Alternative Investment Fund Managers Directive (AIFMD)

The Alternative Investment Fund Managers Directive (AIFMD or AIFM Directive) aims to introduce a harmonised regulatory framework across the EU for EU established managers (AIFMs) of alternative investment funds (AIFs).  AIFMD requires AIFMs to be authorised and requires provisions about how AIFMs should conduct business, transparency and marketing.  AIFMD must be implemented by Member States by 22 July 2013.

Key Points

• Certain fund managers will need to be re-authorised under the AIFMD to operate as AIF managers. For example:
  • MiFID firms carrying out portfolio management and/or risk management for EEA funds that are not UCITS funds or funds located offshore in third-country jurisdictions, such as the US and Cayman Islands; and
  • operators of collective investment schemes that are not UCITS funds carrying out portfolio management and/or risk management in-house.

• The AIFMD will mean certain fund managers are being regulated for the first time. For example, investment companies that do not employ an external manager will need to be authorised or registered with the FCA under the AIFMD.
• Depositaries of AIFs will have to comply with new requirements.
• The AIFMD brings in significant changes to the management/administration of AIFs in the EU and introduces new EU-wide passports for authorised full-scope AIFMs to market and manage AIFs from 22 July 2013.
• Marketing and management passports will not be available to non-EEA managers of AIFs or to EEA managers in respect of their non-EEA AIFs (this may be adopted from 2015 subject to ESMA reports and Commission delegated acts). Marketing of such funds to professional investors is allowed under national private placement (NPP) regimes. It is envisaged that existing NPP regimes will be phased out after the non-EEA passport regime becomes operational, although not before 2018.

Implementation

HM Treasury and the FCA have each undertaken 2 rounds of consultation. Draft regulations have been published.  A third consultation is expected from the FCA shortly (May 2013).

There remains some uncertainty as to the timing of authorisation of new AIFs as it appears the FCA will not be ready to provide authorisation prior to 22 July.

Managers/funds who expect to be subject to the Directive should already be taking steps to comply with various requirements relating to among other things Marketing and Third Country Provisions, Depositaries, Remuneration, Operating Conditions, Capital Requirements, Valuation, Transparency Requirements, Leverage, Portfolio Company Disclosure and Asset Stripping.

AIFMD and Pension Schemes

No specific actions for pension schemes arise from the implementation of AIFMD but schemes will want to understand how funds are responding to AIFM and basis on which any costs associated with compliance are being met.