The UK Financial Conduct Authority (FCA) has launched a consultation with proposals to alter the Alternative Investment Fund Managers Directive (AIFMD) and Fund Reporting for Asset Management Entities (FRAME) requirements.
“With a sharp focus on proportionality, we can particularly boost freedom for smaller firms to find new ways to achieve the same high standards,” said Simon Walls, executive director of markets at the FCA.
The proposed changes are estimated to save asset managers £128m a year.
Read more: AIFMD II creates overlooked compliance burden for managers
The FCA suggests that firms be classified under three new categories, based on net asset value (NAV): small with NAV under £750m, medium with NAV between £750m and £5bn, and large with NAV over £5bn. At present, AIFMD mandates compliance based on assets under management (AUM), not NAV.
Current leverage calculations are also set to change, with the British regulator opting to move away from a single leverage ratio, arguing it is not comparable across different fund types. Instead, it wants firms to disclose the quantum of leverage using methods best suited to their investment strategy, while ensuring disclosure to investors is clear and not misleading.
Meanwhile, funds that use derivatives only for hedging would be classified as “unleveraged” under the new FCA rulebook.
The FCA also aims to impose different requirements depending on whether the fund is closed-ended and unleveraged; closed-ended and leveraged; or open-ended. For instance, closed-ended and unleveraged funds would face no liquidity rules.
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One area that will see greater scrutiny, however, are valuation expectations. Unlike the current framework, the new FCA regime would see all AIFMs, regardless of size, be subject to valuation rules, with the regulator putting a greater emphasis on conflicts, governance and documented oversight.
The Managed Funds Association, the trade association for the global alternative asset management industry, issued a positive response to the proposed changes.
“MFA welcomes the FCA’s efforts to simplify reporting requirements and update legacy rules to enhance competitiveness,” said its head of government affairs EMEA, Rob Hailey. “The proposed reforms recognise that alternative investment funds can achieve strong risk management and investor protection standards without unnecessary operational complexity. This will allow firms to direct more resources toward serving investors and providing capital to UK markets.”
The UK AIFM regime consultation has a deadline of 14 October 2026, and the FRAME consultation ends on 22 September 2026. Separately, the FCA is also consulting on the solo remuneration rules reform, with stakeholders having to submit feedback by 16 September 2026.
