So You’ve Decided to Outsource Your ACD. What Comes Next?

In our recent article, Independent or Internal ACDs: What’s the smarter choice for your fund governance?, we looked at why more firms are reassessing the role of the internal Authorised Corporate Director (ACD), and whether a "hosted," or the more appropriately described "independent" model could offer a stronger long-term governance structure.

That decision is an important one. Although many firms refer to the move as “outsourcing the ACD”, it is more accurately understood as appointing an independent ACD. And once that decision has been made, the question changes to, “how do we make the move work?”

A transition from an internal ACD to a hosted model is not a straightforward switchover. It is a fund governance change programme. It affects operating roles, oversight forums, board reporting, regulatory responsibilities, service provider relationships, management information, and investor communications. We’ve developed a transition checklist that lays out considerations and steps firms must work through when moving from an internal ACD to an external ACD.

Download the checklist

This type of project will usually require a formal fund transfer project, with workstreams spanning vendor selection, due diligence, regulatory review, onboarding, and BAU oversight.

For managers who have already made the strategic call, four areas deserve particular attention.

1. Be clear on what the operating model is really changing

The first challenge is defining the future-state operating model. This needs to go beyond a high-level view of “the ACD function is moving externally”. Firms need to be clear on which activities the investment manager will retain, which activities the hosted ACD will perform, and how the two parties will interact in practice.

The investment manager will retain activities such as portfolio management, distribution, and client relationships, whilst the ACD will perform fund governance, regulatory oversight, COLL compliance, board oversight, Assessment of Value, fund risk oversight, and oversight of delegated activities.

This will of course unsettle established ways of working. Teams that previously relied on interacting with an entity within their company and individuals that they know will now need work with a new third party and its resources to evidence decisions, formalise controls, and provide information in a more structured way. That can create tension if responsibilities are not clearly defined from the outset.

The key question is not only “who owns the activity?” – it is also “what evidence, reporting, escalation, and decision-making does each party need to discharge its responsibilities effectively?”

2. Treat management information as a core workstream

As with any large change programme, weak management information is one of the practical risks that can undermine the transition. Our checklist identifies weak management information, loss of control over governance processes, insufficient oversight of delegated activities, and conflicts between the investment manager and ACD as key risks to manage.

This is where the move to an independent model can become operationally demanding. The ACD needs reliable information to oversee the fund, challenge appropriately, and evidence its governance responsibilities. The investment manager needs to understand what information is required, who owns it, how frequently it must be delivered, and how exceptions will be escalated.

That means MI should not be treated as a reporting add-on late in the project. It should be designed early, alongside the operating model and control framework. Firms should clarify the MI pack, data sources, dashboards, escalation thresholds, reporting timelines, and ownership model before onboarding begins.

The FCA’s review of host AFMs/ACDs highlighted the importance of effective due diligence, oversight of delegated investment managers, governance, and financial resources. It also noted that effective host firms are typically well-resourced, have clear governance, recognise and control conflicts, and hold delegated third-party investment managers to account.

In practice, this raises the bar for both sides. The hosted ACD needs the right oversight model, but the investment manager also needs the operating discipline to support it.

3. Get the contracting and regulatory dependencies right early

The legal and commercial workstream is another area where complexity can be underestimated. A hosted ACD transition may require an ACD Agreement, Investment Management Agreement, Delegation Agreement, Service Level Agreements, Distribution Agreement, Co-Manufacturer Agreement, and reporting and escalation protocols.

These documents need to do more than appoint a provider. They need to translate the future operating model into practical obligations. That includes how reporting will work, which service levels apply, how breaches will be escalated, what support the investment manager must provide, and how oversight meetings will be structured.

Regulatory dependencies also need to be identified early. Depending on the structure, fund documentation may need to be amended, prospectus and KIID/KID updates may be required, depositary and administrator consents may be needed, and FCA notifications or approvals may apply.

The risk is that firms focus heavily on provider selection and only later uncover the operational, legal, or regulatory dependencies that affect timing. A better approach is to run these workstreams in parallel from the beginning, with clear ownership across legal, compliance, operations, product, distribution, and investment teams.

4. Don’t underestimate the hidden dependencies

Many firms start by mapping governance responsibilities, only to discover a wider network of activities supporting the ACD. Depending on the operating model, this can include prospectus maintenance, factsheet production, regulatory reporting, data dissemination, client money processes, vendor oversight and specialist support from legal, risk, compliance, finance and audit teams.

The challenge isn't simply identifying what sits within the ACD entity. It's understanding which activities are shared across the organisation and which need to be replicated, reassigned or formally governed once the hosted model is in place. This is often where unexpected complexity emerges.

From Decision to Delivery

Moving to an independent ACD model can be a logical next step for firms looking to strengthen governance, access specialist oversight capability, or reduce the burden of maintaining an internal ACD model. But the value of the move depends on execution.

The firms that manage the transition well will not treat it as a narrow vendor onboarding exercise. They will treat it as a governance change programme — one that requires a clear operating model, robust due diligence, reliable management information, well-structured agreements, and disciplined oversight once the hosted ACD is in place.

To support firms preparing for this transition, we have developed a practical checklist covering the main workstreams, decision points, and risks involved in moving from an internal ACD to a hosted model.

Download the checklist
From Internal to Independent ACD – a practical guide to evaluating, planning, and delivering an ACD transition