Concept
In the United Kingdom, a regulated business—for example, fund management—can be launched under someone else's FCA licence. An appointed representative (AR) conducts regulated activities under the licence of a principal (FSMA 2000, s.39); where this regime sits alongside the payments agent route and direct FCA authorisations is set out in the FCA authorisation map. In funds, the role of principal is played by a host AIFM—a separate FCA firm that officially becomes the manager (AIFM) of your fund, while the sponsor works as an investment adviser under delegation. This is the fund vertical of embedded finance.
A host AIFM typically has full-scope AIFM status with MiFID top-up. Portfolio management and risk management formally remain with the host; the sponsor, as an AR, conducts investment ideas, deal due diligence, and investor relations under a delegation agreement. For UK venture managers, a related regime is RVECA—the UK's retained version of the EuVECA label for qualifying venture capital funds.
The principal is responsible to the FCA for the actions of the AR. Therefore, the host must substantively control the sponsor; in its 2023 review of host models the FCA found weak oversight of seconded staff and hosts that left investor due diligence to third parties.
How It Works
The diagram below shows how the roles divide: the licence and the accountability sit with the host, the investment side with the sponsor under delegation.
The distribution of roles is set by the delegation agreement. The host holds the licence, regulatory reporting, capital, and compliance functions; the sponsor-AR conducts the investment side within the mandate. Legally, the host manages the fund; the sponsor drives the economics and deal decisions—within the limits of what the host has agreed and controls.
What You Need to Launch
You don't need your own FCA licence. You need a host AIFM (full-scope + MiFID top-up) and registration of the sponsor as an AR or sub-manager under delegation. Onboarding—guideline 4–6 weeks, depending on documents and service provider onboarding. The fund can charge a management fee from the very start.
What the host requires: investor due diligence (AML and financial crime), a delegation agreement with clearly described functions, regular reviews of delegated activities, sometimes secondment of sponsor personnel under host supervision. Substantive control means the host has access to the sponsor's deals and investment decisions, veto rights, and periodic audit—it is precisely the depth of such supervision that the FCA checks first.
Compliance
Host perimeter: SMCR on key individuals, AML, conflicts of interest management, capital adequacy, regular reviews of each AR. The FCA's 2023 review identified typical failures: weak supervision of secondees (working remotely, primary employer is the sponsor, hence conflict of interest), insufficient host participation in due diligence, capital not accounting for the number of funds and ARs, misleading statements (AR calling itself an investment manager). Supervision of ARs must be ongoing.
How It's Done in the Market
Hosting economics: setup fee, fixed annual fee and percentage of AUM or share of management fee. What to look for: capacity and reputation of the host (its problems with the FCA hit all ARs on the platform), real depth of supervision, conflicts, and exit terms.
Host AIFM providers
Notable UK host AIFMs. Group composition and provider ownership change as the market consolidates, so status should always be verified against the FCA AR register.
- Sturgeon Ventures — a UK regulatory incubator and host platform.
- G10 Capital (full-scope AIFM with MiFID top-up) and Sapia Partners (small-scope) — platforms of the IQ-EQ group, acquired through the purchase of Lawson Conner; popular with PE and hedge teams.
- ACA Mirabella — a host platform for hedge funds and investment managers.
- Brooklands (full-scope AIFM with MiFID top-up), Privium, Khepri, and Laven — notable independent host providers.
The continental analogue is third-party ManCo/AIFM in Luxembourg and Ireland (Waystone, IQ-EQ, Universal Investment, Apex/FundRock, Ocorian, Alter Domus, Carne, Gen II) for cross-border distribution via EU passport; more details—third-party ManCo in the EU. The general logic of choosing and comparing structures is in the material on funds. When AUM and management fee cover the cost of your own AIFM licence, firms transition to their own.
When the Model Is Justified
Hosting is most often used by first-fund managers: teams spinning out of larger funds who need to build a track record before obtaining their own licence, and foreign managers entering the British market without a months-long authorisation. This also includes fund incubators and accelerators, where a host platform allows a first compartment to be raised quickly.
The main motives are time-to-launch and ready-made regulatory infrastructure; saving on the size of the fee comes last here. For investors, the host adds an independent layer of supervision and AML onboarding, which simplifies their own due diligence. As the fund gains momentum, the team transitions to its own AIFM licence.
