Old and new sign
iStockphoto

In an effort to boost competition and innovation in its alternative fund sector, the U.K.’s Financial Conduct Authority (FCA) is proposing to overhaul and streamline its regime for alt asset managers — making it easier for firms to enter the market.

In a consultation paper published today, the FCA said it’s seeking to reform the regulation of the alt fund sector to make the regime easier to understand and comply with, simpler for new entrants to join the market, and easier for existing firms to grow without needless regulatory burdens.

As part of the reform effort, policymakers are seeking to shift certain provisions governing alt managers in the U.K. from legislation into rules, and to revise those rules. 

The regulator’s initiative is taking place alongside a consultation by the HM Treasury on proposed changes to the legal framework, including redrawing the regulatory perimeter — which determines the firms that must be registered and regulated — in the alt fund sector.

“We propose an approach that is proportionate to firms’ size and activities, allowing for growth without sudden or undue regulatory burdens,” the FCA said in the consultation paper outlining its proposals. 

As it stands, asset managers in the U.K. manage £2 trillion in “alternative assets” alongside £12.3 trillion in “mainstream” assets, the FCA said in its paper — which also noted that, globally, private assets have tripled over the past decade. 

“We also plan to remove unnecessary regulation and reduce the administrative burden for all [alt managers],” the FCA said. “We want a regime that has enough flexibility to allow firms to do business across borders and is consistent with international standards.”

When it comes to implementing changes, the FCA said that it intends to scrap unnecessary rules “relatively quickly,” while also giving firms time to adapt to other aspects of the new regime.

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

“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,” he added.

Indeed, the FCA noted that it is also considering various other reforms that aren’t covered in today’s consultation, including potential changes to the prudential rules and regulatory reporting requirements for alt managers; the rules on disclosure, distribution and marketing to retail investors; and remuneration rules.

The FCA and the Treasury are also considering creating bespoke regulatory regimes for investment trusts and for venture capital firms, it noted. 

The consultation paper is open for comment until June 9. 

“Subject to feedback, and to decisions by the Treasury on the future regime,” the FCA said that it plans to consult on detailed rules in the first half of 2026.