Launching a fund in Europe without drowning in regulation

The single biggest reason first-time fund managers in Europe delay launching is regulation. They hear "AIFMD" and picture a two-year licensing process, a team of compliance officers, and six-figure legal bills. For some fund structures, that picture is accurate. But for most emerging managers, there are significantly lighter paths available — and choosing the right one can mean the difference between launching in months rather than years.

The regulatory spectrum

European fund regulation is not one-size-fits-all. There is a spectrum from full AIFM authorisation at one end to relatively light registration regimes at the other. Where you sit on this spectrum depends on your fund size, strategy, investor base, and domicile. Understanding your options is the first step to making an informed decision.

Sub-threshold AIFM in Europe

The Alternative Investment Fund Managers Directive (AIFMD) introduced a registration regime for smaller managers — commonly called "sub-threshold" or "de minimis" AIFM. If your total assets under management are below €100 million (with leverage) or €500 million (without leverage and with a five-year lock-up), you may register rather than obtain a full AIFM licence. Registration is faster, cheaper, and involves significantly less ongoing regulatory burden. You still report to your national regulator, but the scope of those reporting obligations is reduced.

The sub-threshold regime is available across EU member states, though the specifics of the registration process vary by country. Germany (BaFin), the Netherlands (AFM), France (AMF), and Ireland (Central Bank) all have established sub-threshold registration processes. The UK — post-Brexit — has its own sub-threshold AIFM regime under the FCA, which operates on similar principles.

EuVECA: a marketing passport without a full licence

The European Venture Capital Regulation (EuVECA) offers an alternative for managers investing at least 70% of committed capital in qualifying venture capital investments. EuVECA-registered managers can market their funds across the EU using a simplified notification procedure — effectively a marketing passport — without needing a full AIFM licence. This is particularly attractive for early-stage venture capital managers who meet the investment criteria.

The trade-off is that EuVECA imposes specific portfolio composition requirements and investor eligibility rules. It is not suitable for every strategy, but for qualifying managers it provides a streamlined route to cross-border fundraising.

US: Section 3(c)(1) and 3(c)(7) exemptions

For managers launching in the United States, the Investment Company Act of 1940 provides exemptions that most private fund managers rely on. Section 3(c)(1) permits a fund with up to 100 beneficial owners. Section 3(c)(7) permits unlimited investors but requires all investors to be "qualified purchasers." Most emerging managers start with a 3(c)(1) exemption and their first fund of accredited investors. The Securities and Exchange Commission also requires investment adviser registration above certain thresholds, though there are exemptions for venture capital fund advisers and private fund advisers with less than $150 million in AUM.

UK: sub-threshold AIFM under the FCA

The UK's Financial Conduct Authority operates a sub-threshold regime similar to the EU's. Managers below the same AUM thresholds (£100M leveraged / £500M unleveraged) can register as small authorised UK AIFMs. This requires FCA authorisation but with a reduced scope of regulatory obligations compared to a full-scope AIFM. The UK regime has the advantage of operating in a familiar common-law legal environment with a well-established fund services ecosystem.

Germany: BaFin registration

Germany has become an increasingly popular domicile for European emerging managers. BaFin's sub-threshold registration is well-established, the legal framework for fund structures (particularly the GmbH & Co. KG for venture capital) is well-understood, and the country's position in the European market makes it an attractive base for managers targeting DACH-region investors.

How to decide

The right regulatory path depends on several factors. What is your target fund size? Where are your investors located? What is your investment strategy? How quickly do you need to be operational? A sub-threshold AIFM registration might take weeks to months, while a full AIFM licence can take twelve months or more. Your jurisdiction choice also matters for LP perception — some institutional investors have preferences or restrictions around fund domicile.

We operate across multiple jurisdictions — UK, US, Germany, Austria, Cayman — and help managers navigate these decisions as part of our fund setup process. The regulatory path is not just a legal question — it has operational and commercial implications that should be considered together.

If you are planning your first European fund launch, book a call with our team and we will help you map the right path.

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