U.K. market or venue.
Key substantive changes
-
Leverage. Firms will no longer need to calculate leverage on the prescriptive gross and commitment bases. Instead, AIFMs could use whichever methodology they consider appropriate to their fund and strategy, provided the approach is clearly disclosed to investors. This is one of the more straightforwardly welcome changes in the package
-
Risk management and liquidity. Unleveraged closed-ended AIFs would be carved out of detailed liquidity requirements entirely, with liquidity assessed as part of general risk management instead. A new “look-through” requirement is proposed for larger AIFMs managing open-ended funds that invest in other open-ended funds, requiring monitoring of underlying managers' liquidity management.
-
Delegation. The FCA proposes to remove the requirement for FCA pre-approval of delegation arrangements and to replace pre-notification with notification as soon as practicable after the delegation takes effect, while retaining the core principle that the AIFM remains liable to the AIF and its investors.
-
Reporting. Under FRAME, most AIFs with NAV below GBP500M would report only “essential” information (covering general fund data, strategy, investor base, performance, and liquidity). Larger funds would additionally provide enhanced data on portfolio exposures, dealing terms, fees, and risk sensitivities. Reporting frequency would be quarterly for hedge funds and authorized funds, and annual for other fund types.
-
Marketing. The longstanding 20 working days' prior notice requirement for marketing would be removed.
-
Portfolio company disclosures. Despite industry hopes to the contrary, the requirement to notify the FCA when acquiring large shareholdings in a portfolio company will remain, though the obligation to notify periodically when increasing or reducing holdings would be removed.
-
External valuers. The statutory unlimited liability of external valuers to the AIFM would be removed, with liability to be determined contractually—a change the industry has long sought.
Impact of reforms
Although the precise impact of the changes will vary consider
The U.K.'s alternative investment fund manager (AIFM) regime is about to change significantly. On July 14, 2026, the U.K. Government and the Financial Conduct Authority (FCA) launched a coordinated package of reforms that will reshape how AIFMs are classified, regulated, and supervised.
The proposed changes represent the most substantial overhaul of the regime since it was introduced in 2013 and are designed to make it more proportionate and competitive.
What’s being proposed?
The package comprises:
-
the government's draft Alternative Investment Fund Managers Regulations 2026 and a related policy note
-
the FCA's main consultation (CP26/28) on the U.K. AIFM Regime
-
the FCA's consultation (CP26/26) on fund reporting for asset management entities (referred to as FRAME)
-
a separate FCA's consultation on remuneration for solo-regulated firms (CP26/27).
Together, the reforms would move most firm-facing AIFM requirements out of assimilated EU law and into FCA rules housed in a new sourcebook for alternative investment funds, to be known as ALTS.
A new three-tier regime
The headline change is a new three-tier classification system for U.K. AIFMs based on net asset value (NAV), with requirements applying proportionately across tiers and the detail to be located in the new ALTS sourcebook.
The proposed tiers are:
-
large AIFMs (over GBP5B NAV)
-
medium AIFMs (GBP750M–GBP5B NAV)
-
small AIFMs (below GBP750M NAV).
While AIFMs moving between tiers would not require a variation of permission, they would be expected to notify the FCA and would generally have six months to comply with new obligations, or 12 months where a depositary appointment becomes required.
AIFMs may also elect to comply with a higher-tier regime without formally entering that classification (e.g. to meet client or counterparty expectations or align with international standards).
Changes to the regulatory perimeter
The government proposes to amend the definition of an alternative investment fund (AIF) to clarify that an investment policy may be implicit and that “raising capital” covers situations where capital has previously been raised or is only intended to be raised in the future. The FCA expects that some vehicles currently operating as residual collective investment schemes will, as a result, fall within scope as AIFs—requiring fresh legal analysis and potentially new FCA permissions.
