01 The proposition
Make it cheap to experiment.
In the US, a $10M fund loses about 4.5% to admin and compliance costs over its lifetime. In the UK, the equivalent costs can be as high as 14% of the fund. This is largely due to the need for authorisation, or the rents paid to appointed representatives.
Growth and risk are siblings. This is as true for private industry as it is for governments, and both face similar challenges of inertia and risk aversion.
The proven strategy, used for policy in Singapore, technology in San Francisco, and finance in London: Make it cheap to experiment.
For decades, this has been the secret of entrepreneurial success. Startups provide a low-cost approach to test ideas that are deeply uncertain and economically transformative.
There are two components to that cost. First, the investment required. Second, the process-related costs of that investment. Keeping both low enables a healthy rate of experimentation and a sustainable appetite to provide funding.
In the UK, the costs related to the investment process are far too high. This raises the barrier to entry for emerging managers who distribute access to venture capital. It is a systematic drag on innovation and prosperity.
This cost barrier concentrates activity into fewer firms, in an already smaller ecosystem. For example, the median US VC fund was $21M in 2024, versus £70M in the UK. Only 16 first-time UK VC funds closed in 2024, against a ten-year average of 30. As a result, UK VCs are more risk averse and less able to provide coverage of the whole market opportunity.
The government already recognises the need to support small and emerging managers, and the unique role they play in ensuring founders have access to capital. However, trying to solve this problem with capital should be secondary to simply lowering barriers to entry.
The solution is a US-style Exempt Reporting Advisor regime where qualifying funds can get started with notification, rather than authorisation. These are unleveraged, closed-end vehicles which do not solicit investment from the general public. They target sophisticated individuals or institutions who understand the risk and illiquidity. Entry should reflect this.
We (listed below) propose creating a similar exemption for UK fund managers, proportional to strategy, eliminating the need for authorisation or an appointed representative. This proposal falls within the scope of the current AIFM consultations across the FCA and HM Treasury, and represents a meaningful opportunity for the growth of UK industry and innovation, across industries and in every postcode.
The deadline for responses is October 14th 2026. Any party that wishes to support this proposal may add their signature below to receive a copy of the submitted paper and a template to submit a response independently if they wish.