As we kick off 2021, we approach the 10th anniversary of the Alternative Investment Fund Managers Directive (AIFMD). For US investment advisers, AIFMD has offered rich opportunities. Ten years on, change is afoot. Brexit has sundered Great Britain from the AIFMD market. The European Union is engaged in revisiting AIFMD. This article reviews some of the changes to the AIFMD environment that US managers should have in mind as the year unfolds.
First proposed in April 2009 in response to the 2008 financial crises and adopted effective June 2011, AIFMD has harmonized the EU regulatory frame- work for the supervision and operation of alternative investment fund managers (AIFMs) and the marketing of alternative investment funds (AIFs). AIFMD also had a complementary objective: The creation of a unified market for AIFs marketed to professional investors in the European Union. By any measure, AIFMD has been a remarkable success story. The European Commission has concluded that under AIFMD the market for AIFs grew from €2.3 trillion to €5.9 trillion, attributing the industry’s growth to AIFMD’s depositary regime, its rules on conflicts of interest, and requirements for disclosure and transparency that protect investor interests and built investor confidence in the AIF market. Against this background of highly successful capital formation, changes are now underway that will affect US fund managers, and that will need to be accounted for in the near term. These changes constrict reverse solicitations, impose a new process to getting to a “first fund close,” force all US sponsors into a hybrid approach to pan-European marketing, as the reality of Brexit has taken hold, and will require taking a stand on sustainability.