The Financial Conduct Authority (FCA) is proposing reforms to its regime for alternative asset managers which will reduce the regulatory burden on smaller firms.

The reformed rules are aimed at making the regime easier to understand and navigate, making it simpler for new entrants to join the market and for existing firms to grow without undue regulatory burdens.

Among other suggestions, the FCA wants to lift the threshold for ‘full-scope’ regulation from £100m of assets to £5bn for alternative asset managers, effectively diluting the regulations faced by smaller alternative funds.

The regime for the largest firms would ensure that the strictest risk management standards apply to the firms with a broad reach and potential for harm, the FCA said.

“We want rules better tailored to UK investment managers,” said Simon Walls, interim executive director of markets.

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“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.”

The FCA noted that UK asset managers manage £12.3tn in mainstream assets and £2tn in alternative assets, while private markets have tripled in size over the past decade.

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However, most of the UK’s asset management regulation still derives from EU legislation, such as the alternative investment fund managers directive (AIFMD). The UK government is currently consulting on bringing into effect new provisions that repeal AIFMD’s firm-facing legislative requirements, while the FCA is also considering changes to its existing AIFMD rules.

The announcement follows a turbulent few days on the global markets after US President Trump’s tariffs sent equity valuations into freefall. As a result, many investors are turning to private market and alternative assets in an effort to offset risk.

The FCA has invited comments on its alternative asset regulation proposals before 9 June 2025. The regulator 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.

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