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Article
Publication date: 5 March 2018

Maiia Sleptcova, Heidi Falkenbach and Wisa Majamaa

The purpose of this paper is to investigate the effect of Alternative Investment Fund Managers Directive (AIFMD) on European private equity real estate (PERE) industry.

Abstract

Purpose

The purpose of this paper is to investigate the effect of Alternative Investment Fund Managers Directive (AIFMD) on European private equity real estate (PERE) industry.

Design/methodology/approach

The paper draws upon a set of 12 semi-structured interviews with European PERE fund managers to explore their views on the reporting and risk management under the AIFMD, the costs and benefits associated with the AIFMD compliance and the effect of the AIFMD on European PERE industry.

Findings

A “one size fits all” approach adopted by the AIFMD results in difficulties in understanding and implementing the AIFMD requirements by PERE managers. Due to the limited applicability of the AIFMD risk reporting requirements to PERE funds, PERE managers have developed their own risk metrics, which they report internally. The formalization of risk management process and the separation of risk management function constitute the two most significant changes experienced by PERE managers. The managers recognize a positive branding effect from the authorization and improved risk awareness in their organizations due to the AIFMD.

Research limitations/implications

The current paper focuses on PERE fund managers and does not address other real estate funds falling under the AIFMD.

Practical implications

PERE fund managers require feedback and guidance from authorities and best practice recommendations from industry organizations to enable proper compliance. Industry-specific reporting requirements would benefit both the industry players and authorities.

Originality/value

Given the broad scope of the AIFMD, it is of interest to look at how PERE fund managers have adapted to the regulatory change.

Details

Journal of Property Investment & Finance, vol. 36 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

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Article
Publication date: 26 April 2013

Peter McGowan

This article aims to outline in depth the European Commission's adopted implementing rules (the Regulation) for the Directive on Alternative Investment Fund Managers

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317

Abstract

Purpose

This article aims to outline in depth the European Commission's adopted implementing rules (the Regulation) for the Directive on Alternative Investment Fund Managers. These new regulations have been eagerly awaited by private equity fund managers and their investors who have been seeking a measure of certainty about how the AIFMD will be transposed into local law.

Design/methodology/approach

This piece summarizes some of the key points of the Regulation.

Findings

This article addresses the rules in the Regulation concerning: the calculations of assets under management; capital requirements in relation to professional liability risks applicable to alternative investment fund managers; operating conditions for alternative investment fund managers, including liquidity management, organizational requirements and rules on valuation; conditions for delegation; rules on depositaries, including the depositary's tasks and liability; transparency, reporting and disclosure requirements; and rules for cooperation arrangements.

Practical implications

The Regulation supplements certain elements of the Directive and contains implementing rules that will have direct effect in EU member states on application without the need for national implementing legislation. By discussing some of the highlights of the Regulation, the article will help fund managers and investors gain a better perspective of the AIFMD, which is useful from both a compliance and business planning standpoint.

Originality/value

This piece is of value to those private equity fund managers and investors looking for guidance as to how to digest the Regulation and the implications of these new measures on their respective businesses, as well as the investment marketplace as a whole moving forward.

Details

Journal of Investment Compliance, vol. 14 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 26 August 2014

Jacob Ghanty, Justin Cornelius, Matthew Baker and Chris Ormond

To provide a practical look at the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD) and other regulatory requirements as they pertain to marketing funds

Abstract

Purpose

To provide a practical look at the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD) and other regulatory requirements as they pertain to marketing funds in Europe.

Design/methodology/approach

A series of questions and answers exploring some of the principal issues to be aware of when raising a fund in Europe. AIFMD is the key focus, but we also examine other financial regulation that may apply alongside AIFMD, as well as cross-border implications of any marketing initiative.

Findings

One of the original aims of AIFMD was to harmonise the management and marketing of alternative investment funds in Europe so that a uniform set of rules will eventually apply. However, in the meantime, the law and regulations relating to marketing are particularly complicated, with a wide range of different requirements that may apply depending on who you are and where you are marketing.

Originality/value

Practical guidance from experienced investment management and financial regulatory lawyers.

Details

Journal of Investment Compliance, vol. 15 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 28 October 2014

Winston Penhall and Jacqui Hatfield

– The article sets out the practical implications of the EU Alternative Investment Fund Managers Directive for USA managers with a focus on the marketing provisions of AIFMD.

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103

Abstract

Purpose

The article sets out the practical implications of the EU Alternative Investment Fund Managers Directive for USA managers with a focus on the marketing provisions of AIFMD.

