Alternative Investment Fund Managers Directive Research Articles

SPACs in the AIFMD Context

The growth in the use of Special Purpose Acquisition Companies (SPACs) within the context of the European market economy has been particularly evident in recent months. When structuring SPACs, the question of whether and when SPACs fulfil the objective criteria of the activities indicative of the characteristics of their specific management under the Alternative Investment Fund Managers Directive (AIFMD), arises. SPACs are, in fact, similar in their basics to the alternative investment funds established under this directive and whose investment strategy is directed towards private equity. The aim of this paper is to answer the presented question, which is crucial for current financial market practice. If the intended investment structure of SPACs fulfils the criteria of the AIFMD, it can only be structured under the rules (and restrictions) arising from respective regulations. Any misconduct is otherwise severely sanctioned.

Italian Tax Authorities Provide First Clarification of the New Tax Exemption for Dividends Related to Direct Investment by EU/EEA Investment Funds

In this note, the authors discuss Answer 327/2021 of the Italian tax authorities, which addresses the new tax exemption for dividends on qualified shareholdings in relation to investments in companies resident in Italy for tax purposes. The Answer addresses foreign undertakings for collective investment established in an EU Member State or EEA country that exchanges adequate information with Italy, in particular, where the managers are subject to the EU Alternative Investment Fund Managers Directive (2011/61) rather than the EU UCITS Directive (2009/65).

The Regime of Depositary Under the Alternative Investment Fund Managers Directive 2011: French and Luxembourg Perspectives

The Alternative Investment Fund Managers Directive 2011 requires every fund manager to designate a depositary for every fund it manages. This is the first time in the history of European alternative investment fund industry that an appointment of a depositary is obligatory across all Member States. We analyse the differences in the implementation of this regime in French and Luxembourg law. AIFM Directive, UCITS Directive, depositary

Rule omission, rule migration and the limits of financial industry power

AbstractThis paper seeks to deepen our understanding of financial industry lobbying efforts that result in specific regulatory rules being dropped from the regulatory agenda, or what we call ‘rule omission’. Critically, existing research either ignores rule omission or characterizes it as the pinnacle of lobbying success. We argue that only in carefully mapping out industry preferences and tracking what happens to rules following their omission can we say something about the extent to which finance wins or loses in its effort to shape regulation. Our analysis is based on two in‐depth case studies from the European Union: (1) solvency rules in the Institutions for Occupational Retirement Provision Directive (IORPP II), where rule omission does reflect a strong case of industry influence; and (2) short selling rules in the Alternative Investment Fund Managers Directive (AIFMD), a case of rule omission resulting in more stringent rules over industry activities.

The Directive on Alternative Investment Funds Managers (AIFMD): An Introduction

This is the introductory chapter to the third edition of the book ' The Alternative Investment Fund Managers Directive', 3rd. ed. 2020, provided with kind permission by the publisher WoltersKluwer. The chapter provides an overview of the legislative history leading to the AIFMD, introduces to the regulatory approach of the AIFMD, discusses latest developments with regard to the AIFMD (including the Cross-Border Fund Distribution Directive and Regulation, Brexit as well as AIFMD II) and ends with a detailed overview of the full book. It argues that the AIFMD's specific regulatory approach to collective investment schemes paired with the European passport explains why almost a decade after its adoption the AIFMD has become the role model for fund legislation worldwide.

Zur möglichen Qualifikation von Mietenpools und Alternativen Investmentfonds nach dem AIFMG

In an update of the „Frequently Asked Questions zur Anwendung des Alternative Investmentfonds Manager-Gesetz (AIFMG)“ (FAQs) by the Austrian Financial Market Authority (FMA) regarding the Austrian implementation (AIFMG) of the Alternative Investment Fund Managers Directive (AIFMD) dated 9 October 2020, rental pool constructions were also included as possible alternative investment funds (AIF) pursuant to the AIFMG. However, such AIF qualification needs to be assessed on a case-by-case basis and can only be affirmed in case such rental pool or rental poollike structure fulfills the requirements of a collective investment scheme. Against this background, the present article intends to provide a practical overview of cases in which a rental pool can qualify as AIF and cases in which it cannot.

