On January 10, the European Commission published a report (dated December 10, 2018) on the operation of the Alternative Investment Fund Managers Directive (AIFMD).

The EC commissioned KPMG to conduct a general survey of the main stakeholders most affected by the AIFMD and carry out an evidence-based study, the key findings of which are set out in the report. The report concludes that the AIFMD has clearly played a major role in helping to create an internal market for alternative investment funds (AIFs) and a harmonized and stringent regulatory and supervisory framework for alternative investment fund managers (AIFMs). It also finds that most of the provisions remain relevant, have added value to the European Union, have contributed to the achievement of the AIFMD’s specific and operational objectives, and have done so effectively, efficiently and coherently. Of note is the finding that the EU management passport is working well.

However, certain areas were identified as requiring further analysis and improvement, for example:

  1. A lack of transparency regarding differing national rules and supervisory processes relating to the marketing passports, caused by national competent authorities adopting different approaches about which activities are considered as “marketing.” Respondents to the survey have, therefore, observed that it would be of “EU added value” to retain the national private placement regimes, even if non-EU passports were to be introduced for non-EU AIFs and AIFMs;
  2. Excessive investor disclosure requirements, which are often ignored by or prevent investors from obtaining a clear understanding of an AIF’s investment proposal;
  3. Inadequate and duplicative reporting requirements, as well as reporting obligations that overlap with other EU legislation; and
  4. The effectiveness of the valuation rules is impaired due to the binary choice between internal or external valuation and the diverging member states’ interpretations of the extent of the liability of external valuers.

The EC will continue its work on the AIFMD review and will report to co-legislators in 2019.

The EC’s report is available here.