TRW & Co · Funds & Financial Services
Investment Funds and Fund Formation Lawyers in London
Fund formation lawyers London managers instruct structure the vehicles, documents and permissions behind private and authorised funds. In 2026 the stakes are higher: the FCA is consulting on a new UK AIFM regime envisaged for 2028, carried interest moved into an income tax regime from April 2026, and new UK vehicles such as the Reserved Investor Fund widen the options.
Key pointDocuments and structures agreed at first close will run into the new UK AIFM regime and the 2026 carried interest rules, so build flexibility for both into the limited partnership agreement and carry vehicle now.
At a glance
Core regulation
Managing a fund is regulated under FSMA 2000 and the Alternative Investment Fund Managers Regulations 2013, supervised by the FCA, with marketing restricted by the financial promotion regime.
AIFM reform proposed
FCA CP26/28 proposes small, medium and large manager categories, a new FCA sourcebook and new reporting, with the new regime envisaged to apply from 2028.
Reserved Investor Fund
A UK unauthorised co-ownership fund for professional and large investors, introduced by SI 2025/216 and available since 19 March 2025.
Carried interest from April 2026
Carried interest is now taxed as trading profits under income tax rules, with qualifying carry charged on only part of the amount.
Limited partnership reform
The Economic Crime and Corporate Transparency Act 2023 adds registered officers, verification and confirmation statements for UK limited partnerships.
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What fund formation lawyers London managers instruct actually cover
Fund formation lawyers London managers and sponsors instruct design the legal vehicle that pools investors' money, the contracts that govern the relationship between manager and investors, and the regulatory permissions that allow the fund to be managed and marketed. The work spans private equity, venture capital, private credit, infrastructure, real estate and hedge strategies, as well as retail and semi-retail authorised funds.
A fund is rarely a single entity. A typical private fund has a limited partnership as the main vehicle, a general partner, an authorised manager (or a host manager), a carried interest vehicle, feeder and parallel funds for particular investor groups, and often one or more holding companies beneath. Each choice affects tax, regulation, investor appetite and cost for a decade or more.
The legal questions arise at predictable points: when a team spins out to raise a first fund, when an existing manager launches a new strategy or co-investment programme, when a family office wants to take third-party money, and when regulation changes the economics. In 2026 that last point is particularly live, with the UK's alternative investment fund manager regime under fundamental review and a new carried interest tax regime in force.
The legal and regulatory framework
The starting point is the Financial Services and Markets Act 2000 (FSMA). Most pooled funds are "collective investment schemes" under section 235, and operating or managing one is a regulated activity. Carrying on a regulated activity without permission breaches the general prohibition in section 19, and promoting a fund is restricted by the financial promotion regime in section 21.
Managers of alternative investment funds are regulated under the Alternative Investment Fund Managers Regulations 2013, which brought the EU AIFM Directive into UK law, together with retained EU delegated rules and the FCA's FUND sourcebook. The FCA's AIFMD pages explain the current split between full-scope UK AIFMs and smaller managers that are registered or authorised under a lighter regime.
Retail and authorised funds
Funds offered to the public are usually FCA-authorised: UCITS schemes, non-UCITS retail schemes, qualified investor schemes and the Long Term Asset Fund (LTAF), which the FCA introduced to give wider access to illiquid assets. These can take the form of an open-ended investment company, an authorised unit trust or an authorised contractual scheme. The FCA's authorised and recognised funds pages set out the application route.
Who regulates what
The FCA authorises and supervises managers and authorised funds. HMRC administers fund tax regimes, including the qualifying asset holding company rules. Companies House registers limited partnerships and companies. Where a fund invests in UK businesses, merger control and the National Security and Investment Act 2021 may also apply to its acquisitions.
