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there is no alternative

AIFMD is at our doorstep but uncertainty and misperceptions about the initiative are still in abundance, writes Yvonne Lenoir Gehl, senior policy advisor at EFAMA


This broad universe is captured by the AIFMD independently of investment strategies or target investors. CIS-covered products do not necessarily pursue an ‘alternative’ investment strategy but may be equity, bond, money market or real estate funds, ETFs, private equity vehicles, hedge funds, charity funds and many more.

The AIFMD covers both retail funds and institutional investment vehicles. Throughout Europe, more than 20,000 such CIS are already authorised but a large number of CIS will for the first time appear in statistics in July.

Any non-European CIS is considered an alternative investment fund (AIF) and will fall under the scope of the directive if it is proposed to European investors or managed from Europe.

Beyond current directives

The AIFMD seeks to bring a European quality label for AIF funds and managers through harmonised regulatory standards. Several of these requirements are similar to those imposed under the Ucits and MiFID directives.

In many ways, they go beyond these directives, requiring additional own funds or an indemnity insurance, valuation of the assets, stricter rules regarding delegation of risk and portfolio management to external managers and important reporting requirements. Additionally, each AIF is obligated to appoint a depositary for the safekeeping of its assets.

EU AIF managers meeting these requirements will benefit from a European passport, and will be able to market AIF to institutional investors in all EU member states or provide management services to AIF domiciled in other member states. It is important to note that the AIFMD regulates a large number of retail CIS without providing a European passport for distribution to retail investors.

Restructuring in motion

The AIFMD will affect new AIF managers in July, while existing managers have until July 2014 to submit their request for authorisation. In order to meet these tight deadlines, the industry is currently undertaking substantial restructuring. This is, however, being held up as only Level 1 of the directive is already adopted in a final form.

Implementing measures to be published by the European Commission have been expected and repeatedly delayed for months, in particular because of discussion around limits which will be imposed on managers when delegating portfolio and risk management within or outside Europe.

Wealth managers are advised to follow closely any developments and to expect preparation on short notice in the second quarter of 2013.