By Scott Price, Maitland – It is fair to say that regulatory fatigue has set in when it comes to the European Union market. This has been brought about in particular by the Alternative Investment Fund Managers Directive (AIFMD).
Yet the EU remains attractive to US alternative investment managers, particularly post-Brexit. Many investors in the EU and the UK are seeking opportunities to invest in US funds and US strategies – and demand is likely to remain high during a protracted period of uncertainty following Brexit.
So how can US managers access the lucrative EU market and reduce the barriers to entry? Specifically how can they manage the costs, resources and risk concerns that come with complying with the AIFMD?
Growing outsourcing trend
The answer is to consider partnering with a trusted third-party service provider as a way of testing the waters before developing a full-fledged alternative investment fund manager (AIFM) presence later. The more regulatory risk and compliance functions that can be outsourced, the less managers have to worry about what changes to make to their operations and business models – and the better chance they have to focus on delivering alpha.
Maitland was the first fund administrator to come to market (in 2014) with a powerful end-to-end AIFMD compliant solution in Luxembourg. The solution comprises a Management Company (ManCo) and fund product platform.
As a US manager, you partner with Maitland which becomes the external AIFM to your funds; we delegate the portfolio management back to you, while as ManCo we assume responsibility for all of the other duties envisaged in the AIFMD including risk management, compliance monitoring, regulatory reporting and investor due diligence; and we appoint a depositary as required.
We also provide an umbrella fund platform under which you can obtain a "cell" on the ManCo platform, allowing you to passport your fund throughout the EU and raise capital in a complaint fashion.
Advantages
For managers without a European presence, the ManCo delegated model is the quickest and easiest route to market, and the speediest way to establish the required level of transparency. It avoids the uncertainties that come with setting up a new office.
The other big appeal of the delegated model is that it allows fund managers to focus purely on their core specialty of generating returns for their investors and raising capital while allowing us to focus on the administration and reporting need.
The RAIF game-changer
US Managers will also be interested to hear about the Reserved Alternative Investment Fund (RAIF), a new investment fund product passed by the Luxembourg Parliament in July 2016 which makes the EU "fortress" a whole lot less intimidating.
The RAIF is a game-changer as it vastly shortens time-to-market, brings certain tax advantages and provides easy access to the marketing passport provided by the AIFMD.
Aimed specifically at "well-informed investors", the RAIF removes the double layer of regulation imposed at both the ManCo and fund level.
With a 40-year history in Luxembourg and its AIFMD infrastructure already in place, Maitland is well positioned to provide a client solution for the RAIF
