Exclusive: GPs can market freely to French fund of funds

Guidance from the French securities regulator says it is not ‘marketing’ under the AIFMD when capital is solicited from fund of funds.

Fund managers seeking commitments from French fund of funds do not need to gain an Alternative Investment Fund Managers Directive (AIFMD) marketing passport, or go through France’s arduous private placement regime, pfm has exclusively learned.

Recent guidance issued – only in French – by the country’s regulator, the L’Autorité des marchés financiers’ (AMF), states that under certain situations funds are not deemed to be “marketing” in France. The guidance lists an “unsolicited request to purchase a specifically designated financial instrument, where allowed by the laws and regulations in force (reverse solicitation)” and “in the context of portfolio management by a fund of funds regarding investment made in underlying funds.”

The guidance will be well received by fund managers who were left disappointed when the AMF left non-EU fund managers needing to meet the requirements of the AIFMD to market in France – including those around capital, risk management, valuation, delegation, remuneration and reporting.

“No one can market into France. It is very frustrating and industry pressure has shown no signs of making a difference,” said one UK-based regulatory lawyer, who added that many of his clients decided to pull any marketing efforts in France due to the strict regulations.

Even AIFMD-authorized managers were having a difficult time marketing in France as they must first hire a France-based bank or administrator before soliciting capital from French investors, pfm previously revealed.

“It’s a complete and utter nightmare. A passport works if there is one set of rules. France gold-plating a passport is ridiculous,” said one UK-based regulatory lawyer, adding that no one is sure exactly which institutions are accepting the role and what the local correspondent is supposed to do.

“What do they do? Who on earth knows. Every role they have seems to be duplication [of the fund manager’s own AIFMD requirements] apart from the fact they are in France,” added the UK lawyer.

The provision requiring the hiring of a French-administrator resulted in the European Private Equity & Venture Capital Association (EVCA) to file a formal complaint to the European Commission.

“We feel that gold-plating a passport is contrary to the letter and spirit of AIFMD and have therefore written formally to the European Commission to express our concerns,” Michael Collins, public affairs director at the EVCA, told pfm at the time.