The Financial Conduct Authority (FCA) has unveiled plans to reform the regulatory framework for alternative investment managers, in a move aimed at fostering competition, innovation, and long-term economic growth.
The proposals, published as part of a call for input, are designed to create a more proportionate and streamlined regime that better reflects the UK’s post-Brexit regulatory environment.
Alternative assets are increasingly important to the UK economy, with private markets having tripled in size over the past decade, according to the FCA. UK-based managers now oversee around £2trn (€2.3trn) in alternative investments, alongside £12.3trn in mainstream assets.
The FCA has said its proposals will make it easier for firms to operate globally while maintaining high standards of risk management and investor protection.
“Asset managers play a vital role in capital formation and the financial wellbeing of millions,” said Simon Walls, interim executive director of markets at the FCA.
“We want rules better tailored to UK investment managers. These could allow them to operate more efficiently, further supporting competition, competitiveness and economic growth.”
Much of the existing UK asset management regime is based on EU legislation, notably the Alternative Investment Fund Managers Directive (AIFMD).
The HM Treasury (HMT) is now consulting on removing firm-facing elements of the AIFMD from statute, with the FCA expected to replace relevant provisions through its own rulebook. This reflects a broader post-Brexit ambition to create a more flexible and domestically focused regulatory framework, the authority noted.
Bespoke regimes
As part of the reform, the FCA is also considering bespoke regimes for investment trusts and venture capital firms, recognising their distinct structures and operating models. The regulator said the reforms would help firms grow and innovate while continuing to uphold market integrity and investor confidence.
The changes are part of a wider FCA strategy, published in March, which committed to reforming the regulatory rulebook to support UK competitiveness. This includes nearly 50 actions aimed at bolstering economic growth, which the regulator recently outlined in a letter to prime minister Keir Starmer.
Stakeholders have until 9 June 2025 to respond to the FCA’s call for input. A full consultation on proposed new rules is expected in the first half of 2026, subject to Treasury decisions.
For institutional investors and asset managers, the reforms represent a significant opportunity to help shape a regulatory regime that supports innovation while maintaining high standards of investor protection. The FCA’s willingness to engage signals a shift towards more agile, UK-specific policymaking for the sector.
Chris Cummings, chief executive officer of the Investment Association, said: “The UK is a world-leading centre for investment management, and we welcome the opportunity to work with policymakers and regulators to streamline the regulatory regime for investment managers to create a more proportionate and competitive regulatory framework.”
He said the AIFMD was integral to a range of funds used by both institutional and retail investors, with alternative investment funds playing an important role in the growth of private markets.
“The proposals will allow the UK investment management industry to better serve its customers in the UK and around the world, to deploy capital effectively to support growth and to make a broader contribution to the UK economy. We look forward to responding to today’s call for input from the FCA and to the consultation from HMT,” he added.
Jiri Krol, deputy CEO and global head of government affairs at AIMA, the investment trade body, said: “HM Treasury and the FCA recognise that the current rules can be made less burdensome while maintaining necessary consumer protections. A rethink of the crude monetary thresholds applying to managers is long overdue.”
He added that AIMA was “pleased to see that some of the overly prescriptive organisational requirements and duplicative data managers must report are being reviewed”.
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