The EU Alternative Investment Fund Managers Directive (AIFMD or Directive 2011/61/EU) is the most significant piece of EU legislation affecting the private equity industry.

Setting the global standard for private equity regulation, the 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. One key issue that still needs to be addressed 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.

Invest Europe position

With the Directive in force, Invest Europe’s attention is now on its implementation and application across 28 Member States, and particularly on ensuring that the tailoring and proportionality the Directive foresees is maintained in the various technical standards and guidelines the European Securities and Markets Authority (ESMA) produces. Where any inconsistencies with or deviations from the Directive are identified, we seek to challenge these at the appropriate level, whether that be national or EU.

The debate on an appropriate third country regime (including a passport) and the Directive’s planned review in 2017 are also priorities. The Commission is due to prepare its report on the latter by mid-2017, although this process could be delayed.

Third Country Access to the EU

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

For non-European managers and for European managers marketing non-EU funds, a ‘third country passport’ is foreseen in the Directive. But 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. 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.

The Directive does not have an immediate impact on non-European LPs. They may continue to invest in European funds without any additional restrictions.

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AIFMD Fund Marketing

20 March 2015, EVCA

A closer look at marketing under national placement rules across Europe.

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AIFMD Implementation Depositary (Preview)

14 May 2014, EVCA

A closer look at the AIFMD depositary regimes across Europe

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AIFMD Third Country

2 December 2013, EVCA

A simple introduction to the impact of the EU’s Alternative Investment Fund Managers Directive (AIFMD) on non-European GPs and LPs.

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