The Alternative Investment Fund Managers Directive: Ten Years After

The Alternative investment Fund Managers Directive 2011 is a first pan-European regulation of alternative investment fund industry. It establishes the set of duties for the managers that manage hedge funds and private equity funds. Adopted as a response to the 2007/8 financial crisis, its effectiveness can be questioned after almost ten years of evolving financial markets. This article thus will analyse whether the Alternative Investment Fund Managers Directive (AIFMD) still represents an effective regulatory tool from the three viewpoints: (1) prevention of future financial crises and protection of investors; (2) establishment and maintaining of single European market for financial services; and (3) accommodating for the needs of financial industry post-Brexit. Alternative investment Fund Managers Directive

Establishing an EU internal market for depositaries

Purpose This paper aims to examine the rationale for the establishment of a depositary passport as the next logical step in building an internal market for investment funds in the European Union (EU). It makes the point that the de facto prohibition of depositary passporting poses risks to financial stability and has an adverse impact on investor protection in EU member states, which do not have a fully developed funds industry. Design/methodology/approach This paper analyses both the arguments in favour and against the adoption of a depositary passport. Moreover, it examines this proposal in the context of different approaches to fostering the internal market such as mutual recognition, harmonisation of regulation, reflexive governance of financial supervision and centralised supervision. Findings Based on the review of the current EU legal framework, this paper, subsequently, puts forward possible solutions for the establishment of an internal market for depositary business, which solutions have been discussed with various experts in the field to assess their feasibility in practice. Originality/value The paper contributes to the debate on the EU internal market in the field of asset management, which is topical in view of the upcoming review of the EU’s Alternative Investment Fund Managers Directive.

ESMA’s Mission to Integrate ESG Risks and Factors into UCITS and AIFMD: Value Added or Additional Administrative Burden

Environmental, social, and governance (ESG) factors are getting more and more important for the fund industry, not only for the management companies of the funds but also especially for the investors who become more sensitive to these kinds of aspects. This increasing importance has also been recognized by the European Commission, which officially mandated on July 24, 2018, the European Securities and Markets Authority to provide technical advice on how sustainability risks and factors should be integrated in European regulation. This article examines which approach the European Securities and Markets Authority suggests in order to integrate sustainability risks and factors in the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and the Alternative Investment Fund Managers Directive and how this is seen by the market, as burden or value added, and therefore will be in the interest of UCITS management companies, self-managed UCITS investment companies, Alternative Investment Fund Managers, and their associations and for investors in these products. <b>TOPICS:</b>ESG investing, portfolio construction, portfolio theory <b>Key Findings</b> • ESG factors are getting more important for market players, and there are still a lot of challenges ahead. • ESMA’s initiative was well received from the market and helps to close the gap. • Market participants mainly don’t see this initiative as administrative burden but more a value added.

Will the EU Commission Successfully Integrate Sustainability Risks and Factors in the Investor Protection Regime? A Research Agenda

Building a common EU framework for sustainable finance undoubtedly implies the integration of sound and sustainable processes and skills across the whole structure and governance of financial institutions. Consequently, a new financial paradigm is going to be needed, which will require the strengthening of investor care and protection, so contributing to the restoration of trust in the financial sector. In particular, on 18 December 2018, the European Securities and Markets Authority (ESMA) launched two public consultations on draft technical advice for the integration of sustainability risks and factors into the Directive on Markets in Financial Instruments (MiFID), the Alternative Investment Fund Managers Directive (AIFMD), and the Undertakings for Collective Investment in Transferable Securities Directive (UCITS) regimes, with the aim to clarify the so-called fiduciary duties and to increase transparency in the financial services industry. However, the success of the EU initiatives on investor protection regulation may be seriously endangered by the existence of many challenges, weaknesses, and contradictions raised by economists and stakeholders in relation to the definition of sustainability, ESG data availability and reliability, the development of an EU taxonomy, conflicts of interest, product governance, and suitability assessment. This paper starts by briefly analyzing the recent developments of the regulation of sustainable finance at the global level, then offers a more detailed view on the establishment of a common regime on sustainable finance in the EU, with particular reference to the action plan ‘Financing Sustainable Growth’. Then, it examines the recent proposals for regulation on sustainable finance, specifically considering the barriers to the integration of sustainability risks and factors in the EU investor protection regulation—with particular reference to investment services—with respect to its four main dimensions: (1) disclosure of product information, (2) conduct of business (COB) rules, (3) product governance and intervention, and (4) financial education. The paper concludes that the EU reforming proposals, though admirable, risk oversimplifying a complex issue that cannot be easily solved without considering its practical implications on each category of financial operators in the performance of different financial services.

