Scope of the Directive is very broad. The AIFMD aims to regulate Alternative Investment Funds Managers (AIFMs) of Alternative Investment funds (AIFs). AIFs being basically defined as all non-UCITS funds, thereby covering hedge and private equity funds but also real estate structures and 'plain vanilla' long only non UCITS funds. The Directive provides some exemption for smaller AIFMs as well as limited grand fathering clauses. A few uncertainties remain. In particular, joint ventures or family office vehicles are not expected to be considered AIFs. The difficulty lies in the lack of definition of these structures.
Rules regarding the liability of the depositary are far reaching. Conditions of safe-keeping of assets, the due diligence and supervision duties over sub-custodians, if any, and the monitoring of the fund’s operations will dramatically increase with these new regulations.
The AIFM will have to comply with specific substance, conflict of interest, risk management and liquidity management requirements.
A clear risk management process needs to be implemented whereby all risks associated with the AIF will need to be measured and monitored (e.g. market risk, counterparty risk and operational risk). A strong liquidity management process will need to be put in place.
This function will need to be robust and have a high degree of operational independence.
The AIFM will have to adopt specific remuneration policies aligned to the recent EU Capital Requirements Directive for the financial services industry.
Reporting and disclosure
The AIFM will have to comply with several reporting and disclosure requirements towards the regulators and the authorities.
Third country regime
A dual regime (EU vs Non EU) will operate for a period of time. A EU AIFM will need to be fully compliant as from 2013 at which point access to the EU passport will be granted. On the other hand, non-EU AIFMs, as from 2013, will only need to comply with transparency provisions of the Directive. Access to the EU passport will not be granted and marketing to EU investors will continue via national private placement regimes (NPPRs). Such NPPRs may evolve following the transposition of the Directive into national law. Non-EU AIFM should closely monitor such evolution. As from 2015, AIFs managed by non-EU AIFM may be granted access to the EU passport, at which point in time the non-EU AIFM will not only need to fully comply with the Directive (as a EU AIFM) but will also be subject to additional specific 'third country' provisions (e.g. cooperation and tax agreements, designation of an EU competent authority and member state of reference and legal representative). Non EU AIFM, for which marketing to professional investors in the EU, is relevant need to consider and assess the impact of this dual regime and take appropriate actions accordingly; one potential solution would consist of establishing a EU AIFM.