AIFMD – Alternative Investment Fund Managers Directive
AIFMD, which stands for the Alternative Investment Fund Managers Directive, is a European Union (EU) regulation that was introduced to regulate and harmonize the activities of alternative investment fund managers (AIFMs) within the EU.
AIFMD refers collectively to the Alternative Investment Funds Managers Directors Directive (Directive 2011/61/EU) and the Commission Delegated Regulation (EU) No 231/2013. Directive 2011/61/EU was transposed into Irish law under the European Union (Alternative Investment Fund Managers) Regulations 2013 (the AIFM Regulations), on 16 July 2013 and aimed to create a framework for the management and marketing of alternative investment funds (AIFs) across the EU1. The AIFM Regulations are now the relevant point of reference for understanding the relevant law.
Here’s a more detailed definition of AIFMD:
The Alternative Investment Fund Managers Directive (AIFMD) is an EU regulatory framework that governs the management and marketing of alternative investment funds (AIFs) in the European Union. AIFs are investment funds that do not fall under the scope of the UCITS (Undertakings for Collective Investment in Transferable Securities) Directive and can include hedge funds, private equity funds, real estate funds, and other non-traditional investment vehicles.
AIFMD is a significant piece of financial regulation within the EU, and it applies to both EU-based AIFMs managing AIFs as well as non-EU AIFMs seeking to market and manage AIFs in the EU. It has had a notable impact on the regulation and operation of alternative investment funds in the region, promoting transparency, investor protection, and cross-border activities within the EU.
Key elements of AIFMD include:
- Regulation of AIFMs: AIFMD imposes requirements on entities that manage AIFs, including fund managers, to ensure proper governance, risk management, and transparency in their operations.
- Passporting: AIFMD introduced a passporting system that allows AIFMs to market and manage AIFs across EU member states with a single authorization from their home country’s regulatory authority. This streamlined cross-border operations within the EU.
- Reporting and Transparency: AIFMs are required to provide detailed information to regulators and investors about the funds they manage, including risk management procedures, fees, and leverage.
- Delegation: AIFMD allows AIFMs to delegate certain functions to third parties, but they remain responsible for the activities performed by these delegates.
- Investor Protection: AIFMD includes provisions aimed at protecting investors, including disclosure requirements and restrictions on marketing AIFs to retail investors.
- Valuation and Asset Verification: AIFMD mandates that AIFs value their assets using independent valuers and verifies the value of their assets regularly.
- Compensation: AIFMD sets requirements for the alignment of AIFM and AIF compensation practices with the long-term interests of investors.
Legislation relevant to the regulation of AIFMs is listed below. Where the links provided are to www.irishstatutebook.ie users should note the disclaimer on the Irish Statute Book website2.
Statutory Instruments
