GPs should not be worried about the Alternative Investment Fund Managers directive (AIFMD), according to speakers at valuation specialists Duff & Phelps fifth annual European Alternative Investments Conference on Friday.
The AIFMD “doesn’t change anything” for large cap firms and is merely an “increased cost of doing business,” said on the panel Kurt Björklund, co-managing partner at Permira. He even went so far as to note that increased regulation plays into the hands of larger firms by lowering competition due to increased barriers to entry in the industry.
Nordic Capital non-executive director Andrew Bennett concurred with Björklund, calling the AIFMD a “non-event”. On the panel he said the directive will not cause a significant impact as most private equity firms have been completing the majority of the directive’s requirements as a result of investor due diligence and demands, which have heightened since the financial crisis.
“As GPs we are very service minded and we have already been meeting the demands of our investors,” said Bennett.
The views from the panel speakers is contrarian to those held by industry veteran Jon Moulton. “The AIFMD, which we are all trying to get to grips with, is written in a language of its own, makes no sense, is pure overhead for the industry and it's going to be a real pain in the future,” he argued at the Australian Private Equity and Venture Capital Association’s Alpha 2013 conference last month.
The Duff & Phelps conference also touched on whether or not complying with the AIFMD brings any reputational advantage with investors. Guy Eastman, senior investment manager, Aberdeen SVG Private Equity, said he sees no fundamental advantage of AIFMD-compliant funds.
The panel asked delegates, which was primarily comprised of GPs, lawyers and valuation experts, if the AIFMD has any brand value and the answer returned was a resounding no. One of the AIFMD’s key selling points was being able to show off to investors that a firm abides by compliance and regulatory best practices. But delegates speaking to PE Manager on the sidelines said investors are not concerned whether a firm is AIFMD complaint or not, they argue that private equity investors are sophisticated and so do not require the levels of protection afforded to them by the AIFMD.