Choosing a fund vehicle
The choice of vehicle is the first major decision fund formation lawyers London sponsors work with must get right. Investors expect familiar structures; tax transparency, liability protection, flexibility of terms and speed to market all pull in different directions.
| Vehicle | Legal basis | Key features | Typical use |
|---|---|---|---|
| English limited partnership / private fund limited partnership | Limited Partnerships Act 1907; PFLP regime added in 2017 | Tax transparent; contractual flexibility; PFLP "white list" of activities limited partners can undertake without losing limited liability | Closed-ended private equity, venture, credit and infrastructure funds |
| Scottish limited partnership | Limited Partnerships Act 1907 | Separate legal personality; enhanced transparency obligations in recent years | Carried interest and feeder vehicles |
| Reserved Investor Fund (RIF) | SI 2025/216, in force 19 March 2025 | Unauthorised co-ownership contractual scheme; units only for professional and large investors (and existing holders); tax rules aimed at real estate | UK real estate and other professional-investor funds |
| Qualifying asset holding company (QAHC) | Finance Act 2022 regime, from April 2022 | UK holding company taxed on a limited basis; eligibility and ownership conditions | Holding and credit platform beneath private funds |
| Authorised funds (OEIC, AUT, ACS, LTAF) | FSMA and FCA COLL rules | FCA authorisation, depositary, retail protections | Retail, wealth and defined contribution pension distribution |
| Offshore vehicles | Local law (for example Luxembourg, Ireland, Cayman, Jersey, Guernsey) | EU marketing passport (for EU AIFs with EU AIFM), investor familiarity | Funds targeting EU or global investors, managed or advised from London |
Limited partnership reform
The Economic Crime and Corporate Transparency Act 2023 introduces significant changes for UK limited partnerships, including registered officers for corporate general partners, identity verification, a UK registered office requirement, annual confirmation statements and new deregistration powers. The changes are being phased in by Companies House; managers should check commencement status for each measure and plan the governance work across their existing partnerships, not just new ones.
Manager regulation and the 2026 AIFM reform
A fund needs a manager with the right permissions. A new team can either seek its own FCA authorisation or launch under a third-party "host" AIFM, often working as an appointed representative or delegate. Hosting is quicker, but the host controls key decisions and charges for the service. Our FCA authorisation team advises on which route fits the business plan.
The regime itself is changing. In July 2026 the FCA published CP26/28 on the UK AIFM regime, alongside HM Treasury's draft legislation to replace the 2013 Regulations. The proposals would sort managers into small, medium and large categories by assets under management (with proposed boundaries of £750 million and £5 billion), move most rules into a new FCA sourcebook, remove the current small registered AIFM category, and replace Annex IV reporting with a new reporting framework. The FCA has said the new regime is envisaged to apply from 2028.
Fund formation lawyers London managers rely on should already be stress-testing documents against the reform: management agreements, delegation arrangements and investor disclosures signed now will run well into the new regime. Our article on AIFM regime reform tracks the detail.
Retail disclosure: from PRIIPs to CCI
For funds sold to retail investors, the Consumer Composite Investments regime replaces the PRIIPs-derived key information documents. The legislation commenced on 6 April 2026 and the FCA's final rules in PS25/20 provide an optional transition, with the regime fully in force from 8 June 2027. The Consumer Duty also applies to retail distribution chains.
Marketing the fund in the UK and abroad
Raising capital is where funds most often stumble on regulation. In the UK, a communication inviting investment in a fund is a financial promotion and must be made or approved by an authorised person unless an exemption applies, typically those in the Financial Promotion Order 2005 for investment professionals, high net worth companies and certain sophisticated investors. Promotions of unregulated collective investment schemes face an additional restriction under section 238 of FSMA.
Marketing an alternative investment fund to UK investors also triggers the National Private Placement Regime for non-UK funds or non-UK managers, which requires notification to the FCA and ongoing transparency and reporting. The CP26/28 proposals would retain this regime with some simplification. For retail access, overseas funds can seek recognition under the Overseas Funds Regime.
Since the UK left the EU, UK managers no longer have an EU marketing passport. Marketing to EU investors depends on each member state's private placement rules, and some states are restrictive. "Reverse solicitation" is narrow and regulators scrutinise it. EU managers should also note the EU's revised AIFM Directive, which member states had to apply from April 2026. Our financial promotions regime guide explains the UK rules.
