"The Alternative Investment Fund Managers (AIFM) Directive will have a profound structural impact on the fund industry, both in Europe and internationally"
While the main focus of the AIFM Directive (the AIFMD) is on managers of funds, the AIFMD will not only impact European Union (EU) and non-EU AIFM, but also EU and non-EU domiciled Alternative Investment Funds (AIF), service providers to these funds and their investors.
The AIFMD covers all alternative sectors such as hedge funds, real estate and private equity, but also traditional sectors where the funds are not registered as UCITS. It applies to funds and certain corporate collective investment vehicles. Such products are generally for professional investors, but may also be sold to retail investors.
The AIFMD lays down requirements which must be met by AIFM, covering authorization, capital, marketing, organization, remuneration, conduct of business, conflicts of interest, functions and service providers and transparency. Specific provisions cover the use of leverage and acquisition of major holdings and control.
In return for more regulation of AIFM, their service providers and funds, the proposed Directive provides for the introduction of passports enabling AIFM to offer their management services and market their AIF throughout the EU.
In our view
We believe that the AIFMD has ramifications far beyond achieving basic compliance:
- Alternative investment groups (including promoters, sponsors, advisers, general partners and managers of all types of non-UCITS funds) should conduct a strategic review of their fund ranges and their operating models
- Service providers, especially depositaries, custodians, administrators and valuers, will also need to assess the strategic impact on their service offering and operating model and consider how they will react to new obligations and risks introduced by the AIFMD
- Investors will need to consider the accessibility of products, and the AIFMD’s impact on their investment process
Overall, the AIFMD will mean new opportunities and challenges for all the key stakeholders in the alternatives sectors’ value chain.
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