The Alternative Investment Fund Managers (AIFM) Directive

In the aftermath of the financial crisis, increased regulation of funds and their managers operating in the EU or marketing to EU investors was proposed to enhance the strength of the European financial system. The AIFM Directive seeks to provide a harmonised regulatory and supervisory framework for the management and administration of alternative investment funds (“AIFs”) across Europe. The Directive covers the management of all collective investment undertakings  which fall out of the scope of the UCITS regime thus including venture capital funds, hedge funds, investment trusts, commodity funds, property funds and private equity funds amongst others. Authorisation by the home Member State will be required in order to provide management services to alternative investment funds or market alternative investment funds in the EU if the assets under management exceed the thresholds of €100m or €500m in the case that the fund is unleveraged and does not grant investors redemption rights for at least 5 years.

The AIFMD will come into force on the 21st July. EU-domiciled funds run by managers based within the EU will benefit from a ‘passport’ enabling them to be marketed to sophisticated investors throughout the EU from 22 July, 2013. The passporting system is envisaged to be eventually extended to non- EU managers and funds.
Level 2 Implementing measures will be drawn up by the European Commission over the next two years on the basis of advice provided by the European Securities and Markets Authority (ESMA). ESMA has recently published its proposals for implementing measures, these include amongst others the calculation of the value of assets under management,  the treatment of potential cases of cross-holding among the AIFs managed by an AIFM and the procedures for small managers to ‘opt-in’ to the AIFMD.