Launching a New Fund in Europe

There are three routes for start-up fund managers to bring a product to market quickly: 

1. Directly Authorised 

2. The Incubator Route 

3. Appointed Representative Route

Using options 2 and 3 of the above can allow start-up managers to begin operating in the UK and Europe in a matter of weeks, compared to 8-10 months or more for a full application for authorisation with the UK Financial Conduct Authority (FCA).

The FCA Principal/Incubator Route:

Using this model, an existing FCA authorised firm (the Incubator or Principal firm) permits a new entity set up by the start-up manager that has not yet obtained FCA authorisation (the NewCo) to take advantage of the Principal's/Incubator’s FCA  regulatory permissions.  

The FCA permissions that the NewCo can benefit from vary depending on the Principal/Incubator, therefore is it essential that you partner with the appropriate FCA principle in line with your business activities.  For example, if your fund will specialise in Private Equity, it is sensible to align yourself with a Principal/Incubator that has industry contacts and knowledge of this asset class to assist and guide you.    

Most Principal/Incubator firms, such as Vantage Point Capital act as the Fund's AIFM and include a broad range of regulated activities that start-up managers most commonly engage in (i.e.  advising on investments, arranging deals in investments and managing investments for investors).  

In an incubator arrangement, the NewCo’s fund (the Fund) appoints the Incubator (Vantage Point Capital) to be the investment manager of record (AIFM) to the fund, whilst the NewCo appointed individual would be onboarded as part of SMCR and Seconded into the Incubator (Vantage Point Capital), making them a portfolio manager.  The NewCo in this instance would be onboarded as an Appointed Representative ("AR") of the Principal/Incubator firm.  It is important to note that the AR can promote, advise and arrange for Fund in question, but the AR cannot act as investment manager for the Fund, as this can only be carried out by a directly authorised entity, such as the Principal/Incubator firm. 

The regulated activities in relation to the Fund (such as investment management) will be carried out by the Secondees, relying on the Principal/Incubator’s regulatory permissions.  The AR (which will be promoting and advising the fund) will remain responsible for the remuneration of the Secondees and would ordinarily be  liable to the Incubator in respect of the Secondees’ acts and omissions.  

The management fees and performance fees of the Fund are typically paid to the Incubator/Principal, who then passes on these fees in full to the AR.   The AR entity would be required to pay the Incubator a fixed monthly/quarterly service fee in respect of it receiving the Secondees and providing compliance monitoring and maintaining records (as required by the FCA).  


It is possible to run a full FCA authorisation process in parallel with operating under an incubator model. Once a start-up  manager has become authorised it can then begin to operate using its own permissions.  


Under the AR arrangements, the Principal must itself be authorised to carry out the relevant regulated activities that the AR wishes to carry out.  An AR arrangement is relatively quick and straightforward and can typically be implemented in several weeks.  In order to become an AR, a start-up manager would need to put in place an agreement with a Principal. The  agreement must be compliant with the regulations applicable to ARs and the Principal must accept full responsibility for the acts and omissions of the AR, including taking on any liabilities that might arise in connection with the AR’s  performance of those activities. 

Although the AR will be operating under a Principal/Incubator firm, the AR is required to comply with the FCA handbook - although the the Principal will be responsible for ensuring compliance and will therefore require access to the AR’s premises, data-rooms, employees and  records to conduct its supervisory functions. 

It is important to note that the AR route is only available in respect of certain regulated activities, including advising on  investments, but not the activity of managing an Alternative Investment Fund.