UCITS versus AIFMD · AIFMD · Artizan Governance

Where the UCITS rulebook and the AIFMD rulebook actually differ, provision by provision, and which of the differences a manager running both has to design around.

One regime constrains the portfolio, the other constrains the manager

COLL authorises a fund and then tells the authorised fund manager what the fund may hold, how often it must deal and how units are priced. Most of the investor protection sits in the product. FUND 3 authorises a manager and then tells it what it must be able to do for each AIF it runs, leaving the fund's terms to its own instrument and prospectus. Most of the investor protection sits in the manager's competence and in what it disclosed.

That difference shapes most of the rows below, and it is a weaker explanation than it looks on three of them. On risk management, delegation and depositary duties the two rulebooks have converged a long way, and what is left is specific: a proportionality escape at COLL 6.11.2R(2), a whole-structure test and a letter-box rule at FUND 3.10, and a depositary liability standard that sits outside the Handbook entirely. Reasoning from the headline gets those three wrong.

Two scope qualifications run underneath everything. FUND 3.1.1G varies which sections apply to an AIFM according to whether the AIF is a UK AIF and whether it is marketed in the UK, so “AIFMD applies” is never the whole answer. And SYSC 1 Annex 1 2.6B disapplies most of the SYSC 4 to 10 common platform requirements for a full-scope UK AIFM of an unauthorised AIF, while they continue to apply to a UCITS management company. A group policy set written for one side will cite rules that do not bind the other.

