The FCA is proposing a major rule overhaul for managers of alternative investments to promote growth and get rid of old EU regulations.

The regulator has put forward a series of reforms to its regime for alternative asset managers.

It says the changes would make it easier for firms to, “enter the market, grow, compete and innovate.”

The changes could cover a wide variety of investment managers, says the FCA, including:

• hedge funds

• private equity funds

• venture capital and growth capital funds, including Registered Venture Capital Funds (RVECAs)

• Social Entrepreneurship Funds (SEFs)

• real estate funds

• other types of private market funds, such as infrastructure and private debt funds

• funds of funds

• investment companies, and

• authorised funds that are not UK UCITS, such as Non-UCITS Retail Schemes (NURS), Long Term Asset Funds (LTAFs), and Qualified Investor Schemes (QIS). 

The FCA has published a Call for Input paper today: Future regulation of alternative fund managers

The FCA says that a, “more streamlined and proportionate regime” will make it easier for firms to operate globally and encourage effective risk management.

A new regime will also uphold market integrity and market confidence by making sure consumers are appropriately protected, the regulator said.

The watchdog says that asset managers are crucial for the financial wellbeing of millions and play a key role in capital formation for the UK economy.

UK asset managers manage £12.3 trillion in mainstream assets plus £2 trillion in alternative assets. Private markets have tripled in size over the past decade, the FCA said, and it wants this growth to continue. 

Much of the UK’s asset management regulation is derived from EU legislation, including the alternative investment fund managers directive (AIFMD). The Government is consulting on bringing into effect provisions that repeal the AIFMD’s firm-facing legislative requirements.

Where appropriate, the FCA will replace those legal provisions with its own rules, it says. It is also considering changes to its existing AIFMD rules. 

Simon Walls, interim executive director of markets at the FCA, said: “We want rules better tailored to UK investment managers. These could allow them to operate more efficiently, further supporting competition, competitiveness and economic growth.

“It’s part of our wider work to streamline the regulatory regime for asset managers, to support the continued competitiveness of our world-leading financial services as outlined in our new strategy."

In collaboration with the Treasury, the FCA is considering creating bespoke regimes for investment trusts and for venture capital firms due to those sectors’ "distinct characteristics."

The FCA is seeking comments on its proposals before 9 June with plans to consult on detailed rules in the first half of 2026, subject to feedback and to decisions by the Treasury on the future regime.

• Read the Call for input: Future regulation of alternative fund managers.