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AIFMs welcome ‘flexibility of NPPR’ when accessing Europe

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National private placement regimes (NPPR) continue to offer the flexibility and ease of access for marketing into Europe that appeal to fund managers, a London funds audience has heard.

Speaking at a Guernsey funds masterclass at the British Museum, panellist Cathy Pitt (pictured), Corporate Partner of CMS Cameron McKenna LLP, said that fund managers appreciated the NPPR process, particularly when they only wished to target a select set of jurisdictions.
“I think people welcome the flexibility offered by the national private placement regimes. I’ve had a lot of experience of non-EU managers who are pleasantly surprised to find that access to Europe and, in particular, to the UK is not closed and they can access European markets without having to become registered under AIFMD,” said Pitt.
Pitt explained that whether managers were thinking about going down the NPPR or passport route it was still the case that marketing and pre-marketing concepts were often different in each member state, despite the fact that the passport is supposed to be harmonised.
“That lack of harmonisation, even when the passport is used, does mean that some people are attracted back to national private placement, but they do then have to change their initial approach from ‘we want to market everywhere,’ to, ‘actually, we’ve thought about it. We’ve looked at the advice and these are the countries we really want to target’.”
Fellow panellist Rebecca Gordon, General Counsel of Liberum Capital, agreed with Pitt’s view that the lack of harmonisation in the passport rules was an issue when she answered a question from the audience which suggested that experiences of using the passport under AIFMD were not entirely positive.
“Some of the stories we hear, and some of the experiences we’ve had, have not been particularly positive either. I think that, whilst you have a harmonised set of rules, some of the countries are actually interpreting those rules slightly differently – they’re sort of applying different charges. Then, obviously, when you’re marketing into those jurisdictions you have still got to also think about the other legislation, the local legislation that might be applicable as well,” said Ms Gordon.
Pitt added: “The passport isn’t necessarily as smooth as it might be, and I think ESMA acknowledged that in the response for their call of evidence. It was one of the issues that I think they’re planning to address because, obviously, the intention was that the passport should be a harmonised process.”
The masterclass, titled ‘NPP or third-country passport?’, attracted nearly 300 delegates and considered the European Securities and Markets Authority’s (ESMA) recommendation that Guernsey should be given access to the AIFMD passport scheme and how the industry generally was utilising NPPR in relation to AIFMD.
In addition to Pitt and Gordon, the panel session also featured Storm Boswick, Managing Director of Brightwood Capital; Peter Gibbs, Chief Operating Office of Permira Debt Managers,  and Emma Bailey, Director of the Investment Supervision and Policy Division at the Guernsey Financial Services Commission (GFSC).
Gibbs said the UK was one of the easiest markets to access whereas there were other countries such as Germany and Denmark, which took longer to access because of their depositary requirements under AIFMD.
“The UK is incredibly straightforward. It’s no different really than it was pre-AIFMD in many ways. The issue is the inconsistency across other countries, or inconsistency and the lack of clarity for managers,” said Gibbs.
Since recommending Guernsey for a third country passport in July, ESMA has been asked by the European Commission to complete, by 30 June this year, the passport assessments for the second wave of nations – Japan, Isle of Man, Cayman Islands, Bermuda and Australia – as well as the three outstanding countries from the first wave – US, Singapore and Hong Kong. As a result, Guernsey is waiting for the activation of the relevant provision in the Directive to extend the passport.
In addition, the European Commission has agreed with ESMA’s suggestion that it produces another opinion on the functioning of the passport and NPPR once AIFMD is fully transposed in all member states and there is more experience on the functioning of the framework. ESMA had previously suggested it produce another opinion because the delay in implementing the AIFMD, together with the delay in its transposition in some member states, made it difficult for ESMA to provide a definitive assessment by July 2015, the initial legislative deadline. 

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