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 has mainly been 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. One example of this is the practice of certain national regulators to impose a “host” fee on fund managers who are trying to exercise their marketing passport in those jurisdictions.

The debate on an appropriate third country regime (including a passport) and the Directive’s forthcoming review (originally planned for 2017) are also priorities. However, it has become clear over the last few months that the European Commission will not pursue a major overhaul of the AIFMD in the short term. Instead, the Commission prefers to focus on making the existing (UCITS and AIFMD) EU passport frameworks function better and on enhancing and facilitating the cross-border distribution of investment funds within the context of both UCITS and AIFMD.

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. The Commission has confirmed that it will be some time before it will be ready to take a decision, not least because of links now being made to other areas of policy, like taxation and anti-money laundering. Further analysis is also required on enforcement and market disruption.

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. The Directive foresees the possible phase-out of these national private placement regimes 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.

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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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