Area by area

Area	UCITS	AIFMD	Why they differ
Scope and permissions	The fund is authorised. COLL binds the scheme and its authorised fund manager; a UK UCITS management company holds the permission to manage UCITS schemes.	The manager is authorised. FUND 3 binds a full-scope UK AIFM, with FUND 3.1.1G varying which sections apply according to whether the AIF is a UK AIF and whether it is marketed in the UK. The fund is usually unauthorised.	UCITS was built as a retail product that could be sold across borders on one authorisation. AIFMD was written after 2008 to bring the managers of everything else into supervision without standardising the funds themselves.
Eligible assets and spread	Prescribed. COLL 5.2.3R requires a prudent spread of risk. COLL 5.2.11R caps 5% of scheme property in transferable securities or approved money-market instruments of a single body, raised to 10% across up to 40% of the property, and 20% in deposits with a single body.	No eligible-asset list and no spread limits. The restrictions are whatever the fund's instrument, prospectus and offering documents say, and FUND 3.7.5R(2)(c) requires the AIF's risk profile to correspond to them.	UCITS constrains the portfolio because a retail investor cannot inspect it. AIFMD makes the fund's own documents the source of the limits and then makes the manager answerable for staying inside them.
Risk management	COLL 6.11.2R requires a permanent risk management function, hierarchically and functionally independent from operating units, except where that independence would not be appropriate and proportionate to the nature, scale and complexity of the business. COLL 6.12.5R requires a documented risk management policy covering market, liquidity, counterparty and operational risk.	FUND 3.7.2R requires functional and hierarchical separation, with no proportionality escape on the face of the rule. FUND 3.7.3 conditions that separation on three things at once, including pay tied to risk objectives independently of operating unit performance. FUND 3.7.4 requires representation in the governing body with at least the authority portfolio management has.	Both regimes require a permanent independent risk function, which is where this comparison is most often drawn wrongly. What separates them is the proportionality escape at COLL 6.11.2R(2) and the three express conditions and safeguards on the AIFMD side.
Liquidity and dealing	The manager must be willing to effect the sale of units throughout the dealing day (COLL 6.2.16R), at the price struck at the valuation point under COLL 6.3. Suspension requires the depositary's agreement and immediate notice to the FCA (COLL 7.2.1R).	No dealing convention and no tool list. FUND 3.6.2R requires investment strategy, liquidity profile and redemption policy to be consistent, with no method, metric or frequency stated. FUND 3.6.3R requires a liquidity management system, monitoring procedures and regular stress tests for every AIF that is not an unleveraged closed-ended fund.	UCITS builds liquidity into the product by restricting what it may hold, so the rules can assume daily dealing. AIFMD leaves the terms open and requires the manager to show the three fit together.
Valuation	The authorised fund manager values the scheme property and prices the units under COLL 6.3, fairly and accurately in accordance with the instrument and prospectus, with dilution mitigation permitted. The rules are about pricing fairness between dealing investors.	FUND 3.9.2R makes the AIFM responsible for proper valuation, NAV calculation and publication. FUND 3.9.7R gives two routes and no third: a functionally independent in-house function with remuneration safeguards, or an external valuer independent of the AIF, the AIFM and anyone with close links. FUND 3.9.5R sets an annual minimum, more often where the fund deals or its capital changes.	A UCITS holds instruments that have prices. An AIF may hold assets whose value is an opinion produced by people paid on the outcome, so the regime regulates independence rather than arithmetic.
Depositary and liability	A depositary under COLL 6.6A and 6.6B, its appointment evidenced by written contract (COLL 6.6B.13R), and its agreement required before dealing is suspended (COLL 7.2.1R). Oversight and cash monitoring may not be delegated (COLL 6.6B.22R).	A single depositary per AIF (FUND 3.11.4R), with cash monitoring, custody, ownership verification and oversight in four separate rules (FUND 3.11.20R, 3.11.21R, 3.11.23R, 3.11.25R). The AIFM may never be the depositary or a delegate of one (FUND 3.11.7R). The liability standard and the conditions for contractual discharge are not in the Handbook at all: they sit in regulation 30 of the AIFMD UK Regulation, and surface in FUND 3 only as the pre-investment disclosure duty at FUND 3.2.3R.	Both regimes use the depositary as an independent check. AIFMD has to separate assets held in custody from assets whose ownership is merely verified, because for a private markets fund most of the portfolio is the second.
Leverage	Capped. Borrowing must not exceed 10% of the value of scheme property on any day (COLL 5.5.5R), and derivative exposure is constrained by COLL 5.3.	Measured rather than capped. The AIFM sets a maximum level of leverage per AIF and the extent of any collateral reuse right (FUND 3.7.7R), and must demonstrate those limits are reasonable and that it complies at all times (FUND 3.7.8R). Gross and commitment exposure are both calculated under articles 6 to 11 of the level 2 regulation (FUND 3.7.10G). Exposure above three times NAV on the commitment method triggers enhanced reporting (FUND 3.4.6, FUND 3.4.5R).	A retail product carries a hard cap. For an AIF the regime substitutes measurement, disclosure and a reserve power: article 25, as onshored, lets the regulator impose limits where financial stability requires it.
Delegation	COLL 6.6.15AR sets conditions close to the AIFMD list: no mandate to the depositary or a conflicted person, an overseas delegate authorised or registered for asset management and prudentially supervised with cooperation ensured, effective ongoing monitoring, and instruction and termination rights. SUP 15.8.6R requires the management company to inform the FCA first.	FUND 3.10.2R adds objective reasons justifying the entire delegation structure, prior notification on the form at FUND 3 Annex 2R, and a right to withdraw with immediate effect. FUND 3.10.4R requires the AIFM's consent and its notification to the FCA before any sub-delegation takes effect. FUND 3.10.8R and FUND 3.10.9 add the letter-box prohibition and its four limbs.	Both regimes gate delegation and both require prior notice, so the difference is narrower than it is usually put. What AIFMD adds is the whole-structure test and the letter-box rule, which exists because an AIFM that delegates far enough leaves nothing regulated behind it.
Disclosure and reporting	A prospectus with the contents table at COLL 4.2.5R. The key investor information section at COLL 4.7 no longer appears in the Handbook; retail pre-sale disclosure runs through the consumer composite investments product summary regime in DISC.	FUND 3.2.2R requires seventeen items before investors invest, plus any material changes, as a continuing duty in the opening words of the rule. FUND 3.2.5R and 3.2.6R add periodic disclosure; FUND 3.3.3R the annual report within six months; FUND 3.4 the Annex IV return to the FCA, with frequency tiered by assets under management at SUP 16.18.4.	UCITS disclosure describes a standardised product and changes when the product changes. AIFMD disclosure describes the arrangements the manager actually operates, so it has to move whenever they move.
Remuneration	The UCITS Remuneration Code at SYSC 19E, applying to a UK UCITS management company that manages a UCITS scheme.	The AIFM Remuneration Code at SYSC 19B, applying to a full-scope UK AIFM of a UK or non-UK AIF. Code staff are defined at SYSC 19B.1.3R, including anyone whose total pay puts them in the senior management bracket. At least 40% of variable pay deferred over three to five years, 60% for particularly high amounts (SYSC 19B.1.18R); at least 50% in units or equivalent instruments (SYSC 19B.1.17R); control-function pay independent of the areas controlled (SYSC 19B.1.10R).	Two codes with the same architecture. SYSC 19B.1.4R(3) reaches remuneration paid directly by the AIF, carried interest included, because in most alternative structures the variable pay is paid by the fund rather than by the manager.
Marketing	An authorised UCITS scheme may be promoted to retail investors in the UK, subject to COLL and the financial promotion regime.	Marketing is a regulated act with a route chosen per fund. A full-scope UK AIFM markets a UK AIF under regulation 54 (FUND 3.12.2D); non-UK AIFs go through the national private placement regime under regulations 57 to 59 (FUND 10.5), where entitlement follows a complete notification being sent rather than FCA approval.	UCITS was designed to be distributed on a single authorisation. AIFMD was not, and there is no EU passport either way for a UK firm.

