Navigating AIFMD Complexities for Non-EEA Funds
The Alternative Investment Fund Managers Directive (“AIFMD”) is a well-established, harmonised legal framework that applies to European Economic Area1 (“EEA”) domiciled fund managers of alternative investment funds (“AIFs”), and non-EEA domiciled fund managers that manage and / or market AIFs in the EEA.
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With over 3,000 institutional investors and over €700 billion in AIFs under management2, Europe is the second largest alternative investment market globally after North America, making it very attractive to US managers seeking to meaningfully expand their business.
Accessing European capital from outside the EEA requires expertise in understanding and complying with certain in-scope AIFMD obligations, which are primarily designed to ensure a minimum level of transparency and investor protection. Such obligations have evolved in recent years amidst the growth in complexity of the European regulatory landscape and can often be a resource drain across legal, compliance, operations and investor relations teams for non-EEA fund managers.
What do I need to know about Non-EEA AIFMs?
Non-EEA domiciled alternative investment fund managers (“non-EEA AIFMs”) are not subject to ongoing supervision by EEA competent authorities and are unable to avail of all the benefits offered by AIFMD, in particular the ability to market an EEA AIF on a pan-European basis under a marketing passport. Instead, marketing of an AIF in the EEA by a non-EEA AIFM will be subject to Article 42 of AIFMD as implemented in each relevant member state, i.e. national private placement regimes (“NPPR”).
As non-EEA AIFMs typically manage non-EEA AIFs, such as US and / or Cayman funds, the absence of a marketing passport is rarely deemed a significant issue for their business – we consider it to be an acceptable “trade-off” for US managers without an EEA footprint initially exploring wider sales and distribution channels. Ultimately, with the right guidance and support and the skill to execute, NPPR can provide cost and operationally efficient access to EEA investors in a number of key European jurisdictions.
In addition to ongoing compliance obligations in respect of marketing activities in the EEA, non-EEA AIFMs will be at least subject to certain periodic reporting requirements in respect of the relevant AIF, commonly known as “Annex IV”, to the EEA competent authorities that the fund is private placed.
How can the Maples Group help?
The Maples Group offer leading AIFM solutions and regulatory services for managers seeking access to European capital. These are supported by the Group’s extensive expertise in global alternative investments, international compliance and European financial market regulation. A range of services can be tailored to facilitate scaled access to Europe that complements the growth in business of a non-EEA manager, including AIFM services (EEA and non-EEA), global registration services and an EEA domiciled fund platform service. For the purposes of this article, we focus on our non-EEA AIFM, Ceres Fund Management Limited (“Ceres”), and related services.
What is Ceres?
Ceres is our non-EEA AIFM AIFMD manager solution. Ceres is registered with the Cayman Islands Monetary Authority under the Securities Investment Business Act and can be appointed as AIFM to AIFs domiciled outside the EEA, such as Cayman Islands funds.
Ceres is a fully staffed and resourced non-EEA AIFM, drawing on an experienced team of investment and risk management professionals, with in-depth knowledge of finance, operational monitoring, regulatory and compliance matters.
Established in 2013, since the implementation of the AIFMD, Ceres has experience working with a broad range of fund structures and asset classes and has continually enhanced its operations with the institutional infrastructure and global expertise of the Maples Group. Understanding that a ‘one-size fits all’ approach to fund structuring and capital raising is not necessarily optimal amid the complexities of European fund regulation, Ceres’ inherent flexibility ensures managers can gain extensive operational efficiencies for their unique fund structures.
How Ceres can help?
Fund managers seeking to take advantage of available private placement regimes in one or more EEA member states want a service that can be tailored from targeted strategic support to full scope comprehensive service to meet the relevant local obligations and their business needs. Ceres and its affiliates in the Maples Group can assist as follows:
Strategic Support
Annex IV Reporting: Provide an integrated online portal with a comprehensive straight-through Annex IV reporting solution including:
- integration to capture accounting and portfolio data;
- integration with market data vendors to enrich data;
- access to populate static and qualitative data, and parameters that drive risk calculations;
- a calculation engine that drives reporting output;
- secure access for multiple users;
- full audit trail to ensure a controlled and efficient reporting process; and
- an interactive filing interface for reporting in relevant jurisdictions.
Depository Lite Services: Meet specific European member state requirements (e.g. Germany and Denmark) through a service that includes:
- cash flow monitoring of a fund’s bank accounts and reconciliation of all cash movements;
- safekeeping a fund’s financial instruments in custody and verifying its ownership of assets;
- oversight of subscriptions and redemptions in a fund; and
- ensuring a fund’s income is applied in accordance with the national law and the fund’s rules.
Global Registration Services: Application to the local regulator(s) to register the fund to permit marketing activities, preparation of necessary supplementary AIFMD disclosures, assistance with payment of regulator levies, and periodic filings for subsequent notifiable events.
A Full-Service Solution
The Maples Group brings an in-depth knowledge of a wide range of investment vehicles and structures, including regulatory and investor requirements, with access to an extensive global network. In addition to the non-EEA AIFM services provided through Ceres, we also provide the following services:
Regulatory & Compliance Services: Facilitate client compliance with FATCA including applying for a Global Intermediary Identification Number, classification of account holders and accounts, remediation of reportable accounts and ongoing monitoring of FATCA compliance. We can also provide a qualified, named anti-money laundering (“AML”) professional to act as money laundering reporting officer (“MLRO”), Deputy MLRO or AML compliance officer for Cayman Islands vehicles.
Company Secretarial & Board Support Services: Act as a named company secretary for Cayman Islands domiciled entities. We can also provide meeting facilities, initiate and attend board of director and annual general meetings, and prepare and distribute agendas, board packs, minutes and action items to relevant parties.
Directorship Services: Provide independent, non-executive directors based in the Cayman Islands with appropriate experience in investment funds, structured finance vehicles, insurance and corporate entities.
EU AIFM / Management Company Services
Fund sponsors seeking to avail of the AIFMD marketing passport across the EEA can opt to establish an EEA and appoint an EU AIFM. The Maples Group’s EU AIFM (which is also authorised as a UCITS management company), MPMF Fund Management (Ireland) Limited (“MPMF”) provides a hosted model whereby it can be appointed to an AIF and be responsible for the main collective portfolio management of the fund, marketing and ancillary regulated functions. Further information on MPMF can be obtained here.
1Member states of the European Union, and Iceland, Liechtenstein and Norway.
