German investors find comfort in AIFMD

Research shows the directive is easing concerns amongst German LPs that alternatives lack regulatory oversight.

Despite concerns that the Alternative Investment Fund Managers Directive (AIFMD) will hamper fundraising efforts, a recent survey suggests the directive will be a boon for fund managers soliciting capital from German investors.

In the past German institutions have been slow to allocate to alternatives – relative to those in the Netherlands and the Nordic region, for example – because of concerns over lack of supervision, especially when funds were domiciled offshore, where the perception can be that of lax regulation, according to research from fund administration firm Crestbridge.

Fundraising figures from the European Venture Capital Association (EVCA) show that in 2013 German, Swiss and Austrian investors committed a combined €1.7 billion to private equity, compared to €7.1 billion invested by Nordic LPs.

Nonetheless, GPs still feel that investors are not fans of the directive, with only 30 percent of fund managers interviewed by Crestbridge saying their LP base welcomed the additional regulatory burden.

The finding mirrors that of a survey conducted earlier this year by custodian Northern Trust. The survey, of 50 GPs, revealed more than 50 percent of fund managers and consultants said investors do not require their GPs to be AIFMD-authorized.

Yet, in Crestbridge’s report, those GPs that do believe investors have welcomed the directive also think investors will increasingly require funds to be compliant with the AIFMD before considering an allocation.

One GP interviewed said that pension funds are known to have a “herd mentality” and that once some of the market leaders demand AIFMD compliance others will follow.

GPs speaking to pfm have said that they have begun seeing investors asking whether or not they are AIFMD-compliant as part of their due diligence, but they say that it is too early to say whether or not non-AIFMD compliance will be a dealbreaker.