Applicable Regulation
The foundation is FSMA 2000, s.39 (AR regime) and FCA AIFM hosting. After the Greensill collapse, Parliament recommended narrowing the AR regime; in August 2022 the FCA issued PS22/11 (in force from 8 December 2022)—enhanced principal supervision and new reporting requirements. The reform then moved to the level of legislation: in August 2025 HMT published a policy statement, and in February 2026 a consultation (closed 9 April 2026) proposing a gateway—a separate FCA permission to be a principal, the extension of SMCR to AR personnel, and the extension of FOS jurisdiction to complaints against the ARs themselves. The scale of the reform is significant: around 34,000 ARs currently operate under approximately 2,400 principal firms. The government is preparing an implementation plan and timeline.
| Pros | Cons |
|---|---|
| Launch a fund in 4–6 weeks, without your own AIFM licence | The principal is responsible to the FCA for the AR; host controls tightly |
| Management fee can be charged from the very start | Share of economics goes to the host (fee + percentage of AUM) |
| Ready-made regulatory and compliance infrastructure | Dependence on the capacity and reputation of the host |
| Clear path to your own licence as AUM grows | Regime tightening: PS22/11, HMT gateway consultation (closed Apr 2026), SMCR and FOS on AR personnel |
Where the AIFM Regime Is Heading
In parallel with the AR reform, Britain is also reshaping the AIFM regime itself. The full-scope thresholds set in 2013 and not indexed since created a cliff edge: growth in AUM or a revaluation of assets could suddenly drag a small manager under the full scope of requirements. In April 2025, HM Treasury and the FCA put forward for discussion a three-tier regime in which the threshold is determined by net asset value instead of the former leveraged AUM. The draft rules have since arrived: on 14 July 2026 the FCA published CP26/28, splitting AIFMs into small (NAV below £750m), medium (£750m–£5bn) and large (above £5bn), with requirements graduated by category; the discussion chapters closed on 18 September 2026, the consultation chapters and the prudential discussion chapter close on 22 October 2026, and the FCA envisages implementation in 2028. For the host model, this refines the calculation: the threshold for transitioning to your own authorisation becomes smoother.
Context and Evolution
The model grew out of the logic of FSMA: the AR regime existed for agents and distributors, and after AIFMD (2013) the bar for a manager's own authorisation rose, and host platforms became a convenient entry into the industry—essentially licence rental in a fund wrapper. The turning point came after the collapse of Greensill Capital in 2021: the company operated through AR status, and weak principal supervision exposed the risks of the entire construct.
The regulator then tightened the screws: after PS22/11 comes the 2026 HMT consultation on the gateway, SMCR for AR personnel, and the extension of FOS. The practical upshot for the market is that hosting is professionalising: the capacity and real depth of host supervision become the main selection criterion, cheap "paper" principals are leaving, and the path from AR to your own licence remains the natural endgame for growing teams.
Hosting outside the UK
The host model is not a British invention and Britain is not the cheapest place to use it. A manager who wants to launch without a licence of their own has six regional routes, and they are not variants of one product: what the host actually holds, who answers to the regulator, how far the fund can then be distributed and where the arrangement runs out all differ by region.
| Route | What the host holds | Who answers to the regulator | Distribution reach | Time to launch | Where the ceiling is |
|---|---|---|---|---|---|
| United Kingdom — host AIFM with the sponsor as an appointed representative (FSMA s.39) | Full-scope AIFM permission with a MiFID top-up; portfolio and risk management sit formally with the host | The principal, for everything the AR does | The UK; EU investors only through national private placement regimes since Brexit | Four to six weeks on the figures above | The gateway reform and the CP26/28 tiers: as NAV rises, the host's own permission and the sponsor's economics both get more expensive |
| Luxembourg or Ireland — third-party ManCo as authorised AIFM | AIFM or UCITS management-company authorisation, with the regulatory functions and the delegation oversight | The ManCo, which cannot delegate itself into a letter-box | The whole EU and EEA through the AIFMD passport, on the prescribed notifications | Weeks for a RAIF; the wrapper, not the ManCo, sets the pace | AIFMD II from 16 April 2026 and delegation reporting from 16 April 2027 — the provider reprices, and the manager pays |
| Malta or Liechtenstein — the same AIFM model on a lower cost base | A full or de minimis AIFM licence; in Liechtenstein a locally licensed depositary comes with it | The AIFM, before the MFSA or the FMA | EU for Malta; EEA for Liechtenstein, through the EEA agreement rather than EU membership | Days on the Maltese notification route for a NAIF | A thinner provider bench than Luxembourg — replacing a host is harder than appointing one |
| Singapore — sub-management under a licensed fund manager | An LFMC or VCFM licence from MAS; the licensed manager stays the manager of record | The licensed Singapore manager, before MAS | No passport; accredited and institutional investors on a restricted-scheme basis | Days for the vehicle; the licence and the tax award are the slow part | 13O and 13U conditions attach to the fund, not to the host — the sponsor inherits the spending and staffing tests |
| ADGM or DIFC — a fund platform under a licensed manager | A Category 3C fund-manager licence, or an external manager whose home regulation the regulator accepts | The licensed manager in the zone, before the FSRA or the DFSA | No passport; marketing into mainland UAE is analysed separately | About two to five days for the fund once the manager is in place | The zone is the perimeter — the platform does not reach outside it |
| Cayman — a segregated portfolio on an SPC platform | No manager licence at all: the platform holds the directors, the administrator and the compliance function | Nobody on the manager's behalf — the sponsor's own home regulator still applies to it | No passport; private placement country by country | Weeks, with a local CIMA-approved auditor to appoint | It is infrastructure, not a licence — it solves the fund and leaves the manager's own status unresolved |
Read across the table and the six split into two kinds of arrangement that are easy to confuse. In four of them — the UK, the European ManCo routes, Singapore and the Gulf — somebody licensed takes regulatory liability for the sponsor's activity, and that is what is being bought. In the Cayman SPC route nobody does: the platform supplies directors, an administrator and compliance for the fund, and the sponsor's own permission to manage money remains exactly as it was before. A team that treats a Cayman platform as a substitute for a licence has bought the wrong product, which is the single most common error in this whole area.
