AIFMD

Origins and aims of AIFMD

Managers of Alternative Investment Funds (AIFMs) are responsible for the management of over EUR5 trillion of assets across the European Union*. They manage further significant pools of assets via global fund ranges marketed to European sophisticated investors.

AIFMD captures a very broad spectrum of investment funds and asset classes as any investment fund marketed to non-retail investors in Europe is likely to be in scope. AIFMs therefore account for significant amounts of trading in markets for financial instruments, and can exercise an important influence on markets and companies in which they invest.

The aim of the Alternative Investment Funds Directive (AIFMD), agreed on 8 June 2011, was to establish common requirements governing the authorisation, operations and supervision of AIFMs in order to provide a coherent approach to the related risks and their impact on investors and markets in the European Union. AIFMD was implemented in July 2014.

AIFMD allows for a passporting regime for non-EU AIFMs which has not yet been activated.

AIFMD requires the European Commission to review the application and the scope of AIFMD. On 10 June 2020, the European Commission published its Report on its review of AIFMD, and has now published a detailed consultation paper which closes in Jan 2021.

More information on the AIFMD can be found in the European Commission’s FAQs and additionally, in ESMA’s Questions and Answers.

AIFMD in the UK following Brexit

The European Union (Withdrawal) Act 2018 (EUWA) creates a new body of UK law, known as retained EU law, based on the EU law that applied in the UK on 31 December 2020. That retained law may have been amended under EUWA powers to ensure that it operates appropriately after Brexit. These amendments are not intended to make policy changes, other than to reflect the UK’s new position outside the EU, and to smooth the transition to this situation. As a result, from January 2021, there will be an EU version of AIFMD and a UK version of AIFMD containing substantially the same rights and obligations.

Whilst the substance of AIFMD obligations are largely unchanged as a result of onshoring in the UK, a range of practical impacts on AIFMD provisions arise as a result of the UK’s exit from the EU.

In particular, since the UK will become non-EU (“third”) country, a UK AIFM will become a non-EU AIFM for EU AIFMD purposes. As such, those managers will no longer benefit from the EU AIFMD marketing passporting regime. Similarly, non-UK EU managers will not automatically be permitted to market their funds in the UK, although the UK FCA has implemented a temporary permissions regime for this purpose.

The issues arising in relation to AIFMD as a result of Brexit have been the subject of much discussion in the press, by regulators and by trade associations. HSBC Global Banking & Markets has been working to establish arrangements to ensure we continue to service our clients through Brexit and beyond. For specific questions about your relationship and transactions with HSBC please speak to your usual HSBC contact in the first instance.

 

* ESMA Annual Statistical Report, EU Alternative Investment Funds, 10 January 2020.

 

Last updated: 21 December 2020