Changing European Financial Landscape: New Opportunity and Speed to Market for Asset Managers
Recent developments in Europe may see new opportunities and changes to operating models for asset managers undertaking activities in this market.
First, Luxembourg’s Parliament has passed a new law introducing a Reserved Alternative Investment Fund (RAIF) structure. Launched in accordance with AIFMD, a RAIF is not subject to authorization or oversight by Luxembourg’s regulator, the CSSF. It is instead supervised by its AIFM. This creates several benefits for managers including a heavily reduced time to launch (less than a month), planning certainty, and flexibility in legal and tax structuring.
Second, ESMA’s recommendations on the extension of the AIFMD passport to 12 non-EU countries published last week clearly shows the importance of having regulations in third counties that are deemed equivalent to EU rules. However, as only nine of the original group of 22 received positive feedback from ESMA at this point, there still seems to be some way to go before all remaining countries have been assessed and the extension of the passport comes into effect. Currently, non-EU AIFMs and AIFs must comply with each EU country’s national private placement regime (NPPR) when they market funds in that country. ESMA’s advice will now be considered by the European Commission, Parliament and Council.
Finally, following the UK’s vote to leave the EU, UK managers and funds may in the future become classified as 'third country' and ‘non-EU fund managers’. This will have a significant impact on marketing, solicitation, passporting and operations. As the UK will likely join the 22 countries already being considered for AIFMD passports, ESMA’s advice provides useful guidance as to what the key considerations are regarding the extension of the AIFMD passport to non-EU AIFMs. For some UK asset managers without an existing presence in the EU, it may be necessary to establish a base in an EU jurisdiction in order to continue doing business within the bloc, at least for the period in which the UK is applying for a third country passport. While this will inevitably require planning and investment, this does not necessarily entail moving lock, stock and barrel to an EU country.
How Duff & Phelps Can Help
As asset managers consider their options in Europe, outsourced solutions can play a prominent role by enabling firms to operate quickly under an authorized regulatory license, as well as providing the necessary substance to meet regulatory requirements in a cost effective way.
Duff & Phelps’ own Third Party Management Company (Super ManCo) provides an umbrella structure for AIFs and UCITS funds across all asset classes to access European investors. This includes the required regulatory substance, governance and hosting arrangements, as well as risk management and independent valuation services. Our ManCo is responsible for the investment management function of your business, concentrating on the risk management function, whilst at the same time sub-delegating portfolio management.
Furthermore, if your firm is looking to provide investment advice or corporate advisory services in the UK, our authorized Regulatory Hosted Solution allows you to do so as an FCA Appointed Representative of Duff & Phelps Securities Limited. Whether you are seeking to umbrella under a regularly licensing solution for the long term, or whilst your firm seeks its own FCA authorization, we aim to ensure that your firm is set-up and fully operational on our platform in less than one month. All compliance procedures and staff training are also provided to ensure you are operating within the current regulatory environment.