Accessing European Capital: How Third-Party Management Companies Can Help

Europe is mostly comprised of the 27 member countries of the European Union (the “EU”), which has a population of 450 million and GDP of €16 trillion. Added to these 27 are the three additional countries of Norway, Iceland and Liechtenstein making up the EEA, and the larger non-EEA countries of the UK and Switzerland. This makes Europe one of the largest investment fund locations and investor markets globally.

Access to professional investors in the EEA countries is covered by the rules in the Alternative Investment Funds Managers Directive (“AIFMD”) regulatory framework. The AIFMD covers, among other things, specific rules in relation to how funds are distributed in the EEA, who they can be sold to and who can sell them.

Under AIFMD, any non-EU AIF or non-EU Alternative Investment Fund Manager (“AIFM”) must market funds in the EU under the National Private Placement Regime (“NPPR”). This regime applies on a country-by-country basis, with each country having its own requirements which can differ significantly, some of which are much more stringent than others. This can add up to make the NPPR quite inefficient if planning to market into multiple EEA countries.

For EU AIFs with an EU AIFM, however, a pan-EU marketing passport is available. This is a comprehensive marketing tool that allows funds to be distributed across the EU much more efficiently and without any meaningful restrictions.

In addition, for groups that are looking to raise capital in Europe, it is important to note, the EU’s Sustainable Finance Disclosure Regulation (“SFDR”) requirements will apply. The SFDR was implemented in the European Union in 2021 with the objective of reorientating private capital towards sustainable activities. SFDR has had a significant impact on the European funds space, with assets in European sustainability focused funds now exceeding €6 trillion ($US6.63 trillion). More than 50% of all new funds launched in Europe last year were sustainability-focused funds. Asset managers looking to successfully fund raise in Europe cannot ignore SFDR, which applies to those managing or marketing their fund products in the European Union, irrespective of the home domicile of the asset manager being outside Europe.

The Maples Group is a market leader in the area of sustainable finance, read our SFDR Impact Analysis for more information on SFDR across the Irish and Luxembourg fund universe.

Solutions for non-EU managers: The third-party alternative investment fund manager (AIFM)

To avail of an EU marketing passport, a non-EU manager not only requires an EU authorised AIF, but also an EU AIFM. For those managers without the scale or desire to establish a regulated AIFM in the EU themselves, a third-party AIFM can provide the best solution. The third-party AIFM should be a provider who is skilled and versed in navigating the regional alternative investments landscape and serves as a true partner to guide non-European managers to successful capital raising in Europe.

Some of the important areas in which a third-party AIFM can assist entrants into Europe include:

1) Distribution assistance: For the uninitiated, European distribution can be a significant challenge. Both the entity that is marketing the fund and the fund itself most meet all the relevant requirements in the countries where the fund is marketed. The entity selling the fund must be appropriately regulated and must have the correct licence to sell funds within the EEA. The fund must be registered with the local regulator in every jurisdiction where it is being marketed.

A third-party AIFM can assist with each stage of the distribution cycle, from pre-marketing (before a fund is authorised) through to the marketing and fund registration phase. At a minimum, a partner needs to be able to provide strong knowledge and guidance, but may also provide solutions including:
• Assistance with pre-marketing a fund that hasn’t yet been authorised, to determine potential interest from investors;
• Chaperone services, in which the AIFM connects with potential investors, arranges and attends potential investor meetings with the investment manager;
• Distribution support, to share relevant information with potential and existing investors and ensure compliance with the distribution strategy of each fund;
• Distributor due diligence if a third-party distributor is appointed;
• Registration of fund in required regions;
• Appointment of local representatives and paying agents where required; and
• EU facilities agent appointment where required.

2) Investment management: An AIFM can delegate the investment management activity or retain investment management and work with the input of an investment advisor. Any AIFM should be able to demonstrate the requisite experience and expertise in the asset class and strategy being deployed.

3) ESG / sustainability fund expertise – Maples Fund Management Ireland have recently launched the Maples Sustainability Platform ICAV. Complementing our broader suite of ESG and sustainable fund services the Maples Sustainability Platform is an umbrella fund, specifically structured to host ESG and sustainability-focused funds.

The Maples Sustainability Platform offers global managers a flexible, turnkey solution for launching SFDR-compliant fund products for European and global distribution. Managers can take advantage of an established fund platform with regulatory approval, legal agreements and service providers already in place, and are also afforded access to the Maples Group’s best in class sustainability advisory, fund management, fund distribution, operational and reporting solutions.

4) Strong regulatory capability: A third-party AIFM provides a full suite of services to support all aspects of a fund’s EU compliance requirements. It allows investment managers to benefit from the AIFM’s experience and expertise in European jurisdictions, as well as the scale that can lead to cost savings.
Some key functions that AIFMs perform include:
• Capital and financial management oversight;
• Distribution oversight and support;
• Fund risk management oversight;
• Investment management oversight;
• Operational risk oversight;
• Regulatory compliance and reporting, including risk reporting, Annex IV reporting and EMIR reconciliations;
• Liquidity stress testing.

5) Strong client service: A dedicated client service model in which clients interface with one key contact or team who facilitate activities across functional teams, ensuring a comprehensive service and an enhanced client experience.

6) Broad service offering: When an AIFM is part of a wider organisation that offers complementary solutions such as legal services, fund administration and fiduciary services, managers can avail of a comprehensive offering that can grow and develop alongside their fund. Having multiple service providers under one group allows for a simpler, more efficient onboarding experience and provides for an all-round better client experience, with proactive and nimble support.

The Maples Group Difference

Maples Fund Management Ireland is a fully authorised AIFM and UCITS Management Company, regulated by the Central Bank of Ireland, providing a full suite of services in Ireland and Luxembourg.

Beyond our management company offering, the Maples Group also encompasses legal, fund administration, fiduciary services and regulatory compliance services.

Our Sustainable Investing Group

The Maples Group is committed to the goals and initiatives of sustainability. We are highly focused on the impact that ESG and responsible investment is having on the financial services sector, as well as the opportunities that it presents. The establishment of the Maples Sustainability Platform has been a strategic objective of the Sustainable Investing Group, which was formed help our international clients and institutional investors to achieve their sustainability objectives at both an investment and operational level. We have consistently developed our offering in the sustainability space, developing product solutions for our fund manager clients and institutional investors that complement our existing legal, fund, fiduciary, regulatory compliance and entity formation and management services.

The Maples Group services many of the world’s largest asset managers and fund structures, drawing on a combined industry professionals of more than 2,800 worldwide, with a comprehensive array of funds and asset management experience and expertise.

In addition to the broad complement of management company solutions, the Maples Group also provides services including advising on fund structures for raising assets to delivering sustainability / SFDR compliance tools, fund administration, anti-money laundering / know-your-client compliance services, company secretarial and board support, entity formation, and global registration services. Backed by close to 60 years of experience and with support across multiple time zones, the Maples Group brings stability, round-the-clock service and global experience to the client experience.

The European market offers great opportunity for growth and access to additional sources of capital for non-European managers. Having the right partner such as Maples Fund Management can make this move a smooth journey to success.