Build a marketing log from the first investor conversation: who was approached, in which jurisdiction, under which exemption and with which documents. Regulators and investors' counsel increasingly ask for it, and it is far easier to keep contemporaneously than to reconstruct after first close.
Tax structuring and carried interest
Tax drives much of fund structuring. English limited partnerships are generally transparent for UK tax, so investors are taxed as if they held the underlying assets. Holding companies are chosen for treaty access and to manage withholding taxes, and the QAHC regime was introduced so that UK holding companies could compete with offshore platforms. Eligibility conditions are detailed and must be met on an ongoing basis; HMRC publishes guidance on QAHC notifications.
From 6 April 2026 carried interest is taxed under a new income tax regime: carry is treated as trading profits. "Qualifying" carried interest is brought into charge on only a proportion of the amount, producing a lower effective rate, while non-qualifying carry is taxed in full at income tax rates. Non-UK resident individuals can be taxed on carry attributable to UK workdays. These rules affect how carry vehicles, holding periods and the waterfall should be drafted; our article on carried interest tax covers the detail, and our tax team advises on individual positions.
The cheapest time to fix a fund's structure is before first close. After that, every change needs investor consent, and some cannot be made at all.
The fund formation process and key documents
A first-time private fund often takes many months from first conversations to first close, depending on investor demand and the regulatory route. Experienced fund formation lawyers London sponsors work with run legal, tax and regulatory workstreams in parallel so that none holds up the close.
- Strategy and term sheet. Agree target size, investment period, term, fees, carried interest, hurdle, key person and governance. Test these against what target investors expect.
- Structure. Choose domicile and vehicles, feeder and parallel funds, carry vehicle and holding structure, with tax advice for the sponsor and key investor groups.
- Manager permissions. Apply for FCA authorisation, vary existing permissions or agree terms with a host AIFM. Allow for approval of senior managers and readiness of compliance arrangements.
- Documentation. Draft the limited partnership agreement, private placement memorandum, subscription documents, management and advisory agreements and carry documents.
- Marketing. Complete marketing notifications in each relevant jurisdiction and maintain the marketing log. Prepare a data room and due diligence questionnaire responses.
- Negotiation and first close. Negotiate with anchor investors, agree side letters, run anti-money laundering checks and register the partnership.
- Subsequent closes and operation. Admit further investors with equalisation, operate the most-favoured-nation process, and meet reporting and investor-update obligations.
Terms that drive negotiations
Institutional investors benchmark terms closely. The points fund formation lawyers London sponsors most often negotiate are the management fee base and step-down after the investment period, the hurdle and catch-up, whether carry is calculated on a whole-of-fund or deal-by-deal basis, clawback and escrow, key person triggers, no-fault removal of the general partner, limits on recycling and borrowing, and the role of the limited partner advisory committee. Getting these right in the term sheet avoids reopening them at every subsequent close.
Governance terms matter as much as economics. Investors increasingly ask for clear rules on GP-led secondaries, allocation between funds, fee offsets from portfolio company fees and ESG reporting. Drafting these precisely at formation reduces disputes later in the fund's life.
Documents investors will scrutinise
- Limited partnership agreement: economics, governance, key person, removal and conflicts provisions.
- Private placement memorandum and the pre-investment disclosures required under the AIFM rules.
- Subscription agreement, investor questionnaire and AML documentation.
- Side letters and the most-favoured-nation election process.
- Management, advisory, delegation and depositary (or depositary-lite) agreements.
- Valuation, conflicts of interest, allocation and ESG policies.
Risks and common mistakes
Marketing before the permissions or notifications are in place
Teams often start conversations with investors before the manager has its permissions or before the relevant marketing notification has been made. In the UK that can breach the general prohibition or the financial promotion restriction, with consequences including unenforceable agreements and regulatory action. In the EU, premature marketing can bar later marketing in that state. Distinguish clearly between permitted pre-marketing, genuine reverse enquiries and marketing, and keep records of each.