Design/methodology/approach

This article summarises key marketing issues for USA managers.

Findings

The article addresses in particular the means by which USA fund managers who are not regulated in the EU can access EU investors including passive marketing.

Practical implications

AIFMD grants EU member states latitude when implementing their local private placement regime. Some EU member states have not yet implemented AIFMD while others have imposed conditions that are so onerous that in practical terms they equate to the negation of private placement as an option.

Originality/value

The article is of value to USA fund managers who are not regulated in the EU because it provides insight into the practicalities of navigating the minefield that is AIFMD.

Details

Journal of Investment Compliance, vol. 15 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 4 July 2016

Stephen Sims, Patrick Brandt and Greg Norman

To explain two papers published by the European Securities and Marketing Authority (ESMA) covering the application of the mar-keting “passport” under the Alternative

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172

Abstract

Purpose

To explain two papers published by the European Securities and Marketing Authority (ESMA) covering the application of the mar-keting “passport” under the Alternative Investment Fund Managers Directive (AIFMD).

Design/methodology/approach

Explains ESMA’s first paper, containing an advice to the European Parliament, Council and Commission (collectively the Trilogue) on the potential application of the AIFMD passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative in-vestment Funds (AIFs), and a second paper, containing ESMA’s opinion on the current functioning of the AIFMD (currently used by EU AIFMs marketing EU AIFs in the EU) and National Private Placement Regimes (NPPRs, used for marketing by non-EU AIFMs and non-EU AIFs).

Findings

The ESMA papers were disappointing because they gave far less guidance and encouragement than anticipated that AIFs located in major jurisdictions such as the US and the Cayman Islands will be any easier to market to EU professional investors in the near future.

Practical implications

AIFMs (both inside and outside the EU) who are already using, or intending to use, the NPPRs should take some comfort that it seems highly unlikely that these regimes will be removed in the near future.

Originality/value

Practical guidance from experienced financial services lawyers.

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Article
Publication date: 7 May 2020

Christopher Buttigieg, Joseph Agius and Sandra Saliba

This paper aims to examine the rationale for the establishment of a depositary passport as the next logical step in building an internal market for investment funds in the…

Abstract

Purpose

This paper aims to examine the rationale for the establishment of a depositary passport as the next logical step in building an internal market for investment funds in the European Union (EU). It makes the point that the de facto prohibition of depositary passporting poses risks to financial stability and has an adverse impact on investor protection in EU member states, which do not have a fully developed funds industry.

Design/methodology/approach

This paper analyses both the arguments in favour and against the adoption of a depositary passport. Moreover, it examines this proposal in the context of different approaches to fostering the internal market such as mutual recognition, harmonisation of regulation, reflexive governance of financial supervision and centralised supervision.

Findings

Based on the review of the current EU legal framework, this paper, subsequently, puts forward possible solutions for the establishment of an internal market for depositary business, which solutions have been discussed with various experts in the field to assess their feasibility in practice.

Originality/value

The paper contributes to the debate on the EU internal market in the field of asset management, which is topical in view of the upcoming review of the EU’s Alternative Investment Fund Managers Directive.

Details

Journal of Financial Regulation and Compliance, vol. 28 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 15 July 2021

Christopher Griffin, Robert Milner, James Mulholland and Daniel O’Connor

To explain the benefits and the regulations pertaining to Jersey as a domicile for investment funds.

Abstract

Purpose

To explain the benefits and the regulations pertaining to Jersey as a domicile for investment funds.

Design/methodology/approach

Provides an overview of Jersey as an international financial center followed by a detailed description of Jersey regulations applying to private funds, expert funds, listed funds, regulated investor funds, retail and other collective investment funds (CIFs), and notification-only funds. Explains fund vehicles including unit trusts, limited partnerships, and companies. Discusses taxes and fund service providers.

Findings

Jersey is one of the world’s major international finance centers, offering location and time-zone benefits; stability and reliability; tax neutrality; a stable political, fiscal and regulatory infrastructure; and highly-skilled financial-service providers.