Area

UCITS

AIFMD

Why they differ

Scope and permissions

The fund is authorised. COLL binds the scheme and its authorised fund manager; a UK UCITS management company holds the permission to manage UCITS schemes.

The manager is authorised. FUND 3 binds a full-scope UK AIFM, with FUND 3.1.1G varying which sections apply according to whether the AIF is a UK AIF and whether it is marketed in the UK. The fund is usually unauthorised.

UCITS was built as a retail product that could be sold across borders on one authorisation. AIFMD was written after 2008 to bring the managers of everything else into supervision without standardising the funds themselves.

Eligible assets and spread

Prescribed. COLL 5.2.3R requires a prudent spread of risk. COLL 5.2.11R caps 5% of scheme property in transferable securities or approved money-market instruments of a single body, raised to 10% across up to 40% of the property, and 20% in deposits with a single body.

No eligible-asset list and no spread limits. The restrictions are whatever the fund's instrument, prospectus and offering documents say, and FUND 3.7.5R(2)(c) requires the AIF's risk profile to correspond to them.

UCITS constrains the portfolio because a retail investor cannot inspect it. AIFMD makes the fund's own documents the source of the limits and then makes the manager answerable for staying inside them.

Risk management

COLL 6.11.2R requires a permanent risk management function, hierarchically and functionally independent from operating units, except where that independence would not be appropriate and proportionate to the nature, scale and complexity of the business. COLL 6.12.5R requires a documented risk management policy covering market, liquidity, counterparty and operational risk.

FUND 3.7.2R requires functional and hierarchical separation, with no proportionality escape on the face of the rule. FUND 3.7.3 conditions that separation on three things at once, including pay tied to risk objectives independently of operating unit performance. FUND 3.7.4 requires representation in the governing body with at least the authority portfolio management has.

Both regimes require a permanent independent risk function, which is where this comparison is most often drawn wrongly. What separates them is the proportionality escape at COLL 6.11.2R(2) and the three express conditions and safeguards on the AIFMD side.

Liquidity and dealing

The manager must be willing to effect the sale of units throughout the dealing day (COLL 6.2.16R), at the price struck at the valuation point under COLL 6.3. Suspension requires the depositary's agreement and immediate notice to the FCA (COLL 7.2.1R).

No dealing convention and no tool list. FUND 3.6.2R requires investment strategy, liquidity profile and redemption policy to be consistent, with no method, metric or frequency stated. FUND 3.6.3R requires a liquidity management system, monitoring procedures and regular stress tests for every AIF that is not an unleveraged closed-ended fund.

UCITS builds liquidity into the product by restricting what it may hold, so the rules can assume daily dealing. AIFMD leaves the terms open and requires the manager to show the three fit together.

Valuation

The authorised fund manager values the scheme property and prices the units under COLL 6.3, fairly and accurately in accordance with the instrument and prospectus, with dilution mitigation permitted. The rules are about pricing fairness between dealing investors.

FUND 3.9.2R makes the AIFM responsible for proper valuation, NAV calculation and publication. FUND 3.9.7R gives two routes and no third: a functionally independent in-house function with remuneration safeguards, or an external valuer independent of the AIF, the AIFM and anyone with close links. FUND 3.9.5R sets an annual minimum, more often where the fund deals or its capital changes.

A UCITS holds instruments that have prices. An AIF may hold assets whose value is an opinion produced by people paid on the outcome, so the regime regulates independence rather than arithmetic.

