Opalesque Industry Update - Sturgeon Ventures, the regulatory incubator, has entered into a unique joint venture with Dublin-based Gandon Alternative Fund Management to offer a full regulatory service for alternative investment funds (AIFs) in Europe.|
It is the first regulatory incubation service to offer full coverage for both the Alternative Investment Fund managers Directive (AIFMD) and the Markets in Financial Instruments Directive (MiFID).
The service offers a regulatory option to AIFs, especially those that are smaller scale or currently lightly regulated, as the deadline for compliance with the AIFMD rapidly approaches. In the UK, the directive is due to be passed into law on 22 July 2014 and last-minute bottlenecks have been widely predicted.
Gandon has received its full AIFM licence from the Central Bank of Ireland while Sturgeon can provide regulatory cover under MiFID. Under the new service, AIF managers will become appointed representatives of Sturgeon and thereby authorised to market their products within the European Union.
Sturgeon Ventures can help new or existing EU and non-EU AIFs become AIFMD compliant in several ways, such as becoming an external AIF manager, setting up sub or mirror funds or outsourcing risk management. An EU or non-EU asset manager can establish its own segregated sub-fund on one of a number of SICAV SIF platforms in Luxembourg, Dublin, Malta or Gibraltar.
Seonaid Mackenzie, Managing Partner at Sturgeon, commented: “Sturgeon was the first regulatory incubator in the institutional space in the UK and we are leading the way once again by offering a full AIF service in Europe. The clock is ticking in relation to the AIFMD and many self-managed or formerly lightly regulated investment managers will have to make tough decisions with regards to regulation, both under the AIFMD and MiFID.
“I am very excited to be building the next stage of our incubation model with Gandon as a partner. Like ourselves, Gandon’s partners have all been fund and risk managers, which enhances the chemistry with our clients.”
David Cullen, Chief Investment Officer at Gandon, commented: “We are excited to be working with Sturgeon Ventures and we look forward to establishing a unique offering to European and US alternative investment fund managers.”
The first fund to use the JV service as a regulatory umbrella is due to be launched this month (March).
Sturgeon also launched last year a service will enable alternative investment fund managers to navigate the ‘patchwork quilt’ of regulatory requirements resulting from European Union member states exercising discretion under the AIFMD.
The ‘National Private Placement Regime’ enables fund managers to market hedge funds in the EU that are ineligible for passporting under the AIFMD, either because they originate outside the European Economic Area or they are managed by non-EEA managers. It is estimated* that around 17 of the EU member states intend to allow some form of private placement, while others have even yet to announce their intentions. But the result is a patchwork of national treatments of the inward marketing of alternative investment funds.
However, Sturgeon’s new service, drawing on the expertise of third party law firms that can draft the relevant appendices to current offering memorandums in line with the different jurisdictions, enables AIFs to produce bespoke submissions meeting each country’s regulatory requirements.
Sturgeon believes a number of alternative fund management companies, especially US hedge funds domiciled in the Caymans, will give up on trying to operate in the EU because of the difficulties navigating the variety of requirements each country will make.
Sturgeon Ventures is the largest and longest-established wholesale regulatory incubator, which is also known as an ‘FCA umbrella’ or ‘regulatory hosting platform’. Sturgeon owns the trademark rights to the term ‘Regulatory Incubator’.
Sturgeon specialises in helping entrepreneurs establish start-up financial services businesses, nurturing them through the initial regulatory phase until they can be directly regulated by the Financial Conduct Authority in their own right. Sturgeon provides advice on marketing, training, human resources, branding and compliance, helping companies to gain competency and prove their business models to the regulator. It also offers education and training courses covering: senior management obligations and governance; monitoring governance of fund directors; anti-bribery and anti-money laundering procedures; market abuse; data protection training; compliance induction for wholesale, private equity and real estate fund managers; and financial promotions. It believes it is the UK’s longest running regulatory umbrella in the institutional arena.
*Source: Ernst & Young, 2013