Non-EU firms provided clues to AIFM rules

Private equity firms outside of EU borders have been left in the dark over how they can continue marketing funds via private placement regimes once the pan-EU Alternative Investment Fund Managers directive (AIFM) takes effect this July. 

EU sovereigns have in place various private placement regimes that allow GPs to solicit local professional investors, typically without a great deal of regulatory oversight. The directive however envisions fund managers seamlessly marketing funds across borders with a pan-EU marketing passport. Non-EU fund managers however will not have immediate access to the passport, leading to questions of how marketing rules will change for outsiders in a post-AIFM marketing and regulatory framework. 

EU regulators are expected to allow non-EU fund managers to access the marketing passport in 2015, with the possibility of private placement regimes going by the wayside for all EU states in 2018. 

A briefing from industry trade body the European Private Equity and Venture Capital Association (EVCA) hints at how EU member states will approach the private placement question. 

The UK, Netherlands and Luxembourg are expected to continue offering private placements, as will the Czech Republic, which will only offer private placements for one year following the directive's implementation into national law, according to the briefing.

France, Italy and Germany are expected to “remain somewhat restrictive” – although this is yet to be confirmed by national regulators, the report said. 

It is expected that Germany will allow GPs to solicit professional investors on the condition that “one or several persons have been appointed to assume functions as a depositary” and the firm is subject to registration requirements with the German regulator prior to marketing.

The briefing also notes the need for non-EU countries to sign cooperation agreements with the EU by 22 July in order for non-EU firms to take advantage of the private placement regimes. The European Securities and Markets Authority (ESMA), who has been tasked with centralizing the signing of the agreement, has stressed the need for these agreements to be put in place soon. 

Only Brazil and Switzerland have signed agreements so far, according to EVCA. Popular private equity offshore domiciles the Channel Islands and Cayman Islands are “close to signing”; while the epicenter of private equity, the US, is “well advanced” in its negotiations to sign a cooperation agreement with EU authorities.  

“Private equity is a global industry and institutional investors invest around the world, and we should be taking steps to encourage such investment in the EU given the contribution it can make to delivering jobs and growth,” said in an emailed statement EVCA director of public affairs Michael Collins.