Risk management, cost and changes in fund structuring are the key issues for managers and investors arising from the initial impact of the Alternative Investment Fund Managers Directive (AIFMD), according to Crestbridge.
Launched at a special Crestbridge Forum, attended by over 100 highly influential fund sector specialists in Luxembourg on 2 October, the IFI Global ‘Impact of AIFMD’ report examined opinions on the impact of the introduction of the Directive in the last few weeks before the transition period for its implementation expired.
Featuring a dynamic line-up of panellists from Luxembourg and abroad, the event explored the initial findings from the study, which were presented by Simon Osborn (CEO, IFI Global) and discussed by panellists including Graham Goodhew (Director, JP Morgan Asset Management (Europe)), Daniela Klasén-Martin (Managing Director, Crestbridge Luxembourg), Jérôme Wigny (Partner, EHP), Marc Kramer, (Partner, Curtis, Mallet-Prevost, Colt & Mosle) and Lisa Backes (Managing Director, YCAP Asset Management).
The main findings of the report, which were discussed by panellists, included:
• AIFMD is acting as a catalyst for substantial changes to the structure of Europe’s alternative fund industry, and will initiate much creativity in European fund structuring but will help bring about the end of the era of fund product innovation
• The European alternative fund industry will become more institutionalised than it is today, with fewer independent alternative managers with AUMs below $1 billion left in the EU by 2020
• There will be a considerable growth in manager alliances, third party platforms and related activity to obtain distribution
• AIFMD’s risk management provisions will not be much, or perhaps even any, benefit to investors
• AIFMD means a dramatic increase in managers’ costs but the passport will prove to be of little to no benefit for the overwhelming majority of real alternative managers
During the event, the evolution of risk management as a consequence of the AIFMD was a central theme discussed by panellists that prompted a variety of views, whilst they were surprised that the fund managers surveyed in the report did not offer a view that the AIFMD would help investors – parallels were made to reactions to the introduction of UCITS, of which initially people had been critical and dismissive.
Graeme McArthur, CEO, Crestbridge, says: “The goal of this research was to identify key issues arising from the introduction of the Directive and the sample included 73 alternative managers who in total were managing in excess of USD2.5 Trillion. Crestbridge strives to be at the forefront of the developments of the Directive and we want to help ensure the alternatives industry successfully adopts the new regulations with minimum impact on investors and managers. The range of findings in this research and the discussion in our forum were extremely helpful in this regard.”
Daniela Klasén-Martin, managing director of Crestbridge Luxembourg, says: “The positive response to the role of Third Party ManCos is to be welcomed, whilst I believe there is confusion between risk measurement and risk management with asset managers focusing on the former to the detriment of the latter. It is the role of the independent risk management function to ensure a shift of focus, which investors will benefit from in the long term.
“In addition, it is clear that access to the passport is only as valuable as the inter-EU investment opportunities that exist, and in the experience of our teams in both Luxembourg and Jersey, distribution discussions are invariably global. For a passport to be worthwhile, it will be essential to be able to access well established distribution channels. It’s interesting also that most boutique managers, according to the report, cannot see any real advantages to AIFMD, with a number saying that they might move offices to centres outside Europe.”
