AIFMD cheaper than expected

GPs predict the directive will cost far less than what they predicted last year, according to recent research.

The EU’s Alternative Investment Fund Managers Directive will cost much less than previously expected, a survey from software provider Multifonds said.

The survey, of fund managers and fund administrators in Europe, found respondents think the main cost – employing a depositary – will be about 2.5 basis points of assets under management (AUM), rather than last year’s prediction of 5-25 basis points.

Another component impacting the perceived cost of the directive is that about half of respondents expect the costs to be passed on to investors.

A standard limited partnership agreement will state the fund bears all costs of its operations, including dead deal fees, the use of outside consultants, taxes owed by the fund and third party legal and accounting services employed on the fund’s behalf.

And with respect to unexpected expenses – such as new regulation like the AIFMD – the partnership agreement should be “written in a way that it is clear enough to account for expenses that spring up throughout the life of the fund,” said one fund formation lawyer.

The lower than expected costs also mean respondents no longer expect fund managers to leave Europe due to the AIFMD. In fact, 70 percent of respondents agree that non-EU managers will set up European operations to take advantage of AIFMD.

Earlier this year a survey from fund administrator BNY Mellon polled the expected cost burden of the AIFMD and nearly half (48 percent) of GPs expect the total cost of compliance to be less than $200,000. When taking into consideration all GP responses the mean expected total cost of AIFMD implementation is $300,000.