While most private fund managers looking to bypass the Alternative Investment Fund Managers Directive (AIFMD) are steering clear of Europe, some GPs are flying under the radar of EU regulators by limiting their marketing efforts on the continent and relying on investors to reach out first about new fund opportunities.
Permissible marketing activity by non-authorized managers varies country to country, but most allow “some level of premarketing” without having to notify state regulators.
“You can introduce a flipbook, or arrange some one-on-one meetings with investors, but not much beyond that,” one EU regulatory lawyer told pfm.
Another strategy being utilized by non-authorized GPs is waiting for LPs to contact them first about a fund, a right given to EU investors under the “reverse solicitation” concept.
European LPs wanting access to non-EU funds, especially in the US, are “getting more proactive” about reaching out, a second EU lawyer said, but adding there’s been “some pressure on LPs to justify why they would invest in a non-compliant fund.”
The directive is resulting in a drop in the number of funds pitched to EU investors. A significant 86 percent of LPs polled by the Institutional Limited Partners Association this year said they’re receiving less marketing pitches from non-EU managers.
Marketing under AIFMD was also a talking point at the Guernsey Funds Forum in London last week. Tim Hames, director general of the British Private Equity and Venture Capital Association, told the 500 attendees that it remains to be seen whether the directive will make Europe “a less or more attractive place to outside investors and observers.”
He added: “If that is the simple test for the AIFMD process, then the honest answer is that there are people giving Europe a pass now, who would not have given Europe a pass previously. Because whilst there is no particular individual provision that is a deal breaker, the collective weight, the sheer hassle, and the fact that there are other parts of the world that are not bothering you with this sort of thing, are a very powerful set of arguments.”