COFI and Alternative Investment Managers: What’s Changing?

COFI's adoption of an activity-based regulatory framework is fundamentally altering the operational landscape for alternative investment managers. Under this approach, regulatory oversight focuses on the specific financial activities undertaken by fund managers rather than applying blanket categorical rules, requiring managers to reassess their business models, compliance infrastructure, and risk management protocols to align with activity-specific requirements.

This regulatory shift arrives amid broader market dynamics reshaping the alternative investment industry. Alternative investment fund managers are contending with capital market transitions, evolving client expectations, and the democratization of private market access to retail investors and defined-contribution retirement plans. In response, managers are diversifying their strategy offerings and expanding distribution channels to reach new client segments while maintaining fiduciary standards and regulatory compliance.

The activity-based regulatory model creates both compliance obligations and strategic opportunities. Managers are increasingly focused on tailoring their product suites—including private credit, multi-strategy funds, and differentiated solutions—to meet specific client needs across wealth advisory, institutional, and retirement plan channels. The need to carefully vet offerings for 401(k) plans and other defined-contribution vehicles has become a priority, particularly as retirement system fiduciaries gain greater exposure to private market investments. Fund managers with transparent, well-documented activity frameworks and robust compliance systems are positioned to capitalize on expanded retail and retirement market access, while those slower to adapt to activity-based regulatory requirements may face operational constraints.