Depositary and liability

A depositary under COLL 6.6A and 6.6B, its appointment evidenced by written contract (COLL 6.6B.13R), and its agreement required before dealing is suspended (COLL 7.2.1R). Oversight and cash monitoring may not be delegated (COLL 6.6B.22R).

A single depositary per AIF (FUND 3.11.4R), with cash monitoring, custody, ownership verification and oversight in four separate rules (FUND 3.11.20R, 3.11.21R, 3.11.23R, 3.11.25R). The AIFM may never be the depositary or a delegate of one (FUND 3.11.7R). The liability standard and the conditions for contractual discharge are not in the Handbook at all: they sit in regulation 30 of the AIFMD UK Regulation, and surface in FUND 3 only as the pre-investment disclosure duty at FUND 3.2.3R.

Both regimes use the depositary as an independent check. AIFMD has to separate assets held in custody from assets whose ownership is merely verified, because for a private markets fund most of the portfolio is the second.

Leverage

Capped. Borrowing must not exceed 10% of the value of scheme property on any day (COLL 5.5.5R), and derivative exposure is constrained by COLL 5.3.

Measured rather than capped. The AIFM sets a maximum level of leverage per AIF and the extent of any collateral reuse right (FUND 3.7.7R), and must demonstrate those limits are reasonable and that it complies at all times (FUND 3.7.8R). Gross and commitment exposure are both calculated under articles 6 to 11 of the level 2 regulation (FUND 3.7.10G). Exposure above three times NAV on the commitment method triggers enhanced reporting (FUND 3.4.6, FUND 3.4.5R).

A retail product carries a hard cap. For an AIF the regime substitutes measurement, disclosure and a reserve power: article 25, as onshored, lets the regulator impose limits where financial stability requires it.

Delegation

COLL 6.6.15AR sets conditions close to the AIFMD list: no mandate to the depositary or a conflicted person, an overseas delegate authorised or registered for asset management and prudentially supervised with cooperation ensured, effective ongoing monitoring, and instruction and termination rights. SUP 15.8.6R requires the management company to inform the FCA first.

FUND 3.10.2R adds objective reasons justifying the entire delegation structure, prior notification on the form at FUND 3 Annex 2R, and a right to withdraw with immediate effect. FUND 3.10.4R requires the AIFM's consent and its notification to the FCA before any sub-delegation takes effect. FUND 3.10.8R and FUND 3.10.9 add the letter-box prohibition and its four limbs.

Both regimes gate delegation and both require prior notice, so the difference is narrower than it is usually put. What AIFMD adds is the whole-structure test and the letter-box rule, which exists because an AIFM that delegates far enough leaves nothing regulated behind it.

Disclosure and reporting

A prospectus with the contents table at COLL 4.2.5R. The key investor information section at COLL 4.7 no longer appears in the Handbook; retail pre-sale disclosure runs through the consumer composite investments product summary regime in DISC.

FUND 3.2.2R requires seventeen items before investors invest, plus any material changes, as a continuing duty in the opening words of the rule. FUND 3.2.5R and 3.2.6R add periodic disclosure; FUND 3.3.3R the annual report within six months; FUND 3.4 the Annex IV return to the FCA, with frequency tiered by assets under management at SUP 16.18.4.

UCITS disclosure describes a standardised product and changes when the product changes. AIFMD disclosure describes the arrangements the manager actually operates, so it has to move whenever they move.

Remuneration

The UCITS Remuneration Code at SYSC 19E, applying to a UK UCITS management company that manages a UCITS scheme.

The AIFM Remuneration Code at SYSC 19B, applying to a full-scope UK AIFM of a UK or non-UK AIF. Code staff are defined at SYSC 19B.1.3R, including anyone whose total pay puts them in the senior management bracket. At least 40% of variable pay deferred over three to five years, 60% for particularly high amounts (SYSC 19B.1.18R); at least 50% in units or equivalent instruments (SYSC 19B.1.17R); control-function pay independent of the areas controlled (SYSC 19B.1.10R).

Two codes with the same architecture. SYSC 19B.1.4R(3) reaches remuneration paid directly by the AIF, carried interest included, because in most alternative structures the variable pay is paid by the fund rather than by the manager.

Marketing

An authorised UCITS scheme may be promoted to retail investors in the UK, subject to COLL and the financial promotion regime.

