UK may ease regulation for alternative asset managers

With a response deadline of 9 June 2025 and a more detailed consultation planned for 2026, these reforms are set to redefine the regulatory landscape in the near term.

Economic growth

The reason these regulatory reforms are being pursued is to support the UK government[3] and FCAs[4] strategic priority of economic growth.

As the size of the private markets has tripled over the past decade and with UK AIFMs AUM at £2 trillion there is a big prize to be gained.

Simplification and proportionality

The key objectives behind these proposed reforms are to create a regulatory framework that is simpler, more flexible, and proportionate to the size and activities of individual firms. By reducing unnecessary compliance costs, the FCA aims to foster greater market competition while streamlining the regulatory environment for smaller and mid-sized firms.

Proposed changes include:

• Tiered system based on firm size
  The FCA is proposing a three-tier structure for AIFMs, with requirements scaled according to firm size:
  • Large firms – more than £5 billion in assets under management (AuM) by NAV
  • Mid-sized firms – between £100 million and £5 billion in AuM by NAV

  • Small firms – under £100 million in AuM by NAV

    It is important to note that under the current regime the full scope of the regime applies to AuMs above €500m.

• Clearer and more focused rule sets
  The regulatory framework would be organised into four distinct categories, covering each stage of the investment lifecycle:
  • Structure and operation of the firm
  • Pre-investment phase
  • During investment

  • Change-related

• Flexibility for different activities
  Instead of applying rigid rules across the board, the new framework would allow regulations to be tailored to the activities of the firm, ensuring that rules that are not relevant to the activities of a firm do not apply.

• A dedicated venture capital regime
  Recognising the unique characteristics of venture capital investments, the FCA is considering a bespoke regulatory regime for VC firms, helping to support innovation while ensuring appropriate oversight.

What does this mean for AIFMs?

The proposed changes present both opportunities and challenges for UK AIFMs. While the simplification of rules could reduce operational costs and compliance burdens, firms will need to adapt to the new framework and understand how to effectively navigate the evolving landscape.

As the consultation period progresses, it’s clear that these reforms aim to position the UK as a competitive hub for alternative asset management, with a focus on growth and innovation. At Belasko, we’re committed to helping our clients stay ahead of regulatory changes and leverage the benefits of a simplified regulatory environment.

We would be delighted to hear your view on how the proposed changes could impact your business. If you’d like to discuss further, please get in touch with Nick McHardy, Head of Funds.

[1] Source FCA – https://www.fca.org.uk/news/press-releases/rules-investment-managers-be-reformed-support-growth

[2] Source UK Government – https://www.gov.uk/government/consultations/alternative-investment-fund-managers-regulations-consultation

[3] Source FCA – https://www.fca.org.uk/publication/correspondence/fca-letter-new-approach-support-growth.pdf

[4] Source – FCA – https://www.fca.org.uk/news/press-releases/fca-launches-5-year-strategy-support-growth-and-improve-lives