AIFMD brand will take less time to emerge than UCITS
An AIFMD (Alternative Investment Fund Managers Directive) brand akin to UCITS could emerge in the long-term although it will take less time to develop than UCITS, according to Multifonds.
“There is a distinct possibility that we could see the emergence and development of an AIFMD brand not too dissimilar to that of UCITS. While it is hard to put a specific time-frame on the brand’s emergence, I believe that while it will likely take a few iterations, it may take less time to develop than UCITS which took 25 years to obtain the status it has today,” said Alan Raftery, manager for client and business development at Multifonds in Dublin.
Many fund managers are now recognising the distribution benefits AIFMD affords, according to a survey by Multifonds. Eighty-two per-cent of respondents said that non-EU managers would likely set up European operations to take advantage of AIFMD. Likewise, fewer market participants said there will be exodus of managers from Europe as a result of the high costs AIFMD entails. Fifty-three per-cent said EU managers would leave Europe to set up offshore structures, as opposed to 77% in 2013.
A survey of fund managers in 2013 by BNY Mellon Alternative Investment Services (AIS) found 54% of respondents expected to see an increase in the amount of capital invested in alternative funds due to AIFMD. Fund managers cited their ability to distribute their products more widely as being a key driver for this growth.
One of the biggest draws of AIFMD compliance is the prospect of an AIFMD passport. Seventy-two per-cent of respondents to the Multifonds’ survey said this would help them gather assets The passport is likely to benefit fund domiciles such as Luxembourg and Ireland, as firms grow out their onshore businesses. “The passport will make it easier to market across the EU in a cost-effective manner. It is an exciting opportunity for the industry,” said Raftery.
Whether or not AIFMs attain a global brand status like UCITS or remain strictly European remains yet to be seen. Raftery is optimistic though. “We are seeing some US managers dip their toes in the water with AIFMD and if they are successful at raising meaningful assets, more could go down that route,” he said.
Nonetheless, there are cost challenges. BNY Mellon estimates the initial costs of establishing an AIFMD compliant fund will be between $300,000 and $1 million for the average manager. “Indicators point to the previously anticipated high levels of cost coming down, specifically depositary costs, and in time the cost of launching an AIFM could be comparable to that of a UCITS,” said Raftery.