Originality/value

Expert guidance from experienced investment-funds lawyers

Details

Journal of Investment Compliance, vol. 22 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 3 May 2013

Christopher P. Buttigieg and Martha Chetcuti

The purpose of this paper is to test two hypotheses: first, that the regulatory framework applicable to funds in Malta and the Malta Financial Services Authority's…

Abstract

Purpose

The purpose of this paper is to test two hypotheses: first, that the regulatory framework applicable to funds in Malta and the Malta Financial Services Authority's (MFSA's) approach to financial supervision, have been instrumental to the process which made Malta an attractive jurisdiction for the registration of funds; and second, that the proper implementation of the Alternative Investment Fund Managers Directive (AIFMD) and the sustained commitment of the MFSA to engage qualified resources for proper supervision of the financial sector are fundamental, if Malta is to remain an attractive funds jurisdiction.

Design/methodology/approach

The research was carried out through a literature review of available documentation and empirical research via a survey carried out by way of a questionnaire that was sent to a selected sample of fund professionals operating in Malta.

Findings

The findings of the empirical research suggest that the regulatory and supervisory regime in Malta has indeed played a pivotal role in establishing Malta as a funds jurisdiction. The research has also confirmed the challenges which Malta is facing in this field.

Originality/value

The paper examines the regulation and the supervision of funds in Malta and sheds light on the challenges that need to be overcome if Malta is to retain its position as a jurisdiction for the registration of funds. The authors also make recommendations on how the challenges may be addressed.

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Article
Publication date: 28 October 2014

Lukas Prorokowski

This paper aims to investigate whether enhanced requirements result in the depositories exiting the business. Furthermore, this paper attempts to analyse prospective…

Abstract

Purpose

This paper aims to investigate whether enhanced requirements result in the depositories exiting the business. Furthermore, this paper attempts to analyse prospective changes to the operating structures caused by the Alternative Investment Fund Managers Directive (AIFMD). Most importantly, this paper discusses the processes to evaluate and manage counterparty risk relating to prime brokers. AIFMD makes fundamental changes to the depository liability and managing counterparty risk by making a depository bank liable for any losses to investor assets, even those held within third-party custodians appointed by the depository. Depositories will also need to calculate the probability of default of their sub-custodians and use complex credit models to calculate any capital requirements under the fourth Capital Requirements Directive (CRD IV).

Design/methodology/approach

This paper is based on an insightful secondary analysis of the AIFMD with practical implications drawn for depository banks. The analysis of this topical research has been broken down into the following sections: assessing and managing counterparty risk of prime brokers; insurance against defaults of prime brokers; and regulatory-driven challenges and changes to depository banks.

Findings

The post-Lehman banking industry has realised that counterparty risk cannot be ignored. This has triggered heated debates among regulators and practitioners whereby any depository bank should clearly separate the assets of its clients from the depository assets and its own assets. This paper argues that the custodian services will witness consolidation with the big players remaining and small custodians forced to leave the business in light of the enhanced liabilities under the AIFMD. In addition to this, this paper has stressed that assessing counterparty risk should be supported by an insightful analysis of the culture of a prime broker; its legal, structural and regulatory safeguards; and quality of assets. Moreover, managing risks associated with prime brokers entails significant costs to depositories. Thus, depository banks are advised to factor these costs into their pricing models.

Originality/value

Given the magnitude of recent regulatory initiatives and complex challenges faced by depositories, an important question arises whether depository banks would exit the business in light of the regulatory-induced liabilities. This paper addresses the aforementioned question and provides practical implications into managing emerging risks by depository banks. At this point, the majority of depositories are in a process of developing in-house solutions for managing risks related to prime brokers, and hence would benefit from practical insights into these processes that are provided in this paper.

Details

Journal of Investment Compliance, vol. 15 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 3 July 2017

Lukas Prorokowski

To explain the shadow banking regime that will be enforced in the European Union by local regulators starting in January 2017.

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1231

Abstract

Purpose

To explain the shadow banking regime that will be enforced in the European Union by local regulators starting in January 2017.

Design/methodology/approach

Recognising the regulatory-induced difficulties in the process of identifying certain types of clients (investment funds) as shadow banking entities, this article provides a decision tree for the shadow banking classification process in order to aid the impacted institutions with the assessment of their clients. With this in mind, the article advises the impacted institutions on the specific steps that should be taken when assessing investment funds for shadow banking flags. Furthermore, the article provides insights into the information required to conduct the shadow banking classification process.

Findings

The regime requires the impacted institutions to assess their clients for shadow banking flags in order to impose limits on credit lines to clients classified as shadow banking entities. The US regulatory jurisdiction will be impacted over a longer term.

Originality/value

The recommendations in this article will be especially useful for investment funds to ensure that the relevant information is clearly stated in their prospectuses in order to avoid being classified as shadow banking entities.

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