Side letters that conflict with the LPA
Side letters negotiated under time pressure can grant rights that conflict with the limited partnership agreement or with each other, such as excuse rights, co-investment priority or reporting commitments. A most-favoured-nation clause can then spread those rights across investors. Keep a side letter matrix, check every concession against the LPA and the manager's operational capacity, and avoid commitments that will be costly to honour over the fund's life.
Underestimating conflicts of interest
Successor funds, co-investment vehicles, continuation funds, GP-led secondaries and fee arrangements with portfolio companies all create conflicts. Investors and the FCA expect these to be identified and managed through clear policies, advisory committee consent and disclosure. Poorly handled conflicts are a common source of investor disputes and regulatory scrutiny. Draft the conflicts framework at formation, not when the first conflicted transaction arises.
Treating the host AIFM as a formality
Under a hosting arrangement the host, not the sponsor, is legally responsible for portfolio and risk management. Hosts will insist on genuine oversight, and their policies may constrain how quickly the team can transact. Negotiate the hosting agreement carefully, including fees, termination and transition to the sponsor's own authorisation, and make sure investors understand the arrangement.
Ignoring tax status tests after launch
QAHC eligibility, qualifying carried interest conditions, treaty access and transparency all depend on ongoing facts: who the investors are, how long assets are held and where decisions are taken. A change in investor base or behaviour can break a tax status that was sound at launch. Build monitoring into the fund's compliance calendar and take advice before admitting investors or undertaking transactions that may affect it.
Cross-border funds: Bangladesh, the Gulf, Singapore and the EU
Many London-managed funds raise capital and invest internationally. For managers with Bangladesh-linked investors or targets, the analysis starts with foreign exchange controls: outward investment by Bangladeshi residents is tightly restricted and generally needs Bangladesh Bank approval, which limits the investor base. Inbound fund investment into Bangladesh must comply with foreign investment, repatriation and sectoral rules, and local alternative investment funds are regulated by the Bangladesh Securities and Exchange Commission. Our investing in Bangladesh team and Dhaka colleagues advise on those points.
Gulf investors, including sovereign wealth funds and family offices, are significant sources of capital for London managers, and the DIFC and ADGM offer their own fund regimes for managers with a regional presence. Singapore's variable capital company is a common alternative for Asia-focused strategies. For EU investors, an EU-domiciled vehicle with an EU manager may be needed for passport access. TRW & Co's offices in Singapore and Dubai help coordinate these structures.
How TRW & Co's fund formation lawyers London team helps
TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. We act for emerging and established managers, family offices and investors, working alongside tax advisers, administrators and offshore counsel.
Structuring and launch
We design the fund, general partner, carry and holding structure, and coordinate onshore and offshore counsel so the structure works for both the sponsor and its target investors.
Fund documents
We draft and negotiate limited partnership agreements, offering documents, subscription packs and side letters, keeping terms consistent and operationally realistic.
Manager regulation
We advise on authorisation, variation of permission, hosting arrangements and the AIFM reform, working with our financial services regulation team.
Investor-side review
We review fund terms for institutional and family office investors, identify off-market provisions and negotiate side letters that reflect their regulatory and tax needs.
Fund life-cycle
We advise on successor funds, co-investments, continuation vehicles, transfers of interests and wind-downs, alongside our private equity and asset management colleagues.
Cross-border capital
We coordinate marketing and investment across Bangladesh, the Gulf, Singapore and the EU, drawing on our international offices.
See the full range of our work on our practices page.
Checklist for managers and sponsors
- Have we tested our proposed terms with anchor investors before drafting?
- Is the vehicle and domicile right for our investors' tax and regulatory needs?
- Do we have our own permissions, or a signed hosting arrangement, before marketing starts?
- Have we mapped marketing rules in every jurisdiction where we will approach investors?
- Are carry vehicles and the waterfall drafted with the 2026 carried interest rules in mind?
- Have we considered how the proposed AIFM regime from 2028 affects our documents and operations?
- Do we have conflicts, valuation and allocation policies ready for investor due diligence?
- Is there a side letter matrix and an MFN process?
