Modernising UK Alternative Investment Management: The Potential Impact of CP26/28

The Financial Conduct Authority (FCA) has published Consultation Paper CP26/28, signalling a comprehensive post-Brexit overhaul of the UK’s Alternative Investment Fund Managers (AIFM) regime. Designed to replace the rigid, inherited EU AIFMD rules with a tailored sourcebook titled the Alternative Investment Funds sourcebook (ALTS), the proposals represent a major shift toward proportionate, principles-based oversight.

With the new framework scheduled for implementation in 2028, the consultation carries significant operational, governance, and compliance implications across the UK’s nearly £2 trillion alternative asset sector.

1. Shift to a Tiered Framework

The headline change is the transition from a one-size-fits-all model to a three-tier regulatory structure based on Net Asset Value (NAV) thresholds:

Tier	NAV Threshold	Core Compliance Profile
Small AIFM	< £750M	Streamlined disclosures, simplified annual summaries, basic liquidity controls.
Medium AIFM	£750M – £5B	Baseline requirements plus detailed liquidity management and depositary oversight.
Large AIFM	> £5B	Full regulatory burden reflecting potential systemic and market integrity risks.

This structure alleviates disproportionate administrative overhead for smaller venture, real asset, and private equity managers while concentrating granular reporting where systemic risk resides.

2. Key Operational & Structural Impacts

The End of the Registered Regime

A critical friction point is the abolition of the registered AIFM regime (excluding RVECAs and Social Enterprise Funds). Historically lighter-touch registered managers will now be required to seek full FCA authorisation. For these firms, transitioning to formal authorisation means upgrading compliance infrastructure, governance, and regulatory reporting well ahead of the 2028 deadline.

Streamlined Delegation Oversight

Under the current regime, delegation of fund management often requires prior FCA authorisation. CP26/28 shifts this to a post-implementation notification process. While this reduces upfront deal drag, managers will still need robust ongoing oversight to justify delegating core functions—such as valuation, compliance monitoring, and marketing—based on clear objective grounds like specialist expertise.

Pragmatic Investor Disclosures & Remuneration

The proposal replaces prescriptive disclosure templates with principles-based requirements. Small AIFMs can provide short annual summaries instead of exhaustive annual reports. In parallel, proposed remuneration reforms relax strict malus and clawback mandates, granting firms greater discretion to align variable pay with business reality.

3. Immediate Action Items for Managers

• Map AUM Against New Tiers: Assess current and projected NAV to determine whether your firm falls into the Small, Medium, or Large bucket.

• Review Authorisation Status: Registered AIFMs must evaluate the compliance gap and resource requirements necessary to secure full FCA authorisation.

• Audit Delegation Frameworks: Ensure contractual arrangements, oversight mechanisms, and justification metrics for third-party delegates meet updated core-function standards.

  
  

Strategic Bottom Line

CP26/28 reflects a deliberate effort by the FCA to balance international competitiveness with robust market oversight. While the 2028 deadline offers a multi-year runway, the structural work—particularly for currently registered managers and firms hovering near NAV tier boundaries—begins now.