A fund management company is a legal entity that makes investment decisions for a portfolio and is accountable for them to the financial regulator. It is this activity that is licensed and registered: the manager obtains the authorization, while the fund itself is typically only registered or notifies the regulator. Alongside collective portfolio management stand three independent regulated functions—discretionary management of individual mandates, investment advice, and placement of interests among investors; each requires its own authorization and is rarely covered by a single license in full.
The jurisdiction of the manager and the jurisdiction of the fund do not always coincide: a Cayman fund is lawfully managed by a London company with FCA authorization, and a Luxembourg RAIF by an external AIFM hired by an Irish sponsor. The legal form of the fund itself, its tax regime, and depositary requirements are addressed separately—in the material on fund domicile jurisdictions and in the funds hub. The manager's license does not, however, grant access to investors: the right to offer interests in a particular country is verified separately from the right to manage.
This page follows the sequence of decisions: what exactly is licensed, where the regulator considers management to be effectively carried out, beyond which thresholds the regime changes, which jurisdictions apply to which strategies, when an in-house license is cheaper than an external AIFM, what constitutes real presence, and what happens to the fund when the manager is replaced.
What Exactly Is Licensed
Regulatory regimes describe activities. The same team may simultaneously conduct fund management, manage a separate account for a large client, and receive compensation for attracting investors—these are three different authorizations.
| Activity | Content | Typical Regimes |
|---|---|---|
| Fund management | Final decisions on a collective portfolio of a collective structure and management of its risks | AIFM or UCITS ManCo in the EEA, full or small AIFM in the UK, RIA and ERA in the US, LFMC and VCFM in Singapore, Type 9 in Hong Kong |
| Discretionary management of individual portfolios | Discretionary management of a separate account for a single client under mandate | MiFID investment firm, RIA, Type 9, CMS fund management, FINMA portfolio manager |
| Investment advice | Preparation of recommendations without the right to make a final decision on behalf of the client | Investment adviser, MiFID advice, Type 4, DFSA advising on financial products |
| Placement of interests and investor attraction | Offering interests, organizing subscriptions, compensation tied to attracted capital | Broker-dealer, MiFID placement, FCA arranging deals, Type 1, CMS dealing in capital markets products |
The scope of a license is always specific. An AIFM passport covers management of alternative funds and, with a separate extension, individual mandates, but does not replace authorization for placement. A Type 9 license in Hong Kong permits portfolio management, while active marketing of interests to third parties typically requires Type 1. RIA registration in the US does not eliminate separate analysis of broker-dealer status if compensation is tied to a transaction or the volume of attracted funds.
Place of Effective Management
The regulator looks at functions, not at registration details. What matters is where the people signing investment decisions are physically located; who holds authority in the trading system, with the broker, custodian, and over bank accounts; where the investment committee and risk committee meet; whether a boundary exists between preparing a recommendation and approving it. Additionally assessed are the place of communication with investors and receipt of placement compensation, the location of research, records, and compliance systems, and the level at which valuation adjustments and liquidity measures are approved.
If the team sits in London and effectively manages a Cayman fund through a nominal consultant in Dubai, the FCA will proceed from the functions performed in London, regardless of where service invoices are directed. A Singapore company owning VCC shares does not transfer management to Singapore as long as decisions are made in Hong Kong. The reverse is also true: an actual relocation of the team with authority changes the applicable regime even with an unchanged ownership structure.
The name of the role in the contract must match actual actions. If the team acts as a consultant, it prepares recommendations, while the decision and documented review remain with the licensed company. If the team independently manages the portfolio as a delegated manager, it needs its own authorizations, staff, and systems. The fund presentation, investment committee minutes, trade orders, management agreement, and regulatory reporting must describe the same model—discrepancies among them are the primary material for regulatory review.
