Fund managers outside of the EU watching the Alternative Investment Fund Managers Directive (AIFMD) take effect in Europe this week are weighing their marketing and compliance options in light of the new regulatory landscape abroad.
At the smaller end of the market, some GPs are writing Europe off altogether from their marketing roadmap to avoid AIFMD-related reporting and compliance costs.
Many of these firms are writing carefully worded letters to their existing EU investors informing them of their decision, according to market sources.
“What they’re hoping is that LPs read these letters and get the hint to keep an eye out for their next fundraise; investors in Europe can still commit to their funds in the future if they reach out first under a concept known as ‘reverse solicitation’,” said one EU-based funds lawyer, who warns these letters shouldn’t mention any specific fund details or risk being considered marketing material under the directive.
Most non-EU firms however are reacting to the directive by performing a country-by-country analysis of the new marketing rules in Europe. Similar to before, GPs say they’ll target countries where they feel a significant amount of LP capital is up for grabs and avoid jurisdictions that over padded their local marketing rules during implementation of the directive.
For example Denmark and Germany will impose “depository-lite” requirements on non-EU managers soliciting capital on their soil. “But that cost is well worth it if it means you bring on a big-time German investor into your fund,” one US-based CFO told pfm.
Meanwhile larger shops, especially those in the US, are wondering how they can immediately achieve full AIFMD compliance by setting up EU parallel or feeder funds able to be authorized under the directive, according to market sources. The incentive, sources say, is to obtain a pan-EU marketing passport that isn't available to non-EU managers until July 2015 at the earliest.
“These firms raise a large amount of money and don’t think it’s very efficient to comply with the patchwork of differing national private placement regimes in Europe,” said one source with knowledge of the matter. “They’d rather just get all their AIFMD compliance work over with now then wait until next year.”