With more or less one week to go before the deadline for authorisation, some 47 percent of alternative investment fund managers participating in a snapshot global survey have still not filed under the Alternative Investment Fund Management Directive (‘AIFMD’), one the most contentious and game changing regulatory requirements introduced to the fund industry by the EU.
AIFMD brings hedge funds and private equity firms under EU regulatory supervision.
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The survey, commissioned by Alceda, the leading independent fund structuring specialist in Europe, in conjunction with Kepler Partners, the London-based research firm, was completed at the end of June.
Some 56 alternative fund managers, with in excess of US$300 billion under management, participated in the survey, representing firms in Europe, Asia-Pacific and the USA.
Authorisation under the AIFMD means fund managers will be subject to a host of new requirements, threatening significant operational impact on the industry.
These include increased requirements for due diligence, better risk and liquidity monitoring and new reporting and disclosure requirements as well as clearer marketing and communications rules.
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By GlobalDataWhen asked if they were ready for the AIFMD, only 32 percent said they were already compliant. A further 19 percent said they were planning to submit an application before the 22 July 2014 deadline. Some 13 percent of the respondents are still unsure about their intentions.
European managers responding to the survey are generally well prepared, while managers in the rest of the world appear blindfolded. Some 17 percent of respondents said they preferred to maintain the UCITS access route, an existing and well established EU branded regulatory framework for asset managers, which was originally designed as a retail structure, but is increasingly used by institutional investors.
A number of firms surveyed were still undecided on which route to take, with eight percent saying they were considering using third party service providers and four percent saying they would continue using the private placement route where managers can market within the EU under a specific private placement regulatory framework.
However, this option will expire in 2018. Only four firms said they will not market within the EU.
When asked which aspects of AIFMD posed the greatest threats to their business, 30 percent of respondents cited depositary costs, remuneration and the end of private placement as their most serious concerns.
However, a clear majority, over 40 percent believe in the benefits of a EU-wide distribution passport and increased investor confidence under the AIFMD brand, in particular, this group cited the opportunity to extend both the product range and the distribution of their products across Europe There was also the perception that AIFMD would lead to more offshore funds moving onshore.
Michael Sanders, CEO and Chairman of the Board of Alceda Fund Management S.A. said: "Clearly, the alternative asset management industry is at the crossroads.
A combination of intense regulation, cost pressure, consolidation and globalisation, is forcing many participants to take a close look at their business and operating models.
What is clear from this survey is that there is still an element of wait and see about AIFMD, but we feel that the real winners of the future will be those alternative managers that readily embrace EU regulation, be it under UCITS or AIFMD."
Georg Reutter, Partner, Kepler Partners LLP said: "It’s clear that the general understanding of the implications of AIFMD on the alternative fund management industry is low, with 41 percent of respondents to our survey stating that they have a limited understanding.
In particular we found that alternative asset managers headquarted outside Europe are potentially sleepwalking into the unknown despite the potential impact on their business. Encouragingly the majority of managers don’t think that AIFMD will impact their strategy nor that it will negatively impact the continued growth of alternative UCITS funds.
"Investment managers are concerned about the implication on remuneration and private placement that will come in with AIFMD. However, from an investor perspective it should be good news as it will increase confidence."
