Industry Comment

No matter how complicated the consultation may seem, the outcome is looking clearer all the time ...

Friday, September 23, 2011

The answer is buried in EVCA’s response to the third country consultation, which states that AIF are commonly managed by AIFM domiciled in the Channel Islands, Switzerland or the United States, because these jurisdictions offer the product certainty necessary for particularly high value, long-term institutional investment without many of the political, legal and fiscal complexities in the EU identified by the Report of the Expert Group and the Commission itself. If it wasn’t obvious why AIFM were located outside the EU, current monetary uncertainties and fiscal risks should make everything clear. Picking up again on the EVCA’s response, it is not all clear that international private equity funds even need to market in a European context and, therefore, ESMA should consider a more conservative approach when formulating its advice if it is to keep an international industry onside.

For those successful onshore EU domiciles, the time has come to look very carefully at the definition of an AIF in the context of EU not domestic law and decide whether the term really has the universal meaning that some claim. The application of EU legal concepts to interpreting the Commission’s original work may well leave scope to protect the very stable legal environment necessary for long term investment. With terms such as AIF, AIFM, EU AIF, Non EU AIF etc. the term “EU Non-AIF” would be a worthy addition.

If onshore EU domiciles are unsuccessful in this endeavour, no doubt international, institutional, returns’-driven investors will be provided with a relatively neat choice in the future: the AIF pool or the non-AIF pool. It couldn’t be much clearer I guess.

Click here to read further.

We would like to express our gratitude to the EVCA and various national associations such as the BVCA, the SVCA and LPEA, leading US and European law firms and a handful of very committed promoters for the considerable time taken by them in formulating responses to the consultation process over the summer. We would also like to thank Guernsey Investment Fund Association, Jersey Finance and ALFI as well as IPES in submitting their own submissions. Obviously though, there is still a long way to go.