Regulatory Competition in European Partnership Law: A Case of Alternative Investment Funds

This paper analyses the recent reforms of a limited partnership used for structuring alternative investment funds in the UK (2017), Luxembourg (2013) and France (2015). The introduction of the Alternative Investment Fund Managers Directive (2011) has prompted the EU Member States to modernise their legal structures to get ahead of an increasing competition as a leading fund and fund manager domicile. This paper argues that the UK Private Fund Limited Partnership is the most competitive legal structure in terms of management rights accorded to investors and tax-transparency. Luxembourg provides an equally competitive limited partnership model, which will be used extensively by fund managers and investors post-Brexit. A regulatory competition in partnership law will incite other EU Member States to review their legislation applicable to this legal form.

A Fresh Perspective on Hedge Funds: Exploring New Opportunities Post-Brexit

Hedge funds – rather a financial term than a separate legal category – denote distinct investment funds that use sophisticated investment strategies and are ‘lightly’ regulated as compared to traditional retail-oriented funds. Largely unregulated prior to the 2007/2008 financial crisis, they are now within the tight regulatory perimeter of the Alternative Investment Fund Managers Directive (2011). This article discusses the future of the UK hedge fund industry post- Brexit and explores the opportunities offered by Luxembourg hedge fund legislation. After the exit from the EU, the UK will be considered a ‘third country’ for the purposes of the Directive. Consequently, the UK hedge fund managers will lose the EU passport to manage and market their funds to the EU investors. This article argues that Luxembourg may serve as a jurisdiction of choice for UK hedge fund managers to establish their subsidiaries and act through them to be able to continue offering their units to EU investors. The overview of the recent reforms in both jurisdictions (UK Private Fund Limited Partnership 2017, Luxembourg Reserved Alternative Investment Fund 2016 and Special Limited Partnership 2013) is discussed in terms of their competitiveness post-Brexit.

AIFMG und Stiftungen

The following article deals with the question if and under which circumstances the AIFMG (Alternative Investmentfonds Manager-Gesetz) applies to Austrian private foundations (osterreichische Privatstiftungen) under the Private Foundation Act 1993 (Privatstiftungsgesetz) as alternative investment funds. The topic will be discussed from different angles and especially possible exemptions will be examined by means of the methodology of the AIFMD (Alternative Investment Fund Managers Directive) respectively the AIFMG.

Policy, Regulation and Private Equity: A Rich Research Agenda? (Book Chapter)

Effective from 2013, the Alternative Investment Fund Managers Directive (or AIFMD) fundamentally altered the regulatory environment for European private equity funds, establishing – for the first time – a set of pan-EU rules for private equity and venture capital funds with assets under management that exceeded certain thresholds. For many fund managers this has entailed considerable change that has permeated most aspects of their business, including additional capital requirements, stricter conduct of business rules, enhanced disclosures to regulators, investors and the outside world and, for some, has even required amendments to remuneration policies. It is not easy to discern a clear policy objective for many of these changes, and it is therefore hard to assess whether they achieved their aims. Certainly, in relation to many of the new rules, there is scant evidence that investors wanted them, nor that they will benefit from them; it is also unclear how the rules will alleviate systemic risk, particularly insofar as they apply to private equity funds. This Chapter reviews the rules that were included in AIFMD, seeks to identify their policy objectives, and suggests a research agenda that could assist policy-makers in future reviews of the Directive and further regulatory interventions in the sector.

Developing Macroprudential Policy for Alternative Investment Funds

This joint ECB-DNB Occasional Study aims to inform the ongoing discussions about an EU-level framework for operationalising macroprudential leverage limits for alternative investment funds (AIFs). It builds on, and extends, the analysis of an ECB-DNB special feature article published in the ECB's Financial Stability Review in November 2016. First, this Occasional Study presents new EU-level evidence suggesting that leveraged funds exhibit stronger sensitivity of investor outflows to bad past performance than unleveraged funds, which has the potential to exacerbate systemic risk. Second, it devises a framework for assessing financial stability risks from leverage in investment funds. This is applied to leveraged AIFs managed by asset managers in the Netherlands using Alternative Investment Fund Managers Directive (AIFMD) data for the two-year period from the first quarter of 2015 to the fourth quarter of 2016. Third, it discusses the potential effectiveness and efficiency of various designs for macroprudential leverage limits. To this end, it builds on the findings for the Dutch AIF sector and suggests design options for further exploration at EU level. Beyond assessing financial stability risks from leverage in the Dutch AIF sector, the case study aims to show how equivalent information on AIFs at the European level - which will be made available to the European Securities Markets Authority (ESMA) and the European Systemic Risk Board (ESRB) in the coming years - could be used when developing an EU-level framework for operationalising macroprudential leverage limits.

