Italy closes the door on non-EU GPs

Private funds not covered by the Alternative Investment Fund Managers Directive, which takes effect next week, will no longer be able to raise capital in Europe’s fourth largest economy.

Late last month Italy published a paper detailing how it plans to transpose the directive that didn’t leave any marketing options open for non-EU funds and non-EU managers to solicit capital in the country. This is because previously Italy never had a national private placement regime to enable non-Italian fund managers to market their funds in the country. The old Bank of Italy authorization procedure for foreign non-UCITS funds appears to have been wholly abrogated too, according to a client alert from law firm Paul Hastings.

Significant reforms to the working paper are not expected as Italy prepares to meet the directive's July 22 transposition deadline, according to market sources.

Accordingly funds left outside the AIFMD’s scope are effectively blocked from marketing in Italy until EU policymakers decide if non-EU funds and managers can make use of a marketing passport that allows covered funds to market across borders freely. Pan-EU regulator the European Securities and Markets Authority (ESMA) is expected to produce an opinion on the matter in July 22, 2015. Once the opinion is published the European Commission has three months to adopt an act specifying the date when the passport would be extended to non-EU funds and non-EU fund managers.

However the impact of the blockade may be muted. To access institutional investors in Italy, GPs can still rely on the concept of reverse solicitation – which is when an LP is the one to initiate first contact about a fund opportunity – in the post-AIFMD environment. Many see reverse solicitation as a common strategy in the country.