I spend a lot of time walking emerging managers through the UK's AIFM framework, and the same confusion comes up every time: people think there is one application process, one set of rules, and one outcome. There isn't. The UK operates a three-tier system for Alternative Investment Fund Managers, and picking the wrong tier -- or not understanding which one you fall into -- can cost you months and tens of thousands of pounds you did not need to spend.
The framework sits on the Alternative Investment Fund Managers Regulations 2013, which brought the EU AIFM Directive into UK law [1]. Since Brexit, HM Treasury and the FCA have been reworking it to fit UK-specific priorities, but the core three-tier structure remains. Here is how it works in practice.
Tier one: small registered AIFMs
If your fund manages below GBP 100 million in assets (or EUR 100 million under the legacy thresholds), you can register with the FCA rather than seeking full authorisation [2]. This is the lightest regulatory touch available. You file a registration, not a full application. The ongoing obligations are minimal compared to what sits above you.
Small registered AIFMs still need to appoint a depositary, implement valuation procedures, and report to investors and the FCA. But you skip the heavier governance requirements, the quarterly Annex IV reporting, and the full SM&CR regime that authorised firms deal with [3]. For a two- or three-person GP team launching a first fund, this is almost always the right starting point.
The catch is the cliff edge. The moment your assets cross GBP 100 million, you face an immediate step-up in requirements. There is no grace period, no gradual phase-in. You go from minimal oversight to needing proper authorisation. For a successful Fund I that is approaching that threshold, the transition planning needs to start well before you hit it.
Tier two: small authorised AIFMs
Managers with assets between GBP 100 million and GBP 500 million (on a gross basis for leveraged funds) fall into the small authorised category [1][2]. You need Part 4A permission from the FCA, which means a full application through the Connect system. But the requirements are proportionate: lighter than full-scope AIFM, heavier than registration.
Small authorised AIFMs benefit from streamlined depositary arrangements in certain cases, reduced prudential requirements, and simplified reporting compared to their larger peers [1]. Many second-time fund managers operate here, having accumulated enough AUM with their first fund to cross the registration threshold but not yet reaching the scale where full-scope regulation kicks in.
The FCA application is not light. You submit a business plan, financial projections, details on senior management and their experience, compliance policies, risk management frameworks, and information on any delegated service providers [4]. Expect multiple rounds of questions from your assigned case officer. Budget four to six months for a straightforward application, longer if your structure involves novel elements or significant delegation [4].
Capital requirements. Small authorised AIFMs need initial capital of EUR 125,000 for external managers (EUR 300,000 for internally managed funds), plus one-quarter of the prior year's fixed overheads [5]. Compare that to EUR 50,000 for a small registered AIFM. The difference is real money for an emerging manager.
Tier three: full-scope AIFMs
Above GBP 500 million in gross assets, you are a full-scope AIFM [1][2]. This is the most demanding tier. Full depositary safekeeping functions. Extensive governance and risk management frameworks. Complex prudential capital calculations. Quarterly Annex IV transparency reporting to the FCA covering leverage, counterparty exposures, liquidity profiles, and risk metrics [6]. Stringent delegation oversight. The full SM&CR regime with personal accountability for senior managers [7].
Full-scope AIFMs must establish formal governance structures including independent directors, documented risk management policies, conflicts of interest procedures, and liquidity management frameworks [8]. The regulatory load is proportional to what the FCA sees as the systemic risk of larger fund managers.
Most emerging managers will never need to think about this tier for their first or second fund. But it is worth understanding what sits at the top of the framework, because if your plan is to scale up, you should be building systems and governance today that will not need to be ripped out and replaced when you get there.
The application process
For small registered AIFMs, the process is a registration through the FCA's Connect portal. Expect to submit financial forecasts, a liquidity management plan, Consumer Duty documentation, and ESG policies [9]. The FCA's application fee is GBP 1,000, and annual periodic fees run around GBP 718-781 [10]. Timeline: roughly three months from a complete submission.
For small authorised and full-scope AIFMs, you are looking at a full authorisation application. The FCA assesses these within six months for FSMA firms, though incomplete applications can stretch to twelve months [4]. The FCA's principle is that applicants must be "ready, willing and organised" to comply from the date of authorisation -- meaning you need systems, policies, and governance actually in place before you apply, not just planned [4].
