From this week, with 22 July 2014 marking the end of the transitional period for applications for authorisation under the Alternative Investment Fund Managers Directive (“AIFMD”), any alternative investment fund manager wishing to market its alternative investment funds throughout the European Economic Area (“EEA”) will require authorisation under the AIFMD.
Although the process of implementation of AIFMD has at times raised more questions than answers with regard to its operation (for example, precisely what is meant by “marketing” under the AIFMD) it is safe to say that any hedge fund manager actively seeking European investor assets must have a considered strategy for addressing AIFMD.
For the first time there now exists a comprehensive regulatory framework governing many aspects of the alternative investment market within Europe.
AIFMD provides a regulatory framework governing legal, regulatory, risk monitoring and process elements of alternative investment fund management with specific rules on remuneration, valuation, delegation and capital requirements as well as rules governing risk and liquidity management, business conduct, transparency and the depository function.
What do I need to know now?
For those alternative investment fund managers not yet fully engaged with AIFMD, they need to be aware of some key points:
- Distribution of alternative investment funds within the EEA is now governed primarily by the AIFMD. “Private placement regimes” remain in place for now but have been significantly curtailed in many key European markets.
- How AIFMD will affect alternative investment fund managers will be governed by domicile, with a different approach required by EEA domiciled alternative investment fund managers versus non-EEA domiciled alternative investment fund managers.
- Implementation of AIFMD in Ireland has led to a sophisticated and solutions based approach to the challenges raised. There exist many innovative solutions assisting alternative investment fund managers to access the European market in ways not previously anticipated.
- Alternative investment fund managers marketing within the EEA with no defined AIFMD strategy should immediately seek advice on how to proceed. Although reverse solicitation remains possible, managers not holding an authorisation should proceed with caution and seek appropriate advice.
- Non-EEA alternative investment fund managers who have to-date shied away from Europe and AIFMD because of the perceived implications should speak to one of our Alternatives Team to understand the solutions developed in Ireland to assist managers to meet the compliance and regulatory burden.
For those alternative investment fund managers more fully engaged in AIFMD :
- Authorised EEA alternative investment fund manager or EEA alternative investment fund manager awaiting authorisation - with the end of the transitional period it is now necessary to comply with the AIFMD in full.
- Remuneration Policy
- Risk Management Policy
- Reporting and Disclosure Requirements
- Compliant Depository Appointment
With full implementation of the AIFMD, all policies and procedures drafted in the context of applications for authorisation must now be embedded and applied.
- EEA domiciled alternative investment fund managers not yet authorised must now give consideration to their position, not only with regard to their ability to continue to manage European alternative investment funds, but also with regard to their ability to effectively market their products.
The Alternative Investment Fund Managers Directive and the relevant regulations form a complex and to some degree still imperfectly defined regulatory framework which requires specialised and detailed advice to ensure full compliance. Those alternative investment fund managers looking to understand what solutions may now be in place or, having applied a solution, are looking for advice on its implementation, should speak to one of our Alternatives Team to ensure not only that the full implementation of the Alternative Investment Fund Managers Directive will not adversely impact their operations but also to ensure that they are getting the most from the opportunities that arise from its implementation.