Looking to Europe

A new regulatory regime is scheduled to impact fundraising in Europe starting this summer. The new regulatory structure known as the Alternative Investment Fund Managers Directive (AIFM) has a July 22 effective regulatory date. The effect will be felt if you are a EU-based fund manager or want to market to EU-based investors.

For U.S.-based managers falling under the AIFM there will be three main requirements:

1. Disclosure to investors before they decide to invest
2. Annual report to investors.
3. Disclosure with regulators.

Even with the approaching deadline, there is still a lot of uncertainty. With EU Directives, it’s up to each member state to decide how to implement it. The UK has announced it will require a fund to register and the Financial Services Authority will have some oversight and will require Form PF-like data. Germany will likely implement a much stricter approach.

The main documents involved are the 2011/61 Directive (.pdf) and the Delegated Regulation (.pdf) that provides additional coverage of some aspects of the Directive. The third is the final report of Guidelines on sound remuneration policies under the AIFMD (.pdf).

If you have EU investors in your U.S.-domiciled fund but you don’t intend to market it anymore in Europe, you probably don’t have to worry about the AIFM directive. However, if you do intend to solicit European investors, you’re probably looking at a July 2014 compliance deadline.

There are some minimal thresholds. For hedge funds, an adviser must manage at least 100 million Euros in assets and for private equity funds the adviser must top a 500 million Euros threshold to fall under the directive. However, member states may reduce these thresholds even lower.

If you have European investors in your US fund or have European operation, the AIFM will start taking up a bunch of your time in the next few months.

Sources:

• Commission Delegated Regulation on Alternative Investment Fund Managers
• Directive on Alternative Investment Fund Managers
• final report of Guidelines on sound remuneration policies under the AIFMD (.pdf)
• A guide to preparing for the EU’s AIFM regime before July 22 deadline in IA Watch
• The Alternative Investment Fund Managers Directive – ESMA Remuneration Guidelines by Glynn Barwick at Goodwin Procter
• AIFMD: the road to implementation in July 2013