LP’s increasingly critical of the AIFMD

comment - 24 February 2015

LP’s increasingly critical of the AIFMD

The ‘A-I-F’ was supposed to become the new gold standard; however, it seems to be attracting increasing criticism from European LP’s according to the Institutional Limited Partners Association (ILPA). This is hardly surprising.

According to ILPA’s recent survey, more than two thirds (69%) of European LP’s stated their investment programmes had been prejudiced by the introduction of the AIFMD. This was because fewer funds are now marketing in Europe. ILPA viewed the AIFMD’s implementation as ‘widely negative’ and that it had ‘raised barriers to investment’ for its members, which is a theme reflected in its recent ESMA submission. ESMA is currently reviewing how the AIFMD marketing passport, which is supposed to allow managers to market their funds across the EU, has been working in practice since its introduction last year and whether non-EU managers should be able to make use of the passport.

Industry consensus, however, already seems clear. Mark Mifsud at Kirkland & Ellis explained, “It’s a cost benefit analysis that it may be easier to simply ignore [Europe] and to invest time and money in other regions like Asia or the Middle East”. Similarly, Simon Witney of King & Wood Mallesons stated: “Fewer international funds are offering themselves to European investors because of the marketing challenges created by the AIFMD. It is not surprising that sophisticated institutional investors find that frustrating.” We are also seeing the same picture emerging across the Group and sought to explain with our ESMA submission the obvious reason for this; the AIFMD has been applied incorrectly.

This is little comfort perhaps for European LP’s. In the meantime, they may be well advised to put in place inexpensive, international investment conduits to ensure continued access to the best performing managers.

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