ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Skadden outlines difficulties of marketing under AIFMD

The marketing passport is only available for EU managers


Pete Carvill

The Alternative Investment Fund Managers Directive (AIFMD) will impact negatively on the marketing of private funds by non-EU firms within the continent, lawyers from Skadden have suggested.

Speaking on the law firm’s podcast The Preferred Return: Marketing Private funds in the UK and Europe, Abigail Reeves, associate for financial institutions and investment management at Skadden, said: “The marketing passport is only available for EU managers.

“Non-EU managers, including UK managers, which wish to market funds to investors in the EU, will need to rely on national private placement regimes (NPPRs). These regimes are not enacted in all EU member states, and the requirements across member states can differ. For example, in Germany, there is a requirement that a European depository has been appointed for the fund, whereas in the Netherlands, no such requirement exists.”

She added: “In certain jurisdictions the manager is also required to provide supporting documentation. While the requirements are different, managers may be expected to provide private placement memoranda and certificates of formation, investment management agreements and also to produce Article 23 disclosures for the fund.”

Reeves’s remarks related to the AIFMD, which was first enacted in 2011. According to law firm Linklaters, which calls the regulation “broad”, it was put into place with a view to creating a comprehensive and effective regulatory and supervisory framework for alternative investment fund managers within the EU.

Differing requirements

Joining Reeves on the podcast was Greg Norman, partner for investment management at Skadden. He ran with the point on differing requirements across member states, noting: “Even though the requirements can differ across member states, there are common requirements for relying on NPPRs.

“For example, the filings will request information on whether custodians are used or whether risk management or portfolio management is carried out by a third party. Or if there are brokers, valuation agents or independent auditors, as well as whether the relevant fund is a feeder fund.”

He added: “There are also ongoing requirements the manager has to comply with after registering a fund for marketing. First, the manager has to provide the Article 23 disclosures to investors before they commit. The manager will also have to make ongoing disclosures to investors, as well as reports to regulators. Third-country managers who register their funds for marketing in the EU will also become subject to the AIFMD’s asset-stripping rules and sustainability-related regulations.”