Since mid-2013, EU law has provided that an entity which either manages an EU based non-UCITS investment fund or which markets a non-UCITS investment fund within the EU requires an authorisation to do so.
Such an entity is known as an "AIFM" (an alternative investment fund manager) and the non-UCITS funds which it manages or markets are known as "AIFs" (alternative investment funds).
The authorisation that such an AIFM requires is one under Directive 2011/61/EU (the "Directive" or "AIFMD") as implemented in local law via local domestic legislation which in Ireland is the European Union (Alternative Investment Fund Managers) Regulations, 2013 (the "AIFM Regulations"), and Delegated Regulation EU 231/2013 (the "Level 2 Regulations"). These are supplemented by the Irish Central Bank's AIF Rulebook and related Guidance.
Ireland is not only one of Europe's leading AIF domiciles but is also home to many AIFMs, MiFID firms, UCITS ManCos and the new breed of dual AIFM/UCITS ManCo now referred to as the "Super ManCo".
In this short "How to" guide, we aim to give you an overview of what an AIFM can do, of who can be an AIFM and of the applicable Irish regulatory regime.
You are likely to be interested in this guide if you are:
- looking to set up and manage your own alternative funds in Europe; or
- looking to find a suitable EU jurisdiction from which to co-ordinate EU wide fund management activities; or
- considering your post-Brexit options, including for MiFID firms; or
- just looking to compare a stand-alone AIFM against third party AIFM or platform options.
1. What is an AIFM and what can it do?
In the following sections we summarise what an AIFM is and what it can do.
Note that there are several different types of AIFMs, each with different capacities. In some cases, they are set up by alternative managers to manage specific fund products. In other cases, they are designed to also manage a range of non-fund clients. Others may be set up to provide AIF management solutions to those investment managers who do not wish to have their own AIFM, for cost or other reasons.
1.1 What is an AIFM?
At its most basic, an "AIFM" is a legal person whose regular business is "managing" one or more "AIFs". In Ireland, the legal person will be a corporate entity in the form of either a limited company, a designated activity company, a PLC or an ICAV.
(i) External v. Internal
The AIFM can either be:
- an external manager appointed by the AIF (or on behalf of the AIF) which is responsible for managing the AIF (referred to as an "external AIFM"); or
- the AIF (i.e. the fund) itself (referred to as an "internally managed AIF").
An internally managed AIF type AIFM can also be described as a self-managed fund. It manages itself and cannot manage other AIFs nor provide other services such as individual portfolio management.
An external AIFM has to perform core investment management functions but can also (depending on its authorisation) manage UCITS and / or to engage in managing / advising non-fund clients.
(ii) Authorised v. Registered
If you are an AIFM whose total AIF assets under management are below EUR 100 million or, in the case of closed-ended (5 year) unleveraged AIFs, EUR 500 million, then you can be a registered AIFM. That means that you are not subject to the full rigours of the AIFMD regime but it also means that you cannot avail of the cross-border management or marketing passports.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.