- Are limited partnership governance changes under the 2023 Act being tracked for existing vehicles?
To discuss a launch or a fund review with fund formation lawyers London based at TRW & Co, contact us at info@trw.co or +880 1779 127165, or visit Holborn Gate, 330 High Holborn, London WC1V 7QH.
Frequently asked questions
01Do we need FCA authorisation to launch a fund?
Usually someone in the structure must hold the right FCA permissions. Managing an alternative investment fund from the UK is a regulated activity, so a sponsor either obtains its own authorisation, operates under a third-party host AIFM, or acts as an appointed representative or adviser to an authorised manager. Which route fits depends on the team's track record, budget and timetable. Hosting is often quicker for a first fund, while own authorisation gives more control. Marketing and arranging investments also require permission or an exemption.
02Which vehicle is best for a UK private equity or venture fund?
For closed-ended private equity and venture strategies, the English limited partnership, often as a private fund limited partnership, remains the default because it is tax transparent, flexible and familiar to investors. A Scottish limited partnership is commonly used for carry or feeder vehicles. Where the fund targets EU investors, a Luxembourg or Irish structure with an EU manager may be needed for passport access. The answer depends on investor base, assets, tax and the manager's regulatory position.
03What is the Reserved Investor Fund?
The Reserved Investor Fund is a UK unauthorised contractual co-ownership scheme introduced by regulations that came into force on 19 March 2025. Units may be issued only to professional investors, large investors and existing holders. It was designed with UK real estate in mind and comes with a bespoke tax framework. It sits between an authorised contractual scheme, which needs FCA authorisation, and offshore unit trusts commonly used for property. Conditions apply, so eligibility should be checked against the specific fund and its investors.
04How will the new UK AIFM regime affect existing managers?
The FCA's CP26/28 proposals would classify managers as small, medium or large by assets under management, apply graduated rules, remove the current small registered AIFM category and replace Annex IV reporting with a new framework. Proposed thresholds are £750 million and £5 billion, and the regime is envisaged to apply from 2028, subject to final rules and HM Treasury legislation. Existing managers should review their category, delegation and reporting arrangements and avoid documents that hard-code the current rules.
05How is carried interest taxed from April 2026?
From 6 April 2026 carried interest is treated as trading profits and charged to income tax, rather than capital gains tax. Qualifying carried interest is charged on a reduced proportion of the amount, giving a lower effective rate, while non-qualifying carry is taxed in full. Non-UK residents may be taxed on carry linked to UK workdays. The conditions affect waterfall drafting and holding periods, so executives should take individual advice and managers should review carry documents.
06Can a UK manager market a fund to EU investors?
UK managers lost the EU marketing passport when the UK left the EU. They can market only under each member state's national private placement regime, where available, and some states impose significant conditions or effectively prohibit it. Reverse solicitation is interpreted narrowly. Managers that need broad EU access often establish or appoint an EU AIFM and an EU-domiciled fund. Local counsel should confirm the position in each target country before any approach is made.
07How long does it take to form a fund?
It varies widely. A first-time manager may need many months to finalise terms, obtain permissions or a hosting arrangement and reach first close. An established manager launching a successor fund on known terms can move faster. The main drivers are investor negotiations, regulatory approvals, tax structuring and the number of jurisdictions involved. Running legal, tax and regulatory workstreams in parallel and agreeing key terms with anchor investors early are the most effective ways to shorten the timetable.
Sources and official materials
- Alternative Investment Fund Managers Regulations 2013 — Current UK AIFM framework
- FCA CP26/28: The UK AIFM Regime — Proposed new AIFM regime envisaged for 2028
- Reserved Investor Fund Regulations 2025 (SI 2025/216) — UK unauthorised co-ownership AIF for professional investors
- Limited Partnerships Act 1907 — Legal basis for English and Scottish limited partnerships
- FCA PS25/20: Consumer Composite Investments — New retail product disclosure regime
- HMRC: QAHC notifications — Entering the qualifying asset holding company regime
- Financial Promotion Order 2005 — Exemptions for promoting investments
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.