On successful authorisation, you get added to the Financial Services Register with a Firm Reference Number and Product Reference Numbers for each fund [4]. That registration is your credential to manage AIFs and market them to eligible investors.
What is changing
The UK AIFM framework is undergoing its first major post-Brexit overhaul. HM Treasury published a consultation in April 2025 proposing to remove fixed AUM thresholds from statute and let the FCA set proportionate rules instead [3]. The FCA's own Call for Input proposed restructuring to three tiers based on net asset value rather than gross: large (GBP 5 billion-plus), mid-tier (GBP 100 million to GBP 5 billion), and small (under GBP 100 million) [8].
The goal is to reduce cliff-edge effects and eliminate the "business restriction" that currently prevents external full-scope AIFMs from undertaking MiFID investment services within the same legal entity [8]. That restriction forces growing managers to maintain separate regulated entities for different business functions. Removing it would cut real operational cost.
These reforms remain in consultation as of March 2026, with final implementation timing uncertain [8]. But the direction is clear: more proportionate regulation, fewer sudden compliance jumps, and more flexibility for managers of illiquid assets. If you are applying for authorisation today, you still comply with existing rules -- but you should structure your operations with the likely reforms in mind.
Ongoing compliance at each tier
What you sign up for after authorisation matters just as much as getting through the application.
Anti-money laundering. Every tier requires compliance with the Money Laundering Regulations [11]. You need a Money Laundering Reporting Officer, documented AML policies, customer due diligence procedures, ongoing monitoring, and suspicious activity reporting. For a small registered AIFM with a limited investor base, this is manageable. For a full-scope AIFM with offshore feeder structures and complex beneficial ownership chains, the burden scales fast.
Valuation. All tiers must establish documented valuation procedures. The FCA's recent multi-firm review of private market valuation practices flagged both good and bad practice across the industry [12]. The expectation is clear: rigorous procedures, independent validation, sensitivity analysis, and enhanced disclosure of methodologies to investors. Get your valuation framework right from the start rather than retrofitting it when the FCA asks questions.
Reporting. Small registered AIFMs file annual reports. Small authorised AIFMs face annual or semi-annual reporting. Full-scope AIFMs report quarterly via the Annex IV transparency framework, covering fund composition, leverage, liquidity, investor concentration, fees, and performance [6]. The data infrastructure required for quarterly Annex IV reporting is substantial, and it is not something you bolt on at the last minute.
SM&CR. The Senior Managers and Certification Regime applies to authorised firms [7]. You designate Senior Managers in prescribed roles -- CEO, Compliance Officer, MLRO -- and each gets a documented Statement of Responsibilities. The regime creates personal accountability: if the firm violates requirements within a senior manager's area of responsibility, that individual faces potential regulatory consequences. Small registered AIFMs are generally exempt, which is another reason the registration route is attractive for first funds.
Which tier fits your fund
For most first-time managers launching a venture or PE fund with under GBP 100 million, small registered AIFM is the answer. If you are running a venture capital strategy specifically, the RVECA registration route may be even better. It has its own set of rules and advantages worth examining separately.
Second-time managers with growing AUM will likely move into small authorised territory. Plan for it early. The jump from registration to authorisation is the most disruptive transition in the framework, and I have seen managers lose months because they did not start the application process soon enough.
Whatever tier you fall into, the key is matching your compliance infrastructure to the regulatory requirements -- not over-building for a tier you are not in, and not under-building for the one you are.
How Infra One supports UK AIFM registration and authorisation
We work with emerging managers across all three tiers, though the majority of our UK clients are small registered AIFMs or RVECA-registered managers. Our fund administration platform handles the operational side: formation, investor onboarding with automated KYC/AML, capital calls, reporting, and the ongoing compliance monitoring each tier demands. We built it so that a small GP team does not need to hire a dedicated compliance function from day one.
For managers approaching the GBP 100 million threshold, we help with transition planning: what needs to change, what the FCA application requires, and how to keep running your fund while the authorisation process plays out. If you are working through which regulatory path fits your fund, get in touch.
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