The Alternative Investment Fund Managers Directive (AIFMD) is a European directive, the aim of which is to provide protection to investors in alternative investment funds.
Despite its name, AIFMD has implications for all non-UCITS funds as well as a range of other financial products and covers not just the management but also the administration, custody and marketing of such funds.
Guernsey stated from the outset that it would position its regulatory infrastructure to enable clients to distribute Guernsey-domiciled funds into both EU and non-EU countries.
The existing regime remains in place for those investment managers not engaging in effective marketing of their funds in Europe, and therefore not needing to comply with AIFMD.
The AIFMD 'passport' allows EU investment funds to be distributed across the EU. However, the EU investment fund market is still predominantly a national market - in fact, only 3% of EU AIFs are registered for sale in more than three member states.
Alternatively, a non-EU investment fund domiciled in Guernsey can use NPPR to distribute their funds across the EU in a way which has been demonstrated to be quicker, less expensive and more flexible than the passport.
In July 2016, the European Securities and Markets Authority (ESMA) announced its recommendation to grant Guernsey a third country passport. Guernsey is one of only five non-EU jurisdictions to be given the 'unqualified and positive assessment' by ESMA. The recommendation, once approved by the relevant European authorities, will further enhance Guernsey's position to distribute funds into Europe.
Do I need to comply with AIFMD?
Compliance with AIFMD will be onerous and costly. Guernsey domiciled investment structures provide significant cost saving opportunities for Guernsey managers versus their European domiciled counterparts.
In particular, Guernsey fund structures will provide a cheaper 'out of scope' option for marketing into non-EU jurisdictions.
For those managers with an international focus, it will be possible to take advantage of both EU and non-EU opportunities on a cost-effective basis, which might include a parallel and feeder structure for which AIFMD compliance would not be required.