Now that AIFMD has been implemented into national law, those investment managers who wish to be early adopters of the Directive are busy preparing their applications for authorisation. One of the key selling points of compliance with AIFMD is that it will allow an EU Alternative Investment Fund Manager (AIFM) to benefit from a passport to market its EU Alternative Investment Fund (AIF) to professional investors across the EU. The ability to easily market to a wider range of EU investors, without first having to seek authorisation in each relevant Member State, is an attractive proposition for managers eager to broaden their investor base.
AIFMD defines marketing as “a direct or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF”. The phrase “at the initiative of the AIFM” would suggest that reverse enquiries by investors will not be caught under the definition. Reliance on reverse solicitation is likely to be of limited success and it is probable that the broad definition will encourage managers to comply with AIFMD to avail of the EU passport.
Although a marketing passport is now available to EU AIFMs marketing EU AIFs, it will be two years before the passport is available to an EU AIFM marketing a non-EU AIF or to a non-EU AIFM marketing any AIF. Between now and July 2015, these AIFMs will need to rely on the national private placement regimes in order to market in the EU. It is expected that such regimes will remain available until 2018 but this is by no means certain as individual Member States may choose to discontinue their private placement regimes in the short term.
On the basis that ESMA issues a positive opinion on the functioning of the passport in 2015, a non-EU AIFM wishing to avail of the passport will be required to obtain authorisation from its “Member State of reference”. The Member State of reference is determined in accordance with the requirements of AIFMD and is most likely to be the particular Member State where the non-EU AIFM conducts most marketing or management.
Compliance with AIFMD by a non-EU AIFM will inevitably be costly and time consuming. The Irish self-managed fund, a long established fund structure, can assist in meeting such challenges. Currently UCITS and non-UCITS investment companies may be structured as self-managed funds. A non-EU AIFM may choose to avail of the marketing passport by designating the Irish fund it intends to market as the authorised AIFM. The fund could then (subject to compliance with certain provisions of AIFMD) delegate investment management functions to the non-EU AIFM.