What the host gives the sponsor is time, and what it takes is reach and economics. The four licensed routes all launch in weeks rather than the months an own authorisation takes, and all four take a share of the management fee plus a fixed platform charge. Only the European routes add distribution the sponsor could not otherwise have: the AIFMD passport comes with the ManCo and cannot be acquired later. The UK route lost that when the Brexit transition period ended on 31 December 2020 and now reaches EU investors the same way a Cayman fund does, country by country — the six wrappers and the passports that attach to them are compared in third-party ManCo in the EU.
Every route has a ceiling and they are not in the same place. In Britain it is regulatory: the principal gateway and the CP26/28 tiers make hosting progressively less attractive as NAV climbs. In Europe it is cost: AIFMD II reprices the provider from 2026 and again from 2027. In Singapore and the Gulf it is not the host at all but the regime attached to the fund — the 13O and 13U spending and staffing conditions belong to the structure and the sponsor lives with them. And in Cayman the ceiling is that there was never a licence in the first place. The lighter fund regimes that pair with these platforms are in offshore fund incubators.
When it stops making sense to rent at all is a separate calculation, and it is the same calculation in every region: the point at which a share of the management fee plus the platform charge exceeds the cost of a licence, a compliance officer and the capital to carry them. That comparison, route by route and with the substance requirement each regime attaches, is set out in where the fund manager sits.
Q/A
Hosting outside the UK
Where is hosting cheapest — and is cheapest the right question
There is no common tariff to rank: the host's own fee is a share of the management fee plus a fixed charge and is quoted per mandate in every region, so compare quotes for the same mandate. On time to launch, the Gulf zones and a Luxembourg RAIF lead; on regulatory comfort for British investors, a UK host. None of that is the binding constraint. The real question is what the route buys that cannot be bought later — which is the AIFMD passport, and only the European routes have it.
Is a Cayman SPC platform an alternative to a host AIFM
No, and confusing the two is the standard mistake. An SPC platform supplies the fund with directors, an administrator and a compliance function; it supplies the manager with nothing. Nobody on that platform takes regulatory liability for the sponsor's investment activity, so whatever permission the sponsor needs in its own home jurisdiction it still needs. A host AIFM, a European ManCo, a Singapore LFMC and a Gulf Category 3C manager all do take that liability — that is precisely what is being rented.
Does a host abroad reach European investors better than a UK one
Only if the host is in the EU or the EEA. An authorised AIFM in Luxembourg, Ireland, Malta or Liechtenstein carries the AIFMD or EEA passport, and the fund reaches the whole bloc on the prescribed notifications. A UK host AIFM has reached EU investors through national private placement regimes since Brexit — the same way a Singapore, Gulf or Cayman structure does. The passport cannot be added to a non-EU host afterwards.
The UK host model
Do you need your own FCA licence to launch a fund
No. The host AIFM becomes the fund manager under its own licence, and the sponsor works as an AR or investment adviser under delegation. Your own AIFM licence is obtained later, as AUM grows.
How long does onboarding take
Guideline 4–6 weeks, depending on documents and service provider onboarding. The fund can charge a management fee from the very start.
What did the FCA find unsatisfactory in host models
2023 review: weak supervision of secondees (remote, conflict of interest with primary employer), insufficient host participation in due diligence, capital not accounting for the number of funds and ARs, misleading statements about the AR's role.
How does a host AIFM differ from a fund administrator
An administrator handles accounting and NAV; a host AIFM is a regulated manager responsible for the fund's portfolio and risk management and for the AR itself before the FCA.
What does the gateway from the HMT consultation change
Being a principal will no longer be "by default": a separate FCA permission will be required, and AR personnel will fall under SMCR. Final FCA rules are expected after the consultation closed on 9 April 2026.