UK: Reforms for listed investment funds in FCA’s AIFM regulations overhaul

Why should I read this?

On 14 July 2026, the FCA published Consultation Paper CP26/28, ‘The UK AIFM Regime’. Alongside this, HM Treasury published a draft Statutory Instrument to replace the retained Alternative Investment Fund Managers Directive (AIFMD) framework, along with a policy note. Chapter 11 of CP26/28 sets out a tailored approach for closed-ended investment companies (CEICs) listed on UK markets, including investment trusts, real estate investment trusts (REITs) and venture capital trusts (VCTs). HM Treasury proposes exempting small internally managed investment companies from the alternative investment fund manager (AIFM) regime entirely. Other listed funds stay within the regime, but the FCA proposes lighter rules on disclosure, liquidity and risk management. 

This briefing sets out what the changes mean for boards, managers and investors in listed closed-ended funds.

See our other client briefings on CP26/28 and related consultations:

• UK: Private fund managers and the FCA overhaul of the AIFM regime

• UK: Implications of the FCA’s overhaul of AIFM regime for authorised funds and the new FRAME reporting model

• UK: Implications of FCA’s overhaul of AIFM regime for cross-border distribution of funds

Implementation is expected in 2028.

Sarah Kopec, Senior Associate in the Financial Services Team at Eversheds Sutherland, comments:

“While the FCA has acknowledged that listed closed-ended investment companies differ fundamentally from traditional alternative funds, the consultation proposals do not deliver the wholesale exemption some had hoped for. Most investment trusts would remain subject to the AIF regime, with some targeted exceptions for small, internally managed investment trusts. That said, given the existing obligations of investment trusts under the UK Listing Rules, the proposed exemptions on investor disclosures, would be a welcome change.”

What do I need to know about listed investment trusts and funds?

Background

CEICs listed on UK markets are a long-established investment structure. They include investment trusts, REITs and VCTs, and invest in listed securities, private equity, private credit, property and infrastructure.

Statutory exemption for small internally managed companies

HM Treasury’s draft Statutory Instrument exempts small internally managed investment companies from the AIFM regime entirely. The thresholds are £100 million net asset value (NAV) for leveraged companies and £500 million NAV for unleveraged companies with no redemptions within five years. To rely on the exemption, the company must:

• be a body corporate;

• not be a collective investment scheme;

• be admitted to trading on a UK recognised stock exchange; and

• the individuals who run it must meet fitness and propriety conditions.

Other listed funds remain in scope

Above-threshold and externally managed CEICs will stay within the AIFM regime, but the FCA proposes a tailored approach. Risk management rules apply proportionately to the company’s size and whether it uses leverage. Liquidity risk management rules apply to listed funds in the same way as other closed-ended funds if leverage is used for investment purposes, subject to a hedging exemption for derivatives used to manage currency and interest rate risk.

Investor disclosures and annual reporting

The FCA proposes exempting CEICs from the AIFM investor disclosure rules in ALTS 9 and the annual reporting rules in ALTS 10, to remove duplication with the disclosures CEICs are required to make under UKLR. This extends to companies admitted to trading on the London Stock Exchange’s Specialist Fund Segment, provided they opt to make UKLR-compliant disclosures. The FCA believes the exemption will save CEICs significant sums of money in compliance costs.

Relationship between the board and the AIFM

If a CEIC is managed by an external AIFM, the FCA proposes guidance confirming that the AIFM remains responsible for compliance with the ALTS sourcebook. The company board keeps its separate responsibilities under company law and the UKLR. The FCA is asking whether this split of responsibilities is clear enough in the draft rules.

Wider review of the UK Listing Rules

The FCA is running a separate review of the UKLR for investment entities, following Consultation Paper CP26/21 “Proposed changes to the UK Listing Rules for closed-ended investment funds”. This review will look at board governance, shareholder rights, conflicts of interest, and which types of investment entities should be eligible to list in the UK. The FCA plans to publish a timeline for this work later in 2026.

What should I do?

Boards and managers of listed investment trusts, REITs and VCTs should start assessing the impact of CP26/28 now, given the lead time needed before implementation in 2028:

• Check whether your company could rely on the proposed AIF exemption for small internally managed investment companies, using the £100 million (leveraged) or £500 million (unleveraged, no redemptions within five years) thresholds.

• If your company stays within the AIFM regime, map how the proposed disclosure exemption in the proposed Alternative Investment Funds Sourcebook ALTS 9 and ALTS 10 will interact with your existing UK Listing Rules disclosures.

• Consider responding to consultation questions 25 and 26 on the board/AIFM split and the disclosure exemption, by 14 October 2026.

• Keep an eye on the FCA’s separate review of the UK Listing Rules (UKLR) for closed-ended investment funds in Consultation Paper CP26/21, which may affect listing eligibility criteria. CP26/21 closes for comments on 14 August 2026.

See also our previous client briefing, “UK: Tightening related party and board independence rules for closed-ended investment funds; FCA consultation CP26/21”

Our view

The proposed exemption for small internally managed investment companies is a sensible response to feedback that the AIFM regime does not fit this small part of the market well. For the much larger population of listed funds that stay within the regime, the direction of travel is positive. 

Ronald Paterson, Consultant in the Financial Services Team at Eversheds Sutherland, comments:

“The FCA has at last listened to industry feedback which has been calling for a genuinely tailored approach for closed-ended investment companies ever since AIFMD was first mooted. Removing duplicate AIFM disclosures where UK Listing Rules already do the job is a welcome simplification for boards and managers. Firms and fund boards should use the consultation period to make sure the board/AIFM split of responsibilities matches how the company actually operates.”

Next steps

You can comment on CP26/28’s main proposals, including the proposals for listed investment trusts, REITs and VCTs in chapter 11, until 14 October 2026. You can send technical comments on HM Treasury’s draft Statutory Instrument to AIFMR@hmtreasury.gov.uk until 14 October 2026. The FCA expects to publish a policy statement and final Handbook rules in 2027, ahead of the target implementation date of 2028. We will be responding to the consultation, and we can help with your response or include your comments with ours on an attributed or anonymous basis.

How Eversheds Sutherland can help

Eversheds Sutherland is a leading legal adviser to the UK investment funds sector, including investment trusts, REITs and VCTs listed on UK markets. Our team advises boards, AIFMs and depositaries on the full range of UK regulatory change. We can help you work out whether your company can rely on the small internally managed company exemption, review your board/AIFM governance arrangements, and prepare a response to CP26/28 or CP26/21, whether individually or through a trade body.