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Alternative Market Briefing

Hedge fund managers still considering EU passport system - Part II

Friday, July 01, 2011

Benedicte Gravrand, Opalesque Geneva:

This is the second of three articles on hedge fund re-domiciliation trends and challenges. Yesterday’s Part I can be found here: Source.

The European Union’s Alternative Investment Fund Managers (AIFM) Directive is playing and will continue to play a big part in the hedge fund re-domiciliation phenomenon in Europe as indeed it is one of the main reasons hedge funds do change jurisdiction.

The Directive is aimed at establishing EU rules for monitoring and supervising the risks posed by alternative funds, whilst allowing fund managers to market their funds, subject to compliance with strict requirements.

The main features of the Directive are: authorisation for fund managers to operate; requirement to appoint an independent depositary; to apply risk management and prudential oversight; to provide a clear description of investment policies to investors; to limit leverage according to authorities’ requirements; to disclose information to shareholders when acquiring controlling stakes in companies; to use a passport to market funds throughout the EU.

Following a two-year transition period, the passport will be extended to the marketing of non-EU funds, managed either by EU AIFMs or by AIFMs based outside the EU.

Furthermore, the directive gives member states the option not to apply the directive to smaller AIFMs, ......................

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