Thresholds Beyond Which the Regime Changes
Lighter regimes exist almost everywhere, but each is limited by asset size, investor type, or product line. Breaching a threshold changes obligations immediately, without a transition period for preparation.
| Regime | Threshold | What Changes Upon Breach |
|---|---|---|
| Sub-threshold AIFM in the EEA | €100 million using leverage or €500 million for closed-end funds without leverage and without redemption rights in the first five years | Full AIFM authorization, capital, depositary, independent risk and compliance functions, access to cross-border marketing passport |
| Private fund adviser exemption in the US | Less than $150 million in assets of US private funds when working exclusively with private funds | Full RIA registration: Form ADV in full, compliance programme, custody rule, SEC examinations |
| Venture capital adviser exemption in the US | No asset ceiling; product limitation—only qualifying venture capital funds | One extraneous mandate or non-qualifying fund terminates the exemption regardless of size |
| BVI Approved Manager | US$400 million for open-ended funds and US$1 billion in commitments for closed-end funds | Full SIBA license with capital, reporting, and control function requirements |
| A/I LFMC in Singapore | Work only with accredited and institutional investors; for companies transitioned from the abolished RFMC regime, a limit of S$250 million in assets applies | Retail LFMC license with increased base capital and conduct requirements |
| VCFM in Singapore | Only venture capital funds with qualified investors and limited share of liquid investments | Transition to ordinary LFMC license with base capital and full valuation and custody requirements |
EEA thresholds are set out in Article 3(2) AIFMD and are calculated on the aggregate assets of all managed funds, including those acquired with leverage. US exemptions are described in rules 275.203(m)-1-1) and 275.203(l)-1-1); the mechanics of status are detailed in the material on ERA. The Singapore RFMC regime closed to new applications on January 1, 2024, and was abolished with the transfer of existing companies to A/I LFMC status.
⚠️ A lighter regime limits not only size but also access to capital. A sub-threshold AIFM does not receive a European passport and markets in the EEA only under national private placement rules, country by country. An institutional investor restricted by mandate to work with fully authorized managers will not enter such a fund at all. Savings on authorization in the first fund regularly turn into a forced regime change mid-fundraising for the second.
Main Manager Jurisdictions
European Union and EEA
Management of alternative funds in the EEA proceeds through an authorized AIFM; for retail products, through a UCITS ManCo. Luxembourg and Ireland concentrate third-party AIFM platforms serving sponsors without their own license; France, Germany, and the Netherlands are used by teams physically working there. Directive (EU) 2024/927, known as AIFMD II, applies from April 16, 2026, and tightens precisely those points on which formal structures rested: the applicant discloses to the regulator the delegation structure and justification for each delegated function, and the AIFM's activity must be conducted by at least two persons employed full-time or members of the management body, resident in the Union.
Malta, Cyprus, and Liechtenstein provide the same passport at lower cost, but are separately assessed for depth of service environment and perception by institutional investors: the existence of a passport does not eliminate LP due diligence on the quality of supervision and providers.
United Kingdom
After leaving the EU, the UK retained the division into full-scope and small AIFM with the same threshold values, adding MiFID authorizations for individual mandates. Marketing of interests in foreign funds proceeds through the FCA national private placement regime with notification and ongoing reporting, and any promotion is subject to financial promotions rules regardless of fund domicile. The regime is being restructured: in consultation CP26/28, the FCA proposes replacing the threshold division with three categories by size—small, medium, and large managers; responses are accepted until October 14, 2026, with the new regime planned for introduction in 2028.
A separate market feature is licensed platforms accepting a manager as an appointed representative or as a delegate. The model is lawful and widespread, but the FCA consistently checks whether the principal actually controls the representative's activity.
United States
The choice is between full RIA registration with the SEC, state-level registration, and ERA status under one of two exemptions. On top of this, CPO or CTA activity under CFTC oversight for strategies with derivatives and commodity interests, broker-dealer status when compensation is for placement, and individual state requirements are checked. Foreign fund domicile does not remove any of these requirements.
Switzerland
FINMA separates the manager of collective assets and the manager of individual portfolios: the first regime is designed for managing funds and collective investment schemes, the second for individual mandates under the supervision of a recognized supervisory organization. A Swiss license does not provide a European passport; distribution of interests in the EEA requires a separate decision.
Singapore and Hong Kong
Singapore builds regimes around the capital markets license: A/I LFMC for work with accredited and institutional investors, retail LFMC, and simplified VCFM for venture managers. Requirements for base capital, key personnel, and permanent presence in Singapore are set out in MAS guideline SFA 04-G05; the application procedure is on the fund manager licensing page. VCFM is exempt from base capital requirements and independent asset valuation, but is locked into venture strategy and the circle of qualified investors.
