I’m attending the PERE CFOs & CCOs Forum. These are my notes from the session.
Most of the attendees are using private placement to get into Europe, with the rest split between a parallel Europe fund and reverse solicitation.
AIFMD arrangements are possible with a third-party who has the AIFMD passport. The non-EU firm acts as a subadvisor.
Reverse solicitation is grey area. It can’t be used for a large input of European investors.
Private placement regimes will terminate in 2018 and AIFMD will take over fully. Currently, using the private placement regime requires a great deal of local knowledge of the individual regulatory regimes in each country.
Setting up a new European-based manager for a parallel fund is a solution. That requires more money and more people (and that means more problems).
There is a new Luxembourg investment vehicle type called a RAIF that allows easier use of AIFMD. European investors would come in through this entity. You do not need to submit a prospectus approved. You can also use it for multiple funds. Cells under the RAIF would invest in the fund.
AIFMD has the requirements of a depositary and disclosure of renumeration. You can deal with these, but it’s difficult. The reporting is time-consuming.
The renumeration rule has three boxes. If you have your own AIFM, then you need to report pay of key personnel. If you use a third-party AIFM that subcontracts the management back to the manager, you still may need to report your key personnel. The Annex 2 Guidelines govern the compensation disclosure and variables.
The key control is to have the fund manager control the bank accounts and not allow the appointed-AIFM to control the bank accounts. The AIFM is merely an adviser it does not legal authority to act on behalf of the fund manager.
There are grey areas around the difference between a joint venture and pooled-fund. If the investor has significant control, it may not be a fund subject to AIFMD.
The view is that may take tens of million, if not hundreds of millions of AUM from Europe to justify the cost of being AIFMD compliant.
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