In the aftermath of the financial crisis, increased regulation of funds and fund managers operating in the EU or marketing to EU investors was proposed to enhance the strength of the EU financial stability and investor protection. The Alternative Investment Fund Managers Directive ("AIFMD") seeks to provide a harmonised regulatory and supervisory framework for the management of Alternative Investment Funds (“AIFs”) across Europe.
The AIFMD covers the fund managers ("AIFMs") whose regular business is the management of collective investment undertakings, which fall out of the scope of the UCITS Directive, and which raise capital from a number of investors and intend to invest such capital in accordance with a defined investment policy for the benefit of those investors. This means that a wide range of AIFs are captured by the AIFMD including venture capital funds, hedge funds, investment trusts, commodity funds, property funds, debt funds, and private equity funds amongst others. Retail funds which fall out of scope of the UCITS Directive and listed investment companies also falll within the definition.
Authorisation under the AIFMD will be required in order for an AIFM to provide management services to Alternative Investment Funds or market Alternative Investment Funds in the EU were the assets under management exceed the thresholds of €100 million or €500 million in the case that the AIF is unleveraged and does not grant investors redemption rights for at least a period of 5 years following the date of initial investment in each AIF. Certain EU Memeber States, such as Malta, enable the AIFM to choose to 'opt-in' to the AIFMD regime even where the AIFM falls below the set thresholds.
The AIFMD came into force on the 21st July 2011 and was transposed by EU Memeber States inot national law by the 22nd July 2013. The AIFMD Delegated Regulation was published in the Official Journal of the EU on the 22nd March 2013 and it came into force on the 22nd July 2013. From 22nd July 2013, EU-domiciled funds run by AIFMs based within the EU benefit from a ‘passport’ enabling them to be marketed to sophisticated investors throughout the EU. The passporting system is envisaged to be eventually extended to non-EU managers and funds following the advice by ESMA.