Perhaps more significantly for smaller managers, the existing small registered AIFM regime would be abolished (save for managers of registered venture capital funds and social enterprise funds), meaning that firms currently relying on registration, such as unauthorized property fund managers, would need to seek FCA authorization. Following industry feedback, the government has proposed a targeted exemption for internally managed listed closed-ended investment companies below the current small AIFM thresholds, provided the fund is admitted to trading on a qualifying U.K. market or venue.
Key substantive changes
-
Leverage. Firms will no longer need to calculate leverage on the prescriptive gross and commitment bases. Instead, AIFMs could use whichever methodology they consider appropriate to their fund and strategy, provided the approach is clearly disclosed to investors. This is one of the more straightforwardly welcome changes in the package
-
Risk management and liquidity. Unleveraged closed-ended AIFs would be carved out of detailed liquidity requirements entirely, with liquidity assessed as part of general risk management instead. A new “look-through” requirement is proposed for larger AIFMs managing open-ended funds that invest in other open-ended funds, requiring monitoring of underlying managers' liquidity management.
-
Delegation. The FCA proposes to remove the requirement for FCA pre-approval of delegation arrangements and to replace pre-notification with notification as soon as practicable after the delegation takes effect, while retaining the core principle that the AIFM remains liable to the AIF and its investors.
-
Reporting. Under FRAME, most AIFs with NAV below GBP500M would report only “essential” information (covering general fund data, strategy, investor base, performance, and liquidity). Larger funds would additionally provide enhanced data on portfolio exposures, dealing terms, fees, and risk sensitivities. Reporting frequency would be quarterly for hedge funds and authorized funds, and annual for other fund types.
-
Marketing. The longstanding 20 working days' prior notice requirement for marketing would be removed.
-
Portfolio company disclosures. Despite industry hopes to the contrary, the requirement to notify the FCA when acquiring large shareholdings in a portfolio company will remain, though the obligation to notify periodically when increasing or reducing holdings would be removed.
-
External valuers. The statutory unlimited liability of external valuers to the AIFM would be removed, with liability to be determined contractually—a change the industry has long sought.
Impact of reforms
Although the precise impact of the changes will vary considerably depending on a firm's size, strategy, and fund structures, the FCA estimates the reforms, particularly those to its reporting requirements, will save asset managers GBP128M a year.
The package will be welcomed in many areas (particularly for smaller and private capital managers) but the impact may prove more modest than hoped for medium and large managers, and will increase divergence from the EU AIFMD framework, adding complexity for groups operating across both regimes.
Next steps
The consultation deadline for the draft legislation and the main FCA proposals is October 14, 2026, with certain discussion chapters (including on depositaries and prime brokers) closing earlier on September 18, 2026. The FCA plans to publish a second consultation paper with draft rules on remaining areas of the regime. Final rules are expected in 2027, with the new regime anticipated to take effect in 2028.
Firms should now assess their likely classification under the new NAV-based tiers, identify whether they currently rely on the registration regime, and consider whether changes to the definition of an AIF affect any of their fund structures.
How Winston Taylor can help
Whether you are an established AIFM or a firm newly brought within scope, we are well placed to guide you through the changes and help you prepare for the new regime.
ably depending on a firm's size, strategy, and fund structures, the FCA estimates the reforms, particularly those to its reporting requirements, will save asset managers GBP128M a year.
The package will be welcomed in many areas (particularly for smaller and private capital managers) but the impact may prove more modest than hoped for medium and large managers, and will increase divergence from the EU AIFMD framework, adding complexity for groups operating across both regimes.
Next steps
The consultation deadline for the draft legislation and the main FCA proposals is October 14, 2026, with certain discussion chapters (including on depositaries and prime brokers) closing earlier on September 18, 2026. The FCA plans to publish a second consultation paper with draft rules on remaining areas of the regime. Final rules are expected in 2027, with the new regime anticipated to take effect in 2028.
Firms should now assess their likely classification under the new NAV-based tiers, identify whether they currently rely on the registration regime, and consider whether changes to the definition of an AIF affect any of their fund structures.
How Winston Taylor can help
Whether you are an established AIFM or a firm newly brought within scope, we are well placed to guide you through the changes and help you prepare for the new regime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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