Marketing is a regulated act with a route chosen per fund. A full-scope UK AIFM markets a UK AIF under regulation 54 (FUND 3.12.2D); non-UK AIFs go through the national private placement regime under regulations 57 to 59 (FUND 10.5), where entitlement follows a complete notification being sent rather than FCA approval.

UCITS was designed to be distributed on a single authorisation. AIFMD was not, and there is no EU passport either way for a UK firm.

What a manager running both has to design around

Six places where a shared function or a shared document will not serve both rulebooks unchanged.

One risk function, two independence tests. COLL 6.11.2R(2) allows independence to be scaled back where it would not be appropriate and proportionate; FUND 3.7.2R carries no such wording, and FUND 3.7.3 conditions separation on supervision, activity and pay simultaneously. Run the AIFMD test on the shared function and record why, or the UCITS-side proportionality argument becomes the reason the AIFMD-side separation fails.
Two remuneration codes, one payroll. SYSC 19B and SYSC 19E both apply, and an individual working across both sides can be caught by each on different grounds. The populations have to be identified separately, and the AIFM side has to reach carried interest paid by the fund under SYSC 19B.1.4R(3).
The valuation control is not the same control. COLL 6.3 governs fair and accurate pricing between dealing investors. FUND 3.9.7R governs who may produce the number at all, and the in-house route is unavailable without functional independence and the remuneration safeguard. A pricing policy written for COLL will not evidence FUND 3.9.7R(1).
Delegation paperwork does not port either way. The condition lists are close, but FUND 3.10.2R needs objective reasons for the entire structure, an immediate-effect termination right, and notification on the FUND 3 Annex 2R form, while FUND 3.10.4R needs AIFM consent plus AIFM notification before a sub-delegation is effective. A template built around COLL 6.6.15AR and SUP 15.8.6R will miss all four.
Suspension mechanics differ. For an authorised fund, COLL 7.2.1R requires the depositary's agreement, immediate notice to the FCA and unitholder notification as soon as practicable. For an unauthorised AIF the constraints come from the fund's own documents and from the fair treatment duty at COBS 2.1.4R, so the governance has to be built rather than looked up.
Check which SYSC column applies before citing it. SYSC 1 Annex 1 2.6B disapplies most of SYSC 4 to 10 for a full-scope UK AIFM of an unauthorised AIF, carving in a short list and applying SYSC 6.1.1R only to its financial crime limb. The conflicts rules for that population are SYSC 10.1.22R to 10.1.26R, not the common platform last-resort rule at SYSC 10.1.9AR that most group policies quote.

Where the line is moving, and in which direction

The two regimes are being pulled together in the EU and pushed apart in the UK, at the same time and on the same subjects.

EU law

Directive (EU) 2024/927 amends AIFMD and the UCITS Directive together, and the liquidity provisions are near-identical: a harmonised tool list at Annex V to AIFMD and Annex IIA to Directive 2009/65/EC, with the manager of an open-ended fund required to select at least two tools from points 2 to 8 after assessing them against the fund's strategy, liquidity profile and redemption policy. Suspension and side pockets sit outside the two. Member States apply the measures from 16 April 2026, except the amended Article 24 supervisory reporting regime, which applies from 16 April 2027. This binds a UK manager only through an EU AIF or an EU entity.

Proposed, not law

CP26/28 and the Treasury's draft statutory instrument, both published 14 July 2026, move the UK the other way. There is no UK equivalent of the Annex V selection duty; at 7.14 the FCA says it does not consider wholesale reform of the liquidity rules warranted for firms that are currently full-scope UK AIFMs. The Treasury proposes to remove the statutory external valuer provisions including strict liability (4.6), and the FCA proposes to relax functional independence in valuation for small and medium AIFMs (4.9), having found a fully autonomous valuation function “rarely seen outside the largest AIFMs”. Annex IV is to be revoked and replaced under CP26/26 (FRAME). Final rules are expected in 2027 and implementation in 2028.

One structural consequence is worth holding on to. The AIFM regime would move into a new Alternative Investment Funds sourcebook (ALTS), with obligations scaled by size tiers set at £750 million and £5 billion of aggregate NAV. At that point this comparison stops being a comparison between an FCA sourcebook and an onshored directive, and becomes a comparison between two FCA sourcebooks that the same regulator can change at the same pace. A second consultation covering the authorised AIF regimes, NURS, LTAF and QIS, is promised after the discussion feedback, which is where the UCITS and AIFMD rulebooks meet most directly for a UK retail manager.