Phase 1: Groundwork

•  Define your investment philosophy, investment strategy, asset classes, markets, and instruments your fund will target.
•  Establish a clear investment decision-making framework.
•  Set risk parameters and limits to manage portfolio exposure.
•  If applicable, document how ESG/sustainability factors will be integrated into your strategy.
•  Define your liquidity management approach and investor safeguards.

Regulatory Permissions

•  Map all proposed activities against Part 4A FSMA permissions to identify required authorisations.
•  Determine your firm’s regulatory status: AIFM, MiFID, UCITS manager, or a combination.
•  Evaluate the thresholds distinguishing Small vs Full-scope AIFM classification and assess whether Small AIFM registration (€100m/€500m AUM thresholds) is a viable initial step.
•  Identify your prudential categorisation (e.g., under the Investment Firms Prudential Regime, IFPR).
•  Consider the appointed representative route as a temporary solution, if suitable.
•  Determine whether your firm falls under the core or enhanced tier of the Senior Managers & Certification Regime (SM&CR).

Capital Planning

•  Calculate initial capital requirements (base capital, activity-based, and Fixed Overhead Requirement).
•  Develop a funding model with an 18-24 month runway to cover start-up costs.

Phase 2: Business Plan

•  Develop realistic AUM growth projections with three scenarios: base, optimistic, and stress.
•  Identify target investor segments and outline an acquisition strategy.
•  Create a realistic timeline for fund launch post-authorisation.
•  Develop a distribution and marketing strategy
•  Plan scalable team growth tied to AUM increases.

Fund Structure

•  Select the optimal legal and tax structure for your fund(s).
•  Choose a domicile aligned with your target investors.
•  Plan seed investor terms and arrangements to secure initial capital.
•  Define investor liquidity terms (e.g., redemption frequency, notice periods).
•  Determine your marketing approach (e.g., NPPR, reverse solicitation).
•  Draft fund documentation

Governance

•  Design a proportionate governance structure suited to a start-up’s scale.
•  Define committee structures and draft terms of reference for key committees.
•   Ensure clear separation between executive and oversight functions.
•  Create policies to manage conflicts of interest between the fund, investors, and manager.
•  Document board composition requirements

Phase 3: Operational Setup & Outsourcing

•  Draft core compliance policies, focusing on FCA priorities:
•  Market abuse and insider dealing
•  Personal account dealing restrictions.
•  Conflicts of interest
•  Best execution
•  Valuation policy
•  Liquidity risk management
•  Side letter and investor disclosure
•  Allocation
•  Research payment and unbundling arrangements (MiFID II compliance).
•  AML/KYC framework for investor onboarding.
•  Cybersecurity and data protection policy
•  Delegation and outsourcing oversight

Outsourcing

•  Create a due diligence framework for selecting service providers.
•  Develop an oversight model.
•  Draft Service Level Agreements (SLAs) with key performance metrics.
•  Establish contingency plans for service provider failure.

Technology

•  Design a scalable IT architecture to support growth.
•  Select a portfolio management system suited to your strategy.
•  Establish data security and backup procedures.
•  Establish business continuity and disaster recovery plans.
•  Implement trading and order management systems for your asset classes.
•  Establish a cybersecurity framework to protect against threats.

Phase 4: Prudential Requirement

•  Create a proportionate Internal Capital Adequacy and Risk Assessment (ICARA) document.
•  Identify and assess key operational risks specific to your firm.
•  Calculate additional capital requirements (OFTR and LATR under IFPR, including K-factors for non-SNI firms).
•  Document mitigating controls and any capital or insurance coverage.
•  Develop realistic stress testing scenarios to test resilience.
•  Document potential material harms to clients and markets.
•  Prepare a wind-down analysis with timeframe and costs.
•  Establish a process for ICARA review and challenge by senior management.

Financial Projections

•  Create 3-year P&L with projected cash flows and sensitivity analysis.
•  Prepare balance sheet projections.
•  Calculate capital resources to meet regulatory thresholds.
•  Establish funding contingency arrangements for shortfalls.
•  Implement a financial controls framework to safeguard assets.
•  Assess financial resilience under stress scenarios.

Risk Management

•  Define risk appetite with clear thresholds.
•  Document key risks and controls with assigned ownership.
•  Create a control testing schedule to ensure effectiveness.
•  Document escalation procedures for risk events.

Phase 5: Human Capital

•  Map required Senior Management Functions (SMFs) to individuals.
•  Draft detailed Statements of Responsibilities for each SMF.
•  Create a Management Responsibilities Map (mandatory for enhanced firms).
•  Document a reasonable steps framework for SMF accountability.
•  Establish a certification process for relevant staff.
•  Create fitness and propriety assessment procedures.
•  Design a training and competence programme for all staff.
•  Develop a phased hiring plan linked to AUM growth.
•  Mitigate key person risk.
•  Design a remuneration policy (for material risk takers)

Culture

•  Define and embed firm culture into processes and decision-making.
•  Establish a conduct risk framework to promote ethical behaviour.
•  Establish whistleblowing arrangements for transparency.

Phase 6: Application & Submission

•  Complete all required FCA application forms (Core and Supporting forms)
•  Draft a concise, compelling Regulatory Business Plan.
•  Compile all supporting policies and procedures.
•  Create an implementation plan with realistic timelines.
•  Document IT systems and operational arrangements.
•  Prepare a wind-down plan and operational resilience assessment.
•  Anticipate challenging questions and prepare responses.
•  Document evidence of team competence and experience.
•  Create a timeline for the application process (typically 6-12 months).
•  Designate a single point of contact for FCA communications.
•  Prepare SMF candidates for FCA interviews.

Post-Submission

•  Respond promptly to FCA queries with a clear process.
•  Prepare for additional information requests.
•  Prepare an operational readiness plan for approval.

Phase 7: Post-Authorisation

•  Prepare marketing materials and develop a clear fundraising strategy and timeline.
•  Prepare investor onboarding documentation and establish an investor reporting framework.
•  Finalise agreements with service providers.
•  Set up trading procedures and counterparty arrangements.
•  Establish a regulatory reporting framework and calendar.
•  Implement a compliance monitoring programme.

Ongoing Compliance

•  Implement a regulatory reporting system.
•  Create a process for managing regulatory changes.
•  Design a system for identifying and reporting breaches.
•  Implement a Senior Manager attestation framework.
•  Schedule regular compliance monitoring activities.

Recommendation

•  Focus on core competencies and outsource non-essential functions.
•  Maintain a lean operating model while meeting regulatory standards.

Important

•  A fund manager must wait until FCA authorisation is granted before starting fundraising or accepting investor money for a new fund. Any pre-authorisation discussions must be carefully structured to avoid breaching UK financial promotion rules and should only be directed at exempt investors under strict conditions.