Hong Kong operates through a Type 9 license for asset management; SFC requirements include a minimum of two responsible officers, one of whom must be an executive director. A manager whose license carries a condition prohibiting holding client assets is exempt from the paid-up capital requirement and maintains liquid capital of HK$100,000; in other cases, paid-up capital of HK$5 million and liquid capital of HK$3 million apply. Sale of interests and preparation of recommendations to third parties bring the activity into Type 1 and Type 4.
UAE: ADGM and DIFC
Both financial centers issue their own fund management licenses and simultaneously permit an external manager model: a fund established in the center is managed by a foreign licensed company without creating a local licensed entity. This route removes part of the capital and staffing requirements but retains requirements for a local administrator or authorized representative. A license from either center operates within the free zone and does not extend to the UAE mainland or neighboring Gulf countries—access to local investors is checked separately for each country.
Island and Offshore Centers
The Caymans separate a full license under the Securities Investment Business Act and registered person status with registration at CIMA for managers serving a narrow circle of sophisticated or connected investors. The BVI uses the Approved Manager regime under the Investment Business (Approved Managers) Regulations: the application is submitted no later than seven days before the start of activity, work is permitted for up to thirty days pending a decision, with a filing fee of US$1,200 and US$1,800 annually. Jersey and Guernsey serve private capital oriented toward the UK, with JPF and PIF platforms. Mauritius is applied on the Africa–India route, where tax treaty benefits depend on effective management on the island, and the license name does not create them.
The common limitation for all these centers is the same: a local license covers activity conducted locally and does not replace authorization where the team making decisions is physically located.
In-House License and External AIFM
| Model | Who Is Accountable to the Regulator | Typical Application | Main Limitation |
|---|---|---|---|
| In-house full license | Group management company | Multiple funds and strategies, institutional investors, long horizon | Ongoing costs for officers, capital, and systems; authorization takes months |
| Lighter regime or registration | Group management company within exemption limits | First venture or private fund, limited asset volume, professional investors | Limits on assets and products, absence of full passport |
| External AIFM or ManCo | Independent licensed company | European fund and cross-border marketing without in-house license | External manager retains risk control, veto right, and right to terminate delegation |
| Sub-fund on ready platform | Platform AIFM, ManCo, and board of directors | Testing new strategy, fast first close with shared providers | Dependence on platform; rights to investor data and investment track record require separate work |
| Recognition of foreign manager | Manager in its own jurisdiction subject to local conditions | DIFC, ADGM, and certain recognition regimes | Not all services, asset classes, and client categories are recognized |
An external AIFM shortens launch time and converts part of fixed costs into variable. An in-house license provides direct relations with the regulator and creates independent business value. Economics are compared on total cost of ownership: authorization timeline, regulatory capital, compensation of responsible officers, professional indemnity insurance, systems, audit, depositary, administration, local directors, approval of changes, and cost of exiting the platform together with fund transfer.
The distribution of authority between the team and the licensed company is typically arranged as follows: the investment policy is proposed by the team, approved by the licensed manager or fund board; the portfolio is managed by the licensed manager or a duly authorized delegate; the risk management function remains independent and retains the right to intervene; valuation calculations are conducted by the administrator, while rules, exceptions, and escalation procedures are approved by the manager; placement of interests is permitted only in agreed countries and through approved distributors; preparation of reporting may be outsourced to a contractor, but responsibility for it remains with the licensed company.
Real Presence
Presence is measured by performance of functions. The number of lines in the directors' register proves nothing by itself. The regulator assesses the qualifications and actual employment of responsible officers, the existence of an office and working systems, the calendar of board and committee meetings with substantive minutes, the independence of compliance and risk management, the procedure for maintaining records and accessing them. AIFMD II translates part of these expectations into a direct requirement: at least two persons conducting the AIFM's activity with full-time employment and residence in the EU.
Shared control functions for multiple funds are permissible when the funds operate on a single regulated platform. A group may use one compliance officer and MLRO, shared monitoring and sanctions screening systems, training, and complaints handling. At the same time, each fund retains its own conflicts of interest, investor restrictions, valuation and liquidity rules, side letters, leverage limits, and reporting calendar. The arrangement of shared service functions within a group is detailed in the material on MSO.
