Investment Industry Still Not Ready For Europe's AIFMD - Survey

Stephen Little

2 July 2013

Despite the impending deadline for the Alternative Investment Fund Managers Directive, the investment management industry is still not ready for when it the European Union regime becomes law later in July, according to a new survey by real estate firm Knight Frank in partnership with data room provider Drooms.

Knight Frank and Drooms interviewed 50 property fund managers, private wealth managers, depository banks and private equity firms on the implications of the directive on businesses and the course of action that should be taken in the coming months.

The poll revealed that there is a lack of preparedness in the investment management industry ahead of the 22 July 2013 deadline.

Nearly one in five of those questioned said that they had not yet taken any action preparing themselves for the forthcoming changes.

The survey also found that nearly two-thirds of those interviewed believed that the forthcoming AIFMD will lead to a decline in fund managers.

“This directive should lead to more investor confidence and better pan-European marketing and cross border sales opportunities, but funds haven’t got long. They need to take heed and speak to well informed advisors as quickly as possible as there is a troublingly low level of awareness about the directive, and the steps that companies need to take to get them up to speed," said Nick Powlesland, head of European valuations at Knight Frank.

The AIFMD was introduced following the 2008 financial crisis to provide a new regulatory framework for alternative investment vehicles such as hedge funds and investment trusts. It aims to tighten regulation so that investors have greater protection while ensuring regulators receive detailed information about alternative investment funds and managers to identify significant trends or events that could impact market stability. The directive has prompted fears that funds run from non-EU jurisdictions such as the Cayman Islands, Jersey or Guernsey might face hurdles in marketing products to EU-based investors.

The survey also highlighted concerns that the increased costs of the AIFMD will encourage asset managers to set up alternative investment funds in offshore structures to put them outside the scope of the directive.

Nearly a third of those questioned believed that the AIFMD is inadvertently encouraging the growth of the offshore fund management industry.

In other findings, 49 per cent of those interviewed believed that documentation, transparency and reporting were of greatest concern ahead of July’s deadline.

“Transparency and disclosure provisions will shortly be coming into force so AIFM’s need to organise now. Our advice is to begin talking to administrators, depositories, investors and auditors now to plan data collection," Powlesland said.