Understanding AIFMD

Understanding AIFMD
The alternative investment fund manager’s directive

The Alternative Investment Fund Managers Directive, or AIFMD, is coming. Firms that are affected will need to make significant changes to their structures, strategies and operations in order to comply with its provisions.

However, along with these changes comes an important opportunity for firms to get ahead of the competition. The winners will not just be those who meet the deadline (being either July 2013 or July 2014 depending on activities), but those who have planned for the changes efficiently in order to operate in a more competitive and profitable way.

Act now, it’s almost here

Firms need to prepare now, as one of the major impacts of AIFMD will be on firms’ business models and stakeholder relationships. In particular, depositaries and prime brokers will need to have considered and made any necessary changes to their offerings ahead of the authorisation deadlines so that asset management firms who rely on their services are ready to use them and are assured of compliance.

Those who anticipate rather than react to regulatory developments will keep client relationships strong and lasting. The earlier those businesses can understand the requirements and their impacts and manage client expectations, the better. The deadline is fast approaching.

The detail of AIFMD is coming

We are expecting the release of the final ‘Level 2’ measures in September 2012; although an official date hasn’t been announced yet. These detailed measures supplement the high level text of the Directive and will also guide EU countries and national regulators in transposing AIFMD into national law and regulation. Following this publication, further technical guidelines and standards will be produced by ESMA, the European Securities and Markets Authority, and by EU national regulators as they move forward with their own local implementation.

How will AIFMD affect my business?

AIFMD is a complex piece of legislation, with many technical aspects. It affects firms’ operations, their relationships with service providers, custody frameworks, remuneration policies and marketing approaches – to name a few areas. Firms are asking themselves:

  • How can I take advantage of AIFMD to restructure my current business and organisational structure to become more efficient and enhance quality?
  • How will AIFMD affect my remuneration policies?
  • How will my operations need to change under the new ‘conduct of business’ rules?
  • Do I need to change my custody arrangements?
  • Will I need to change my valuation practices?
  • There are new provisions around risk and liquidity management - how onerous are these?
  • What are the new reporting obligations to regulators and investors?
  • What do I need to do to get authorised and by when?
  • My business is outside of Europe. How does AIFMD affect my route to market?

Firms that develop an integrated response to AIFMD will be best placed to operate in the new alternative investment world. We are working with truly global firms to prepare their responses to AIFMD. These firms are creating a streamlined programme to take the pain out of compliance and more importantly to make the most of the new regime.

Our AIFMD team is comprised of regulatory compliance experts and operational and project management specialists. They work closely with our regulatory and alternative funds lawyers to help asset managers, depositaries, prime brokers and other service providers fully understand and plan for the Directive’s impact.

We have also developed a web enabled methodology we call Compass. Leveraging Compass, we help our clients through the entire life cycle of a regulatory adoption process. This comprehensive package includes gap analysis, project management and evidence repository. This methodology allows our clients to know exactly where there gaps are and the progress of their efforts. Our clients also have the ability to demonstrate to regulators and other stakeholders their compliance with these new requirements, which will be especially critical for AIFMD.

Download sector specific reports:

AIFMD impact for Hedge funds (PDF)

AIFMD impact for Private equity (PDF)

AIFMD impact for Real estate (PDF)