With the advent of the Alternative Investment Fund Managers Directive (AIFMD) hedge fund managers located outside Europe who wish to target European investors will need to develop an understanding of the AIFMD marketing requirements. This is due to the broad extraterritorial effect of AIFMD which could ultimately require a manager who wishes to remain outside its scope to cease all activities which have a connection to the European Union (EU). However, for those managers unwilling to abandon the prospect of attracting European investors, there is a range of marketing options available under the new regime. These include (i) private placement in accordance with local marketing rules and certain minimum provisions of AIFMD in relation to disclosure to investors and regulators, and (ii) marketing on a passported basis to professional investors in each member state of the EU.
The purpose of this article is to assist managers in selecting the appropriate marketing regime to unlock European investment. It also outlines a potential route to AIFMD compliance, through a selfmanaged Irish Qualifying Investor Alternative Investment Fund (QIAIF), which would allow a non-EU manager to act in relation to an EU fund, with the benefit of the full passport, without incurring some of the operational costs of adapting in full to AIFMD.
Overview of AIFMD
The AIFMD applies to alternative investment fund managers (AIFM) based inside or outside the European Union, who manage EU-based funds or wish to market funds to professional investors in the EU. In practice the legislation is extremely broad in scope and the only way for a manager to ensure that it remains out of scope is to be located outside of Europe, manage no-EU funds and refrain from any marketing activity to EU investors.
While compliance with the AIFMD may seem a daunting prospect, there are some transitional provisions available to a non-EU manager, including the ability to avail of national private placement regimes (NPPRs) until 2018 where they are marketing funds in Europe (or 2015 where they are managing EU funds). However, there may be managers who wish to unlock the European market through the use the EU-wide marketing passport. This option should be available to non-EU managers from July 2015.
A summary of the requirements under the private placement regime and under the AIFMD passport is set out below.
Non-EU managers currently cannot avail of the passport and therefore...