The publication of this Guide comes as shockwaves from the UK's decision to withdraw from EU membership continue to reverberate across the world, raising several challenges for UK-based asset managers distributing across the EU.
As Bobby Johal, Managing Consultant, Cordium, notes: "UCITS funds will still be distributed across Europe, but not in quite so straightforward a manner as is the case presently. UK UCITS will lose their status (under the UCITS directive) and most likely become alternative investment funds (AIFs). If we assume the UK is to be a `third country' (the so-called WTO option: a big assumption, subject to much debate over the coming months), this will result in the loss of passporting rights and so such funds will be subject to the vagaries of the private placement rules of each of the states in which they are marketed. A significant increase in complexity and cost will result. A move to re-domicile from the UK (both the fund and management company) will be the inevitable outcome.
"Third country firms do not currently have any passporting rights but ESMA is undergoing a consultation exercise to determine the feasibility of extending such rights (as per AIFMD Art 67)) to a small number of jurisdictions with financial services legislative frameworks deemed to be most closely equivalent to those of the EU."
As the industry grapples with the post-Brexit world, start-ups need to tread carefully. How do traders and prop desk alumni take the first the steps to setting up their own AIFs in the transparent and correct format required by investors and regulators? And, given Brexit and sharpening regulatory differences on either side of the Atlantic and across Europe, where should these funds be domiciled?
To help answer these and other key questions for start-ups and established managers GFM's Team, led by Hedgeweek Managing Editor James Williams, has prepared a two-part "Guide to Setting up an Alternative Investment Fund".
In the first part (published in May 2016) we focused on the factors to consider when establishing an AIF in the USA. In this second part, we tackle these issues from the perspective of setting up an AIF in Europe.
This edition of the 2016 Guide to Setting up an Alternative Investment Fund in Europe was prepared with the support and expert contributions from the following firms:
• U.S. Bancorp Fund Services;
• Deutsche Bank;
• Dillon Eustace;
• Circle Partners;
• Eze Castle Integration;
• Lawson Conner;
• Malta Financial Services Authority;
• Guernsey Finance;
• Linear Investments.
If you would like to participate in future editions of this Guide, or wish to work with GFM on producing other industry Guides, do not hesitate to contact us.