It has been in the making for more than four years and has been heavily negotiated but the Alternative Investment Fund Managers Directive has now finally arrived and was implemented on 22 July.
So yet another acronym to add to the plethora of European Union legislation that has bombarded the financial services industry in recent years, but what does AIFMD mean? What is it all about?
AIFMD regulates fund managers rather than the funds themselves. In very broad terms, it will impact all alternative investment fund managers who are not Ucits managers. As such, it will include private equity, hedge, property, infrastructure and any other alternative investment fund managers.
The impact of AIFMD depends on various factors, including where the manager and its funds are located, where the funds are being marketed, the type of fund and the size of the manager’s assets under management. This means that managers need to carefully analyse their structures against the specific rules as one size does not necessarily fit all.
Scope
The territorial scope is broad. It will impact managers who manage their funds in the EU or manage EU funds outside the EU. It will also capture fund managers who are based outside the EU but who are looking to market their funds to EU investors (irrespective of whether the fund is based in the EU).
Many managers in the UK have already been subject to FCA regulation so the need to get regulatory approval will be less of an issue. However for some fund managers – for example in the context of property funds – authorisation may not have been necessary previously so AIFMD will have a more significant impact on these managers.
As explained above, approval is needed when you are ‘managing’ an alternative investment fund. This has a particular meaning and managers will need to carefully analyse their structures to ascertain who is managing the relevant funds. For AIFMD purposes there can only be one manager and it can be difficult to work out who this is, particularly in multi-manager structures.
There is a lighter touch regime for smaller managers. In broad terms this means opened-ended fund managers with assets under management which do not exceed €100m (£84m) and closed-ended and unleveraged fund managers with assets under management which do not exceed €500m (£420m).
For AIFMD purposes there can only be one manager and it can be difficult to work out who this is, particularly in multi-manager structures