Alternative Investment Fund Managers Directive

The Alternative Investment Funds Directive (AIFMD) is now in force throughout the EEA (as of July 22, 2013).

This led from the EU Commission’s first published draft AIFMD on April 29, 2009. Since then a good deal of debate has taken place, with the view of implementing harmonized regulation in regard to the Management and Marketing of Alternative Investment Funds in the EEA from July 22, 2013. Various seminal publications are shown to the right of this summary. The Directive aims to regulate the management and marketing of collective investment undertakings that are not subject to the UCITS regime, including hedge funds, private equity funds and real estate funds (together referred to as Alternative Investment Funds (‘AIF’)).

The main challenges for AIFs and their Investment Managers will be to determine which entity needs to seek authorization or recognition, as appropriate, as an AIFM, and to ensure that the compliance infrastructure is in place to meet the additional regulatory requirements.

The AIFMD was published in the Official Journal of the European Union in July 2011. The European Commission has since then published, on the Official Journal, the AIFMD’s Regulations which became effective on March 19, 2013 (following the completion of the Objection Period) and are now directly binding Regulation in all EEA States from July 22, 2013. In addition, each EEA State has to implement domestic law implementing AIFMD where the EEA State has discretion and/or the Directive’s provisions are not made by way of the EU Regulations (‘AIFMR’) some EEA States still have to transpose AIFMD. The UK, and a large number of EEA States, implemented AIFMD on July 22, 2013.

Next Steps

In the UK, the FCA published its final Policy Statement on June 28, 2013, following two of the planned three Consultation Papers, and HM Treasury has published the UK’s final draft domestic AIFMD implementing legislation ‘the UK AIFMD Regulations’. Much is now as clear as it will be in advance of developed best market practice and, hence, Alternative managers can now make fundamental

decisions and ESMA’s Guidance and Technical Standards have further, usefully, clarified the implementation issues.

Firms must, if they have not already, begin planning if and how the Directive will affect them. The relevant factors firms should consider include:

  • the domicile of any AIFs
  • the location of the potential Alternative Investment Fund Manager (‘AIFM’)
  • value of AIF funds under management
  • the extent and location of any marketing activities in the EEA
  • the extent to which the AIFMD’s Transitional provisions might, or might not, apply
  • legal and contractual arrangements between the AIFM and the AIF
  • the AIF under management
  • the location of the AIF depositories
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