Frostrow Capital, the London-based investment trust specialist, is launching an alternative investment fund manager arm ahead of the Alternative Investment Fund Managers Directive coming into force.

Under the new rules, investment companies managing more than €100 million must appoint an AIFM that is responsible for investment and risk management before the deadline of July 2014.

Investment trusts are governed by an independent board that is subject to company law and London Stock Exchange listing. They also trade on regulated markets rules and every investor becomes a shareholder in the company with voting rights.

These features make them more similar to publicly-traded companies rather than alternative investment funds such as hedge funds and private equity structures, which are the main targets of the AIFMD.

Alastair Smith, managing partner at Frostrow, said it would be beneficial for firms to employ a third party as its AIFM to remove the potential conflict of interest should the fund management team be in direct employment of the AIFM.

“Frostrow further believes that a third-party AIFM could be beneficial to investment managers that do not want to take on the extra regulatory burden that being an AIFM gives rise to, overseas managers that are promoting funds in the UK that do not wish to become regulated by the Financial Conduct Authority, or for investment company boards who wish to maintain their independence from their fund management team," Smith added.