Institutional investors have criticized Europe’s Alternative Investment Fund Managers Directive (AIFMD), with European investors arguing the regulation has put their private equity programs at a competitive disadvantage.
According to a survey from the Institutional Limited Partners Association (ILPA), investors have seen fewer non-EU AIFs being marketed in Europe as a result of the AIFMD.
Following the implementation of AIFMD, non-EU fund managers, without access to the EU ‘passport’ have been able to market their funds through the national private place regimes (NPPR). However, investors have found that non-EU managers have been deterred from marketing in certain countries due to registration requirements and onerous costs.
Among ILPA members surveyed, 52% said that changes to the NPPR have been somewhat or very negative, and the majority of investors have seen marketing activity among non-EU managers has decreased since implementation of the rules.
Around 88% of respondents indicated that 40% or more of the AIFMs they currently invest with are from outside the EU. It is also found 77% of respondents claim they will invest at least 40% of their private equity capital into non-EU fund managers in 2015.
As a result, with less restrictions being placed on non-EU funds, 69% of European respondents believe their private equity programs are at a competitive disadvantage.
“We feel the regulation is restricting our access to top fund managers rather than providing us with any benefit,” says one respondent.
It is has had a significant impact on the choices of fund managers, with many having to rethink their strategy when faced with narrow manager choice.
Respondents also said that access to smaller niche players, which sometimes offer ‘very compelling investment strategies, are less available to investors because of the rules.
“As a French-based LP (limited partner), AIFMD has been extremely negative for our investment program as it makes contact very difficult with non-French GPs (general partners), it forces us to make use of various techniques to adjust,” adds another respondent. “It forces us to allocate more to Europe, which is definitely not in the interest of the pension savers.”
Private Equity Investors Hit Out Against AIFMD
Institutional investors have criticized Europe’s Alternative Investment Fund Managers Directive (AIFMD), with European investors arguing the regulation has put their private equity programs at a competitive disadvantage.