⚠️ An external manager does not rent out a license. The licensed company is obliged to understand the fund's strategy, receive full access to portfolio data, and have a real right to stop a transaction or placement of interests. When the team acts independently and the licensed entity exists only on paper, the structure is qualified as fictitious delegation and unlicensed management—with consequences for both parties and for the validity of the fund's transactions.
Manager Replacement and Transfer of Track Record
A contract with an external AIFM or platform is assessed by exit terms no less than by entry terms. What matters are the veto and suspension rights, termination timelines and grounds, scope of access to portfolio data and correspondence, rights to the investor register, investment track record, and regulatory records, the obligation to assist with transition, and the ability to replace the manager without forced liquidation of the fund. The full schedule of fees is checked in advance: onboarding, cross-border notifications, each new sub-fund, delegation, and platform exit are priced separately.
Transfer of track record is an independent question. Investment history belongs to the entity that made the decisions and is transferred with the team subject to disclosure conditions: team composition, absence of gaps, comparability of strategy, and verifiability of calculations. When decisions were formally made by an external AIFM but actually by the team, the evidentiary base is built on investment committee minutes and the delegation agreement. The mechanics of investor relations on these issues are set out in the LPA.
Common Mistakes
| Mistake | Why It Doesn't Work |
|---|---|
| Treating the fund's jurisdiction as the manager's jurisdiction | A Cayman or Luxembourg fund does not transfer management regulation to the island: authorization is required where decisions are made. Result—unlicensed activity at the team's location with fully correct fund documents |
| Designating the team as a consultant while leaving it with actual decisions | A consultant contract assumes the decision is made by the licensed entity. When minutes, trade orders, and correspondence show the opposite, the regulator qualifies the consultant as an unlicensed manager and the delegation as fictitious |
| Choosing a license by first-year cost | A cheap regime is limited by assets, products, and investors. Regime change mid-fundraising costs more than the difference in fees and typically occurs when an anchor investor is already conducting due diligence |
| Ignoring placement authorization | The right to manage and the right to offer interests are different authorizations. Compensation tied to attracted capital is tested as brokerage or placement activity in each investor country separately |
| Calculating the threshold by investor reports | AIFMD thresholds are calculated on aggregate assets including leverage; the US $150 million threshold by Form ADV methodology with uncalled commitments. Both figures are higher than NAV from the investor report, and the threshold is breached earlier than expected |
| Ensuring presence with part-time local directors | A director engaged in dozens of structures does not perform a management function. AIFMD II directly requires two persons with full-time employment and residence in the EU, and MAS and SFC check actual employment of key personnel when issuing a license |
| Signing a platform contract without exit terms | Replacing an AIFM without stipulated rights to data, investor register, and transition assistance turns into fund liquidation and loss of track record—even though the commercial reason for departure may be trivial |
Scenarios
Venture Team in Singapore
First fund on VCC, investors are accredited persons in the region. The VCFM route removes base capital and independent valuation requirements but locks the strategy into venture investments and qualified investors.
Key risk: adding a liquid or credit strategy takes the company out of VCFM and requires a full LFMC license.
London Team with Luxembourg Fund
Team works in London, fund is a Luxembourg RAIF under an external AIFM, investors are European institutionals. Portfolio management is delegated to a London company with FCA authorization.
Key risk: after April 16, 2026, AIFMD II requires the AIFM to justify delegation and have two officers with full-time employment in the EU.
Family Platform in Dubai
Structure in DIFC or ADGM for regional capital, strategy is direct investments and real estate. Choice between in-house license and external fund manager regime.
Key risk: a free zone license does not grant access to investors in mainland UAE and neighboring Gulf countries.
Q&A
Must the management company be located in the fund's country of registration?
No. A Cayman, Luxembourg, or Singapore fund is lawfully managed by a company from another jurisdiction. Authorization is required where investment decisions are actually made and where fund interests are offered.
What does a European AIFM passport provide?
The right to manage funds and offer them to professional investors in all EEA countries by notification procedure. A sub-threshold AIFM does not receive a passport and markets under national private placement rules in each country separately.
Can a first fund be launched without an in-house license?
