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AIFMD

AIFMD

The European Alternative Investment Fund Managers Directive (AIFMD) establishes rules concerning the authorization, the ongoing operation as well as the transparency of alternative investment fund managers.  

The Directive significantly affects the organizational structure and business practice of alternative fund managers and the non-UCITS sector including hedge funds, private equity and real estate funds.  

Alternative investment fund managers (AIFMs) will have to comply with specific substance, conflict of interest, risk management and liquidity management requirements.  

Objectives

 

The Directive aims to:  

  • Ensure that all alternative investment fund managers are subject to appropriate authorization and regulatory requirements;
  • Provide a structure to monitor prudential risks through regular reporting obligations;
  • Ensure proper monitoring and control of prudential risks;
  • Provide a common approach to protect professional investors;
  • Enhance public accountability of fund managers;
  • Develop a European single market for Alternative Investment Funds (AIFs).

Implications for Alternative Investment Fund Managers

AIFMD seeks to regulate each AIFM acting in an EU member state, regardless of whether the AIFM is EU-based or not. The impact on each AIFM depends on whether the AIFM has its registered office in a EU member state or if the registered office is outside the EU. Furthermore the fact that the AIF is authorized registered or has its registered office in an EU member state or not, plays a considerable role.

Managers that are indirectly appointed to take investment decisions or provide risk management services to AIFs, may be subject to the AIFM Directive.

The implementation of the AIFM Directive offers a significant flexibility to alternative investment managers to choose the operating model which best suits their needs. The Directive is primarily focused on regulating the manager. The Luxembourg law lays down a specific stand-alone legal framework for AIFM. The Law creates a new legal status: The Alternative Investment Fund Manager (AIFM).

To become an AIFM, an entity will have to submit an application to, and obtain authorization from, the Commission de Surveillance du Secteur Financier (CSSF). The application must include information on the Directors of the AIFM, its shareholders, and the alternative investment funds (AIF), which it intends to manage and demonstrate how the entity will comply with the requirements of the AIFM Law.

Alternative Investment Fund (AIF) Definition

Vehicles that may be qualified as AIF under the AIFM Law are presented below:

  • Undertakings for collective investment (UCI) under Part II of the Law of 17 December 2010
  • Specialized investment funds (SIF) under the Law of 13 February 2007, as amended
  • Investment companies in risk capital (SICAR) under the Law of 15 June 2004, as amended
  • Other currently unregulated Luxembourg vehicles which meet the criteria of an AIF (for example, some SOPARFIs (Holding Companies) may be qualified as AIF.