Access to EU for non-EU managers

Legal framework

The EU Alternative Investment Fund Managers Directive (Directive 2011/61/EU or AIFMD) creates a harmonised regulatory framework for the management and marketing of private equity, venture capital and other alternative investment funds in the European Economic Area.

The AIFMD formally entered into force on 22 July 2011 and took effect two years later on 22 July 2013.

Pursuant to the AIFMD, European managers are required to obtain authorisation in order to ‘passport’ their services throughout the European Union.

Introduction of a passport regime for non-EU GPs

The key issue that still needs to be addressed within the AIFMD is whether to grant a marketing passport for non-EU funds and fund managers. The EU authorities continue to reflect on this and the timetable for a decision remains uncertain. Progress on introducing such a passport – which would require the firm in question to be authorised by a European regulator and to comply fully with the AIFMD – remains slow with the 2015 deadline set out in the Directive missed.

The European regulator (ESMA or the European Securities Markets Authority) is due to give an opinion on the establishment of the passport in 9 jurisdictions by 30 June 2016. The countries concerned include: the US, Hong Kong, Singapore, Japan, Canada, Australia, the Isle of Man, Cayman Islands and Bermuda.

Switzerland, Jersey and Guernsey had previously received a positive assessment.

How can non-EU GPs access EU LPs until the passport is introduced?

Non-European managers can continue fundraising in Europe in accordance with national placement regimes (to the extent they are kept in place by member states) provided they comply with certain AIFMD requirements and any additional conditions imposed by national law in the investor’s home jurisdiction. They will also be able to continue investing in Europe. The Directive foresees the possible phase-out of these national private placements as the passport becomes available to managers from different third countries. But a decision on this will only be taken some years after passporting is in place for third countries.

European LPs may continue to invest with non-EU GPs on their own initiative (often referred to as ‘reverse solicitation’) if those funds are not being marketed in the EU.