The UK is rewriting its fund manager rulebook. Emerging managers should pay attention.

In July the FCA set out the most significant overhaul of UK fund manager regulation since AIFMD arrived from Brussels in 2013. Consultation paper CP26/28 proposes to retire the inherited EU framework and replace it with a regime designed around the size and shape of UK firms. The main consultation closes on 14 October 2026. Some chapters close earlier, on 18 September. New rules are targeted for 2028.

For a UK alternatives sector overseeing roughly £2 trillion, this is a structural event. For emerging managers, the people deciding this year whether to launch a first fund, keep running SPVs or wait, it deserves closer attention than most of the coverage suggests.

What is actually proposed

Three changes matter most. First, the binary split between full-scope and sub-threshold AIFMs would be replaced with three tiers: small, medium and large, sized on aggregate net asset value, with the small tier set at under £750m. Second, the small registered AIFM regime would be abolished, so the very smallest managers who today operate on a registration-only basis would need FCA authorisation. Third, the FCA is openly asking whether depositary requirements are proportionate for private equity-type funds, alongside a consolidated ALTS sourcebook, bespoke reporting for private markets funds and new guidance on marketing under the NPPR.

The delegation detail

Inside the delegation chapter is a proposed new category of additional core AIFM functions, covering third-party valuation, compliance monitoring and AIF marketing, which would become easier to delegate. The regulator is picking up on what small managers already do in practice: buy compliance oversight, valuation and marketing capability rather than build it themselves. Read alongside CP26/26, the FRAME reporting reforms which close on 22 September, the direction of travel is a rulebook that assumes outsourcing rather than one that penalises it.

Proportionality cuts both ways

The headline pitch is a more proportionate regime and for mid-sized managers that is likely true. Three tiers should mean fewer rules written for £10 billion firms applying to £100 million ones, simpler reporting and a remuneration code being separately streamlined under CP26/27.

For the smallest managers the picture is more mixed. Abolishing the registered regime pulls managers that haven’t needed authorisation previously inside the perimeter. That raises the fixed cost of being a micro manager exactly when first-time fundraising is hardest. UK private equity raised £11.7bn across 15 funds in the first half of 2026, on track for the lowest annual total in a decade, and the mix moved sharply towards smaller growth vehicles: 22.2% of capital raised against 2.8% in 2025. More managers, smaller funds and a fixed compliance cost that does not scale down with them.

The rational response is the one the market has already found. Build a track record deal by deal through SPVs, then convert that evidence into a named fund when the LPs and the regulatory maths both support it.

The depositary question is a custody question

Less discussed is the consultation’s challenge to depositary requirements for private equity-type AIFs. Whichever way the FCA lands, the direction is clear. Safekeeping, oversight and cash monitoring are being unbundled and priced on their own merits rather than bought as a compliance bundle. Managers should understand what custody they actually need, for which assets, in which jurisdictions, rather than defaulting to whatever their administrator resells.

What emerging managers should do before October

Three practical steps. Read the tiering proposals against your own three-year AUM plan, because the tier you land in will shape your compliance budget. If you are pre-fund, stress-test whether your launch plan still assumes rules that may not exist in 2028, because structures signed this year will straddle the transition. And respond to the consultation. Note the earlier 18 September deadline on some chapters. The FCA has explicitly asked for input from smaller managers, a constituency that historically leaves consultations to the big firms whose interests differ.

The UK is trying to make itself a better place to build a fund management business. Whether that promise reaches first-time managers depends substantially on the detail that gets settled between now and October.

At Floww we sit under many of these journeys as the regulated rails, from SPV structuring through to FlowwFunds fund infrastructure with AIFM hosting and custody, so managers can start with deal-by-deal vehicles and carry their track record into a fund without rebuilding their stack. The proposals themselves are in FCA CP26/28.

Floww Markets Limited is authorised and regulated by the Financial Conduct Authority (FRN 980098). This article is for information purposes only. It is not financial, investment, legal or regulatory advice and it does not constitute a financial promotion of any investment. Capital at risk when investing in private markets.