The EU has adopted a Directive on Alternative Investment Fund Managers, which is primarily aimed at reducing the risks posed by hedge funds and private equity funds to the financial system. Not something that the property industry would have to worry about, you would think.
You would be wrong...
What's the issue
From mid 2013, the Directive will impose a new regulatory and oversight framework on all alternative investment fund managers (AIFM) - being those whose regular business includes managing alternative investment funds (AIF). We know that this will catch real estate fund managers, and we believe that most corporate property groups, including most REITs, should be outside its scope. Property development and investment joint ventures should also generally be out of scope. Unfortunately, however, the precise scope of the Directive remains unclear, and it may yet apply to businesses which may not think of themselves as fund managers. For those in scope, many of the more detailed rules are yet to be clarified.
Why is it important
There are a number of important issues on precisely how the Directive will apply to those within its scope, which will determine its commercial implications and the compliance burden it imposes. We are working closely with private equity real estate fund manager members in particular to try to secure reasonable outcomes.
We are also particularly focused on keeping corporate groups and joint ventures outside its scope. That is all the more important because we are seeing the European Commission use the AIFM Directive definitions in other contexts - notably the reform of OTC derivatives regulation., and, more recently, proposals for financial sector taxation.
What we're doing about it
As well as raising awareness among members, we continue to engage with members and to liaise with the UK Government, other industry bodies and, where appropriate, EU policy makers, with a view to ensuring that the scope of the Directive is appropriate and that the compliance burden it imposes on those to whom it applies is both manageable and proportionate.
We have responded to a major consultation on the detailed regulatory framework organised by ESMA, the European regulator, and are also engaging (alongside other industry bodies from other countries) with ESMA, the European Commission and national regulators, regarding scope.
Members should not underestimate the challenges involved in securing sensible outcomes.
