AIFMD, the Alternative Investment Fund Managers Directive, came into effect in July 2013 and has remodelled the regulatory context inside the EU for alternative investment funds, private equity and hedge funds..
The primary objective of the directive is to monitor activities and dealings of Alternative Investment Funds (AIFs) and more specifically, the Alternative Investment Fund Managers (AIFMs) themselves in order to form a tighter and more secure regulatory system for such areas.
Owing to the changes within the regulatory landscape, fund managers need to be aware of its impact on their dealings.
Implementation in many regions has been swift. Fifteen EU states reacted immediately to the deadlines imposed by the European Parliament in 2010 by merging the AIFMD into their own legislative constitution by the end of August 2013. A further twelve are still at the blueprint stage and while Estonia has integrated the changes, it is only on a partial scale.
The directive means that AIFMs will be brought under tighter regulations and restrictions. The legislation requires AIFMs to register with their local competent authority in order to comply. They also must follow specific operational procedures to ensure they can remain authorised.
Now the directive is live, AIFMs must publish a yearly report for each of their AIFs, with consideration for each year and each market. They must also include an investment strategy and their objectives, alongside all fees, charges and details of brokers, depositories and auditors.
Further areas to consider for the AIFMs include liquidity risk and the correct procedural monitoring for said risk. They are also increasingly restricted in placing personal investment within client’s portfolios. AIFMs must also ensure there is one depository for each individual AIF, and that depository must be in the same member state as the fund itself.
Some UK-based asset managers have criticised the reforms of the AIFMD. They feel that the increased regulations could adversely affect the competiveness of the funds industry within the EU. It is also feared that the directive might affect the numbers of managers from outside the EU entering the economic region to operate.
Sources: http://www.lseg.com/markets-products-and-services/post-trade-services/unavista/regulation/aifmd, http://www.fca.org.uk/firms/markets/international-markets/aifmd, http://ec.europa.eu/internal_market/investment/alternative_investments/index_en.htm