A working group comprising a law firm, investment bank and the Independent Investment Management Initiative (IIMI) has called on HM Treasury and the Financial Conduct Authority to cut costs, complexity and delays surrounding the establishment of new asset management firms in the UK.

Comprising Charles Hall, Head of Research, Peel Hunt, Dani Hristova, CEO, IIMI, Dan Mannix, former CEO, RWC Partners, James Kaufmann, Partner, Hill Dickinson, and Jamie Carter, CEO, Variis Partners, the group put forward the call at a Mansion House meeting in the centre of the City.

They warned that the current regulatory environment is stifling innovation, limiting competition, and pushing talent and capital overseas. And while the UK has historically been a leading destination for fund launches, thanks to a welcoming regulatory landscape, competitive tax treatment, and an ecosystem supportive of entrepreneurial managers, the ongoing fee pressure, career risk aversion, and consolidation of capital have eroded support for smaller or specialist funds, effectively shutting the door on innovation and diversity in the market. This gives a competitive advantage to other markets with a more streamlined and cost-effective regime.

According to their figures, launching a Fund Management Company in the UK currently takes up to 18 months and costs often exceed £100,000 in direct fees alone, with total costs reaching up to £1 million when indirect expenses are included.

By contrast, in the US, Ireland, Luxembourg and UAE approval processes can be completed in weeks or even days and at much lower costs, they said.

The group's key proposal is the introduction of a UK Exempt Reporting Advisor (UKERA) regime. Modelled on the US Exempt Reporting Advisor regime, UKERA would enable experienced professionals to establish and operate a UK fund management company - whose products are marketed only to institutional clients - under a lighter touch initial regulatory regime. This would allow them to accelerate their growth before being subject to full authorisation and the accompanying increase in regulatory responsibilities, the group stated, adding that restricting access to UKERAs to institutional clients will provide safeguards for retail investors – a principle the group strongly upholds.

A second proposal is for a corresponding UK Exempt Reporting Advisor Fund (UKERAF). The group recommends that a category of funds exists - or can be recategorised - that can be managed by a UKERA . These funds would be established with ease, enjoy capital gains tax exemptions and lower compliance hurdles. It would be designed to evolve into a fully regulated structure as the manager grows.

Charles Hall, Head of Research, Peel Hunt said: "A vibrant fund management sector is an essential ingredient for a vibrant UK capital market, but a heavy regulatory burden is putting us at a major disadvantage compared to our international rivals. If we’re serious about the growth agenda, this needs to be fixed."

Dani Hristova, CEO, IIMI, said: "As it stands, fund management start-ups are largely reserved for individuals with deep personal wealth. This undermines diversity, innovation and growth."

Jamie Carter, CEO, Variis Partners said: "There’s a direct link between supporting fund management start-ups and enabling broader economic growth. We’re calling on policymakers and regulators to seize this moment to make the UK a more competitive and innovative financial hub once again."

The Independent Investment Management Initiative (IIMI) is a member-led industry think tank representing specialist, entrepreneurial investment boutiques that are entirely focused on and aligned with the interests of their investors.