Alternative Investment Fund Managers Directive and its Impact on Malta’s Financial Service Industry

The introduction of the Directive on Alternative Investment Fund Managers (AIFM Directive 2011/61/EU) in 2013 means a radical transformation of the EU regulatory landscape for the whole alternative investment fund industry. Taking into account the growing meaning of the alternative investment fund industry in Europe, the aim of the paper is to assess the impact the Directive on Alternative Investment Fund Managers (AIFMD) will have on the Alternative Investment Fund Managers (AIFMs) managing Alternative Investment Funds (AIFs) in the EU. The research is based on the case of Malta, which is a quickly growing financial centre. The main findings are based on an analysis of questionnaire responses conducted with key players in the fund industry regulated and licensed by the Malta Financial Services Authority. This study provides an extensive analysis of the AIFMD and its impact on Malta’s financial service industry. It has highlighted various factors that will have a positive or negative impact on the industry resulting from the AIFMD. The paper provides recommendations for further development of the Maltese fund industry in the context of the AIFMD that can be partially applied to other fund domiciles.

The Marketing of Hedge Funds in the United Kingdom: Did the System Maintain Its Attractiveness After the Transposition of the Alternative Investment Fund Managers Directive?

The Marketing of Hedge Funds in the United Kingdom: Did the System Maintain Its Attractiveness After the Transposition of the Alternative Investment Fund Managers Directive?

Does it still make sense, from the EU perspective, to distinguish between UCITS and non-UCITS schemes?

This article aims to discuss the usefulness of the distinction between the categories of Undertakings for Collective Investment in Transferable Securities (UCITS) 1 and non-UCITS schemes, 2 within the regulation of asset management. 3 The purpose is to understand whether this distinction still makes sense after the adoption and the implementation of the Alternative Investment Fund Managers Directive 4 (AIFMD) among the Member States, from the European Union (EU) 5 and UK 6 regulation perspectives. 7 UCITSs are open-ended retail investor funds established according to the provisions of the UCITSD. 8 This Directive represents one of the first initiatives of the EU legislature to create a single market for financial products. In this regard, the Directive harmonized the EU Member States’ internal regulations on the funds and the management companies. In particular, the Directive regulates the working structure of these funds. Accordingly, UCITSs must have a depositary who holds the fund’s assets in order to grant more protection to the investors and a separate management company. The Directive also sets forth some relevant limits of investment and in borrowing in order to protect the retail investors, given that these funds have been created in order to satisfy particularly the needs of these investors. This harmonization represents the legal basis of the European passport regime. The passport is a legal instrument of great importance because it allows the managers of UCITSs to market freely their funds to every kind of investor within the EU territory. This means that these funds may be marketed on a cross-border basis in every EU Member State in the same way as domestic retail funds.

AIFMD passport: Europe must try harder

Purpose To explain two papers published by the European Securities and Marketing Authority (ESMA) covering the application of the mar-keting “passport” under the Alternative Investment Fund Managers Directive (AIFMD). Design/methodology/approach Explains ESMA’s first paper, containing an advice to the European Parliament, Council and Commission (collectively the Trilogue) on the potential application of the AIFMD passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative in-vestment Funds (AIFs), and a second paper, containing ESMA’s opinion on the current functioning of the AIFMD (currently used by EU AIFMs marketing EU AIFs in the EU) and National Private Placement Regimes (NPPRs, used for marketing by non-EU AIFMs and non-EU AIFs). Findings The ESMA papers were disappointing because they gave far less guidance and encouragement than anticipated that AIFs located in major jurisdictions such as the US and the Cayman Islands will be any easier to market to EU professional investors in the near future. Practical implications AIFMs (both inside and outside the EU) who are already using, or intending to use, the NPPRs should take some comfort that it seems highly unlikely that these regimes will be removed in the near future. Originality/value Practical guidance from experienced financial services lawyers.

Undertakings for the Collective Investment in Transferable Securities Directive V: Increased Protection for Investors

This article considers the impact of the European Union’s new Undertakings for the Collective Investment in Transferable Securities Directive (UCITS V) on investor protections and the system’s alignment with the EU’s Alternative Investment Fund Managers Directive (AIMFD). It scrutinizes the historical development of the UCITS Directives, the pivotal role of the depositary in the UCITS fund industry and the key regulatory changes of UCITS V. It concludes that the UCITS V provides greater protection for investors and should encourage confidence in UCITS products.