Yes, through an external AIFM, ManCo, or sub-fund on a ready platform. The condition is that the licensed company actually controls risks, compliance, and final decisions, and the team receives authority by delegation agreement with corresponding authorizations.
How many people are needed in the manager's jurisdiction?
There is no single number. AIFMD II sets a minimum of two persons with full-time employment and residence in the EU; SFC requires two responsible officers, one of whom is an executive director; MAS assesses the sufficiency of key personnel considering strategy and asset volume. Formal part-time directors pass none of these tests.
Is track record transferred when the manager is replaced?
History follows the people who made the decisions, subject to comparability of strategy, continuity of team composition, and verifiability of calculations. Rights to records and transition assistance are set out in the platform contract before first close, since after a relationship breakdown it is harder to agree.
Is a separate license needed to attract investors?
As a rule, yes. Compensation tied to attracted capital is qualified as placement or brokerage activity, and the regime is checked for each investor country. A management license by itself does not close this question.
What happens when a lighter regime threshold is breached?
Obligations arise at the moment the threshold is breached, without a transition period. Preparation for full authorization takes months, so asset calculation is conducted quarterly by regulatory methodology, which typically yields a figure higher than the investor report.
🍓 The manager's jurisdiction is determined by the place where investment decisions are physically made and the required access to investors, not by the fund's registration address. Four different activities are licensed—fund management, individual mandate, advice, and placement of interests—and one license covers them only within the scope of its authorization. The regime changes at thresholds: €100 million with leverage or €500 million without under Article 3(2) AIFMD, $150 million for the US private fund adviser exemption, US$400 million and US$1 billion for BVI Approved Manager, S$250 million for Singapore companies transitioned from the abolished RFMC regime. From April 16, 2026, AIFMD II requires disclosure of delegation structure and two officers with full-time employment and residence in the EU, and the UK under consultation CP26/28 is preparing a transition to division into small, medium, and large managers with regime introduction in 2028. An external AIFM shortens launch time but retains risk control and veto rights, so exit terms, rights to investor data, and track record transfer are agreed before first close.
FAQ
Must the management company be located in the fund's country of registration?
No. A Cayman, Luxembourg, or Singapore fund is lawfully managed by a company from another jurisdiction. Authorization is required where investment decisions are actually made and where fund interests are offered.
What does a European AIFM passport provide?
The right to manage funds and offer them to professional investors in all EEA countries by notification procedure. A sub-threshold AIFM does not receive a passport and markets under national private placement rules in each country separately.
Can a first fund be launched without an in-house license?
Yes, through an external AIFM, ManCo, or sub-fund on a ready platform. The condition is that the licensed company actually controls risks, compliance, and final decisions, and the team receives authority by delegation agreement with corresponding authorizations.
How many people are needed in the manager's jurisdiction?
There is no single number. AIFMD II sets a minimum of two persons with full-time employment and residence in the EU; SFC requires two responsible officers, one of whom is an executive director; MAS assesses the sufficiency of key personnel considering strategy and asset volume. Formal part-time directors pass none of these tests.
Is track record transferred when the manager is replaced?
History follows the people who made the decisions, subject to comparability of strategy, continuity of team composition, and verifiability of calculations. Rights to records and transition assistance are set out in the platform contract before first close, since after a relationship breakdown it is harder to agree.
Is a separate license needed to attract investors?
As a rule, yes. Compensation tied to attracted capital is qualified as placement or brokerage activity, and the regime is checked for each investor country. A management license by itself does not close this question.
What happens when a lighter regime threshold is breached?
Obligations arise at the moment the threshold is breached, without a transition period. Preparation for full authorization takes months, so asset calculation is conducted quarterly by regulatory methodology, which typically yields a figure higher than the investor report.
Key factual claims
- The manager's jurisdiction and the fund's jurisdiction do not always coincide: a Cayman fund is lawfully managed by a London company with FCA permission, and a Luxembourg RAIF is run by an external AIFM hired by an Irish sponsor.
- EEA thresholds are set by Article 3(2) AIFMD and are calculated on the aggregate assets of all managed funds, including those acquired through leverage.
- Hong Kong works through a Type 9 asset management licence; SFC requirements include at least two responsible officers, one of whom must be an executive director.