Beginning on July 22nd, 2013, The Alternative Investment Fund Directive, also known as AIFMD, will go into full effect throughout all 27 EU member states. AIFMD is an EU regulation of alternative investment fund managers and alternative investment funds (AIF) such as hedge funds and private equity funds that are either managed or based within the EU or marketed to EU investors. The directive places them under the jurisdiction of an EU regulatory agency.
Enhancement of investor protection and transparency
At the heart of the directive is the enhancement of investor protection and transparency of alternative investments. Whilst there is already a degree of oversight on European-domiciled funds, the directive goes beyond the requirements currently in place and, indeed, beyond what is currently in place for UCITS funds. Offshore funds that previously avoided the glare of regulatory oversight will now be under its spotlight.
North American hedge fund managers are less prepared than European
Preqin’s recent survey of 220 hedge fund managers around the world reveals that there is still uncertainty surrounding the Alternative Investment Fund Managers Directive (AIFMD) among many managers, with 40% of managers that will be impacted by the AIFMD waiting for finalizations of regulations and further advice from their local regulators before taking action.
These interviews also revealed that North American hedge fund managers which will be affected by the AIFMD are less prepared than their European counterparts, with 51% of North America-based respondents looking to market their funds to European investors already compliant or will be compliant by July 2014 compared to 64% of respondents based in Europe that will be impacted by the regulation.
Preqin’s recent survey on AIFMD - Key Facts
- 22% of hedge fund managers interviewed by Preqin that will be impacted by AIFMD are already compliant, and 3% of those affected feel they will not be compliant by the July 2014 deadline.
- 72% of hedge fund managers interviewed will be impacted by the AIFMD; 28% will not be affected, either because they do not market within the EU or they have no active funds.
- 65% of all North America-based hedge fund managers interviewed stated that they will be affected by AIFMD.
- 44% of North America-based managers affected by the AIFMD are waiting on further advice from legislators in their jurisdiction.
- Larger hedge fund managers that will be impacted by the AIFMD are the most prepared 65% of those fund managers interviewed with assets under management over $1bn are either already compliant or will be by July 2014, compared to just 31% and 54% of those in the $500-999mn and the $100-$499mn brackets respectively.
- There is mixed sentiment from investors over the impact of regulation launched in the industry, with 35% feeling regulations will be positive and 22% thinking the opposite. Many investors are unsure of the impact regulations will have.