Proposed UK AIFM reforms, AIFMD II and the growth of ELTIF structures are giving private capital managers more options, while tying jurisdiction choices more closely to investor access, product design and operating capability.
By Cheryl Bai, Director - Head of Funds, UK, at Gen II Fund Services
The UK has re-entered the regulatory competition for alternative funds with notable intensity . In July 2026, HM Treasury published draft legislation intended to replace the existing AIFM framework with a more proportionate and streamlined regime. The FCA has separately consulted on changes intended to make it easier for authorised alternative funds to hold private market assets while retaining investor protections.
At the same time, the European options are evolving rather than standing still. AIFMD II took effect on 16 April 2026, including new liquidity management requirements for open-ended EU AIFs. Luxembourg is seeing substantial growth in ELTIF formation following ELTIF 2.0, while Ireland has introduced provisions allowing ELTIF sub-funds within umbrella AIFs and a 24-hour approval route for qualifying investor ELTIFs that meet the relevant conditions.
The consequence is that managers have more credible choices, but the decision has become more multifactored.
Fund managers increasingly adopt a capital-driven approach. Which investors does the manager want to reach? Will the vehicle target institutional, wealth or retail capital? Is UK, EU or wider international distribution required? Does the strategy need an open-ended, semi-liquid or conventional closed-ended structure? Can the manager maintain consistent governance, accounting, reporting and investor servicing across several related vehicles?
A UK vehicle may be highly credible for a manager targeting UK institutional or wealth investors. Luxembourg may remain the logical route for a cross-border European raise or an ELTIF strategy. Ireland may be attractive where a manager values its established regulated fund structures, English-speaking fund industry and developing ELTIF options. For global managers, several of these may coexist rather than serve as mutually exclusive alternative.
Recent Gen II research found that 55% of UK and European fund managers selected the UK as one of the domiciles they expect to be most attractive in 2026. Luxembourg was selected by 34%, while Ireland and Singapore were each chosen by 24%. Because respondents could select more than one jurisdiction, the findings point less to a dominant jurisdiction than to a market in which several fund centres fulfil different investor and product needs.
Investor-Centric Approach
Domicile discussions can become dominated by regulatory labels, legal structures and establishment costs. Those considerations matter, but they should follow the commercial question of who is expected to invest.
A manager raising predominantly from UK pension schemes, insurers or wealth intermediaries may reach a different conclusion from one targeting professional investors across several EU member states. An EU AIF managed by an EU AIFM can use the AIFMD marketing passport for professional investors, while other structures may require country-by-country distribution arrangements. The choice of domicile therefore affects both investor access and the number of local requirements a manager must navigate.
The growth of private wealth makes this assessment more rigorous. A vehicle designed for a limited number of institutional investors will require a different distribution and servicing model from one intended to reach private banks, wealth managers or individual investors through intermediaries.
The legal ability to offer a fund is only one part of the decision. Managers must also assess whether distributors will accept the structure, whether investors understand and trust it, and whether the potential capital raised justifies the ongoing servicing requirements.
ELTIF 2.0 illustrates the convergence between product design and domicile. The revised regime introduced greater flexibility around eligible assets and fund structures, while Luxembourg and Ireland have both developed routes for managers seeking to use ELTIFs to reach professional, qualifying and retail investors.
One manager, several jurisdictions
The traditional question, “Where should the fund be domiciled?”, implies that the answer will be one jurisdiction and one vehicle. For many managers, that is no longer realistic.
A cross-border raise may involve a principal fund, parallel vehicles, feeders for particular investor groups and local distribution arrangements. A wealth product may sit alongside an institutional flagship. An EU vehicle may give European investors a familiar route into a strategy managed from the UK or the US.
These structures can expand the manager’s addressable investor base, but they can also create duplication if the operating model is designed on an entity-by-entity basis.
Each vehicle may have separate bank accounts, investor records, financial statements, regulatory filings and reporting deadlines. Capital calls and distributions may need to be coordinated across entities and currencies. Fees and expenses must be allocated consistently, while information held by the manager, administrator, AIFM, depositary and distributor must reconcile.
Investors entering the same strategy through different legal routes will still expect a coherent experience. The information they receive should be accurate, timely and consistent regardless of where their particular vehicle is based.
This makes jurisdictional coordination a core operating requirement rather than a legal detail.
Full fund lifecycle Considerations
Jurisdictions are often compared according to launch costs, approval timetables and headline regulatory requirements. Those measures are useful, but they capture only the beginning of a fund’s lifecycle.
A private capital fund may operate for ten years or more. During that period, it may hold several closings, add share classes, admit investors through different vehicles, refinance assets and respond to new reporting requirements.
A structure that appears efficient at launch may generate substantial operational costs if it creates duplicated accounting, disconnected investor records or repeated manual reconciliations. Conversely, a more involved initial structure may prove worthwhile if it gives the manager access to the right investors and supports future products without rebuilding the operating model.
Managers should therefore assess the total cost and complexity of operating the structure, including governance, local service requirements, investor servicing and the coordination required to maintain consistency across jurisdictions.
There is no universal domicile hierarchy. The right answer depends on the target investors, distribution route, product structure, underlying assets and the manager’s ability to operate the resulting structure effectively.
Domicile decisions are increasingly being driven by investor access considerations rather than convention. The strongest structure is not just one that can be launched quickly, but one that will remain operationally and economically viable throughout the fund's lifecycle.
