Alternative Investment Fund Managers Directive

On 11 November 2010 the European Parliament adopted the Alternative Investment Fund Managers Directive (“AIFMD”). The AIFMD came into force in July 2011. The AIFMD creates a regulatory framework that affects not only Private Equity structures and their managers based in the EU but also, under specific circumstances, managers and investment entities established outside the EU.

The AIFMD will, when implemented in the EU Member States, amongst others introduce a marketing passport (the “Passport”) permitting the distribution of Alternative Investment Funds (“AIFs”) in any Member State of the EU without additional authorisation or registration requirements and which is intended to replace, after a transitional period, the fragmented national private placement regimes (“NPPR”) currently in place in the EU for the distribution of AIFs.

AIFMD passport versus National Private Placement regimes

While the distribution of an AIF in the EU currently is subject to national private placement regimes (“NPPR”), the introduction of the Passport will enable an AIFM to market a Luxembourg AIF to professional investors in any Member State without additional authorisation or registration requirements. However, the new regime does provide for exemptions that will apply to a number of Luxembourg players.

These are:

  • Luxembourg funds that are managed by non EU fund managers, until NPPRs are phased out (currently foreseen for 2018);
  • Managers of some closed-ended AIFs existing at  the final date of transposition may benefit from grandfathering clauses, namely:
    1. Managers of closed-ended AIFs “which do not make any additional investments” after mid2013.
    2. Managers of fully subscribed closed-ended AIFs which had their final close prior to July 2011 and are constituted with a maximum life that requires them to be liquidated by mid-2016 at the latest, with certain exceptions that need to be respected.
  • Small and mid-sized AIFMs falling below the de minimis thresholds of either €100 m or €500 m (leveraged and non-leveraged respectively).
  • Luxembourg SOPARFIs.
  • Luxembourg securitization vehicles.
  • Pension funds.
  • Supranational organizations such as the European Investment Bank and Investment Fund
  • The national central bank.
  • National, regional and local governments and bodies and other institutions managing funds supporting social security and pension systems.
  • Employee participation schemes;