The European Commission’s acting head of asset management gave UK managers without a European presence a clue as to how to market their funds to the bloc’s investors in a cautious speech at a London conference last week.
Speaking at the 7th Annual Private Equity Forum on Tuesday, Sven Gentner said that while access is dependent on the future relationship between the UK and the EU, “national private placement regimes are operating well and will remain in place for the foreseeable future for non-EU managers.”
He extinguished any fading hope that Alternative Investment Fund Manager Directive Passports – which would allow managers in qualifying countries automatic access to EU investors – will be issued in time for Brexit, saying that the European Commission’s immediate focus is on smoothing the current roadblocks to the “efficient operation” of fund management across the EU single market. Only after this – a process that is likely to take at least a year – will it turn its attention to the passporting system, he said.
In other words, UK-only managers will have to apply to the regulator in each country they wish to access for permission to market their funds, as is the case for their non-EU peers. This means marketing to investors in multiple jurisdictions is likely to be time-consuming because managers will have to apply to do so via an NPPR in each country.
But it’s not all bad news, particularly for those only looking to access a few markets. Many non-EU fund managers have found NPPRs to be “surprisingly easy” to navigate, according to one general counsel, especially when compared with the experience of managers that have chosen the alternative route – establishing an Alternative Investment Fund Manager – to access European investors.
This is because in addition to meeting the requirements of the AIFMD and completing the associated set-up and maintenance administration, managers taking the latter path still must consider local rules when approaching investors as each country has interpreted AIFMD marketing requirements slightly differently. It is these inconsistencies that the European Commission plans to tackle over the coming year.
While managers marketing via an NPPR still have to be familiar with the nuances of the jurisdiction in which they want to access investors, the application process is considered simpler and most regulators are perceived to be very open to non-EU fund managers.
The ultimate solution of course depends on the outcome of the Brexit negotiations, and a lot could change over the course of the next 12 months. Losing automatic access to EU investors and going down the NPPR route may not be ideal – particularly for managers with a wide geographic reach – but managers looking for investors in a few countries can at least take some comfort from the fact the system is not a huge headache.