No EU regulation sets an authorisation threshold at EUR 20 million; what constrains a small vehicle is the annual fixed cost stack and what it does to the total expense ratio. Four routes exist below that size — a certificate issued under an existing base prospectus, a sub-fund of a third-party umbrella, a Notified AIF managed by an already-authorised AIFM, and separately managed accounts — and each trades money against issuer risk, control, dependency or the absence of a unified track record.
Twenty million euro is the number the industry quotes as the point below which a fund “does not work”. No regulation says so. It is a rule of thumb about fixed costs that has hardened into folklore, and treating it as a threshold has sent a good many promoters down the wrong route. What follows is the arithmetic underneath it, the routes that exist below it, and what each one costs in something other than money.
There is no EUR 20m rule
General rule It is worth being explicit, because promoters are routinely told otherwise. There is no authorisation threshold at twenty million. The thresholds that do exist in EU law sit elsewhere and point the other way: AIFMD sets thresholds below which a manager registers with its regulator instead of holding a full authorisation — broadly, portfolios of AIFs under EUR 100 million including assets acquired through leverage, or under EUR 500 million where the funds are unleveraged and grant no redemption rights for five yearsEUR-Lex. A small vehicle is not a regulatory problem. It is a cost problem, and cost problems have more solutions than regulatory ones.
The real constraint is what the fixed cost stack does to the total expense ratio. The same annual running cost is a rounding error on one hundred million and a fatal drag on five. Nothing about that changes at any particular figure — which is precisely why quoting a round number instead of doing the division is unhelpful.
The arithmetic that actually binds
Before comparing routes, list what each will charge annually regardless of performance. These are the categories to get quoted; the amounts are deal-specific and any provider unwilling to put them in writing has told you something useful.
| Cost | Fund route | Certificate route |
|---|---|---|
| Set-up and legal | Constitutional documents, offering memorandum, regulatory filing | Onboarding and final terms under an existing programme |
| Manager | AIFM fee, whether in-house or third-party | Portfolio management or advisory fee |
| Depositary / custody | Depositary required under the AIFMD framework | Custody at the issuer's chosen bank |
| Administration and NAV | Fund administrator | Calculation agent |
| Audit | Annual fund audit | Issuer-level audit, allocated per cell or series |
| Issuance and paying agent | Not applicable | Issuance, paying agent, ISIN, and any listing fee |
| Market making | Not applicable | Where the instrument is admitted to trading |
| Governance | Board, compliance, risk, AML | Largely carried by the issuer's platform |
Note This page publishes no benchmark figures for either column. Numbers that circulate for “typical” set-up cost or time to market have no published methodology behind them — no sample, no definitions, no date — and a promoter who plans around them is planning around folklore. Ask providers for their own figures in writing, dated, for your specific structure.
Four routes below EUR 20m
| Route | What it is | The real trade-off |
|---|---|---|
| Certificate under an existing programme | An AMC or ETI issued under an issuer's base prospectus, with the promoter as strategy manager | Fastest to market and lightest fixed base, but the investor takes issuer risk permanently and the product is a debt security, not a fund |
| Sub-fund of a third-party umbrella | A new compartment inside an existing SICAV or equivalent, sharing its board and service providers | Fund-grade asset protection at shared cost, but you inherit the umbrella's providers, governance and reputation |
| Notified AIF under a host AIFM | A fund notified to the regulator, managed by an already-authorised AIFM | Removes a product authorisation step, not the AIFMD obligations; you depend on the host AIFM's risk appetite and its willingness to take responsibility |
| Managed accounts | Separately managed accounts in each investor's own name | Almost no wrapper cost and no pooling, but no single track record, no ISIN, and operations that scale badly past a handful of clients |
The Notified AIF route requires a full-scope authorised AIFM that assumes responsibility for the fund, and the fund may be promoted only to professional or qualifying investors; self-managed schemes cannot use it at allMFSA. That last exclusion catches more first-time promoters than any other: if the plan was to manage the fund yourself without an authorisation, this route is closed before it starts.
What each route costs you in something other than money
- The certificate route costs you the conversation. Every institutional investor will ask who the issuer is and what happens on its default. You will answer that question for the life of the product. If your target investors are conservative allocators, budget for it.
- The umbrella route costs you control. You are joining someone else's governance. Their board, their administrator, their compliance appetite, and their other sub-funds' reputation are now adjacent to yours.
- The host AIFM route costs you dependency. The authorised manager carries the regulatory obligationsEUR-Lex, which means it also carries a veto. A strategy the host will not take responsibility for cannot launch, whatever the promoter thinks of it.
- The managed account route costs you the product. No pooled vehicle means no unified track record, and a track record is usually what the promoter was trying to build.
Registering instead of being authorised
General rule A small manager may be tempted by the sub-threshold registration regime, and for some strategies it is the right answer. Understand what is being given up. A registered sub-threshold manager is outside the full depositary, capital, valuation and conduct regime, and — the part that usually decides it — it cannot use the AIFMD marketing passport, so its funds may be distributed only under national private-placement rules, where those existEUR-Lex. If the plan involves raising across several member states, that is a hard constraint, not a technicality.
The regime has also moved recently: Directive (EU) 2024/927 revised the AIFMD framework with effect from 16 April 2026, tightening delegation and substance requirements and adding harmonised rules for loan-originating fundsEUR-Lex. Any structuring advice older than that should be re-checked before it is relied on.
A checklist to take to providers
- The full annual fixed cost stack, in writing, itemised, for the structure you actually intend.
- The minimum size at which that stack gives an acceptable total expense ratio — calculated by you, from their numbers.
- Who assumes regulatory responsibility, and what would make them decline or withdraw.
- Which investors the vehicle may be offered to, in which countries, and on what basis.
- For a certificate: whether assets are segregated, whether a security interest exists, and where that is documented.
- For a fund: the depositary, the administrator, the auditor, and the dealing and redemption terms.
- What happens if the strategy underperforms and assets fall — who can wind it up, and at whose cost.
Framont example Framont & Partners Management Ltd operates across the certificate, umbrella and Notified AIF routes and earns fees on each, so it is not a neutral party to this decision. The checklist above is written to be used against us as readily as against anyone else.