The middle-men responsible for linking GPs and LPs together are experiencing some heartburn when it comes to forming business relationships in Europe.
Since the implementation of the EU’s Alternative Investment Fund Managers Directive (AIFMD) last month, clients have provided placement agents with conflicting interpretations of the complicated regulation, sources tell pfm.
At the heart of the confusion is the concept of reverse solicitation, which allows non-EU managers to bypass the directive’s requirements if a LP reaches out first about a fund opportunity.
At one end of the spectrum, GPs hoping to collect commitments under the reverse solicitation route are telling placement agents – at the advice of their legal counsel – to not provide prospective investors any information in writing. At the other end placement agents are being told that information on the firm can be shared, and later followed up with fund-specific information if an investor asks first.
“We have three clients with three different counsel each with different ground rules in how we proceed. And all three have valid Interpretations,” said Clay Deniger, a managing partner with placement agent group Capstone Partners.
Ultimately fund managers are responsible for any non-compliance with the directive, resulting in more conservative GPs taking a strict interpretation of the directive, sources said.
Other GPs are viewing placement agents as useful intermediaries to raise money in Europe without directly reaching out to EU-based investors.
“As gatekeepers, people come to them. So if they have a few infrastructure firms as clients, and a LP starts asking them about the brilliant returns of one of those client’s funds, it can still be a reverse solicitation for that manager if no specific marketing documents were ever given,” said one London-based private funds lawyer. “But it’s tough to know what’s what without clear marketing rules from the authorities.”