24 june 2019€¦ · key investment trends european market 1. multi-asset is a significant...
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2irishfunds.ie
24 June 2019
Irish Funds Hong Kong Seminar
irishfunds.ie
Event Host
Conor O’Mara
Welcome Remarks
Managing Director, Jefferies
Paul Moloney
Partner, Eversheds Sutherland
Distribution Update
Eversheds Sutherland | June 2019 |
European Distribution Overview
6
Based on the presentation given by Paul Hefferman, HSBC
Eversheds Sutherland | June 2019 |
Key Investment Trends
European Market
1. Multi-asset is a significant investment space and permeates those individual, country
asset class preferences
– Funds are either being marketed as a component of a traditional or alternative, multi-
asset discretionary portfolio and/or on a stand-alone basis
– Significant rise in the number of multi-manager, fund-of-funds and risk-rated outcome
fund launches within the industry to meet investor demand in a post-MIFID II
environment where rebates are no longer the norm
2. Fund selectors and other institutional fund buyers are key
– They account for more than 90% of the European asset pool invested in funds
– It’s all about business-to-business in terms of their underlying buying behaviors
3. B2B investment fund platforms are important access points
– Asset under administration on B2B platforms reached €2.4 trillion at the end of 2017
– Expected to grow to €4.3 trillion by 2021 (45% of total assets currently)
– This growth is coupled with a wave of rapid consolidation
Eversheds Sutherland | June 2019 |
Key European Distribution Channels
Source: Irish Funds 2018
Eversheds Sutherland | June 2019 |
DEFINITIONS (eVestment Advantage Viewership Report – December 2018)
• Top by Increase: products, firms, and universes with the largest increase in the proportion of views they captured in the most recent month compared to the proportion of views they received in the
prior six months
• Top Viewed: the most viewed products, firms, and universes by institutional investors and consultants in the most recent month
• Top by Average Views Per Product : universes with the highest average number of views per product; universes must have more than one product reviewed for inclusion
Institutional Insights- UK Investors &
Consultants
Source: Irish Funds 2018
Eversheds Sutherland | June 2019 |
Institutional Insights - Europe ex UK Investors &
Consultants
DEFINITIONS (eVestment Advantage Viewership Report – December 2018)
• Top by Increase: products, firms, and universes with the largest increase in the proportion of views they captured in the most recent month compared to the proportion of views they received in the prior six months
• Top Viewed: the most viewed products, firms, and universes by institutional investors and consultants in the most recent month
• Top by Average Views Per Product : universes with the highest average number of views per product; universes must have more than one product reviewed for inclusion
Source: Irish Funds 2018
Eversheds Sutherland | June 2019 |
Sustainable & Responsible Investment -
Several Approaches
Approach Concept
Sustainable
(‘best-in-class’)Selection of the best companies/issuers in their sector with regard to sustainable development
ThematicSelection of the best companies/issuers according to a specific sustainable development theme (e.g.
renewable energies, eater treatment, etc.)
Engagement
Voting at general meetings….Dialogue with companies….Shareholder action/lobbying…
Engagement adds an extra overlay to other sustainable & responsible investment approaches or
traditional management
NormativeSelection of companies/issuers according to their observance of the main international treaties (e.g.
Conventions of the International Labour Organisation, etc.)
EthicalExclusion of companies/issuers involved in controversial activities (e.g. alcohol,
gambling, animal testing, etc.)
Solidarity
Solidarity Funds: Investment in solidarity projects / Microcredit funds
Sharing Funds: Payment of all of some of the income / management fees / subscription fees to
charitable organsiations
Eversheds Sutherland | June 2019 |
Source: EFAMA International Statistical Release – Q3 2018
Global Industry (Q3 – 2018)
RESTRICTED
19.9
17.2
0.1
1.5
11.17.6
42.7
Bond Balanced-Mixed
Guaranteed Real Estate
Money Market Other
Equity
Worldwide Regulated Open End Funds Net Assets – By Asset Class
Worldwide regulated open-ended fund assets increased by 2.1% to
€46.64 trillion in Q3 2018
Worldwide net cash flow to all funds amounted to €169 billion
Americas, $25.13Europe,
$15.58
Asia and Pacific, $5.75
Africa, $0.17
Americas Europe Asia and Pacific Africa
$46.64
Trillion
Worldwide Funds Net Assets – By Geography
Eversheds Sutherland | June 2019|
European Asset Management Industry – Q3
2018
13
LatAm
3%
Other
7%
APAC
13%
€16 Trillion Industry
UCITS €10 Trillion AIF €6 Trillion
European Managers – 56% of AssetsUS Managers
30% of Assets
ROW – 14%
of Assets
Cross Border - Sourced 77% of Assets from Europe
Industry Scale
Product Breakdown
Manager Origin
Source Of Flows
Italy
23%Switzerland
17%
Germany
12%
UK
11%
Spain
7%
Rest
30%
Europe 77%Global Breakdown
European Breakdown
Distribution1994 269 funds registered for sale in 5 or More countries
201812,607 funds registered for sale in 5 or
More countries
0.00 1.00 2.00 3.00 4.00 5.00 6.00
Ireland
Luxembourg
Germany
France
Rest of Europe
European Breakout
UCITS AIF
Irish Investment Funds Industry?
• Over 900 fund managers from 50+ countries
• Servicing €4.4 Trillion in total AuA (€2.4 Trillion in Irish Domiciled)
• Distribution to 70 Countries
• 30 languages and 28 currencies fully supported.
• Look at some of the names that are already here
Eversheds Sutherland | June 2019|
Where is the money coming from?
14
- Biggest Outflows in Q3 2018
- Europe – France (-€8.3bn), UK (€-5.05bn)
- Americas – Argentina (-€4.53bn), Chile (-€2.9bn)
- Asia – China (-€35.73), India (-€10.83bn)
- Biggest Inflows in Q3 2018
- Europe – Germany (€19.79bn), Ireland (€18.73bn)
- Americas – US (€113.49)
- Asia – Japan(€35.23)
€0
€50,000
€100,000
€150,000
€200,000
€250,000
€300,000
2017 Q1 2017 Q2 2017 Q3 2017 Q4
€145,475 €152,274
€215,885
€271,159
€115,760
€137,876
€181,121
€98,057
€247,731€234,361 €238,818
€178,281
MIL
LIO
NS
OF
EU
RO
Net Sales Globally 2017
United states Asia & Pacific Europe
-€20,000
€0
€20,000
€40,000
€60,000
€80,000
€100,000
2018 Q1 2018 Q2 2018 Q3
€53,942
€26,628€18,763
€76,602
€14,742€11,365
€89,083
-€16,229
€15,277
European Flows - 2018 YTD
Ireland Luxembourg Rest of Europe
Eversheds Sutherland | June 2019|
Largest Promoters of Irish Domiciled Product
15
Top 25 Irish Domiciled Structures
Scheme & Umbrella Name Promoter/Initiator Legal Status US$ TNAV 30-Jun-
18
PIMCO Funds: Global Investors Series plc PIMCO UCITS $159,958,046,795
Institutional Cash Series plc Blackrock UCITS $144,637,525,241
Goldman Sachs Funds plc Goldman Sachs UCITS $103,663,133,447
Vanguard Investment Series plc Vanguard Group UCITS $86,790,599,272
iShares plc Blackrock UCITS - ETF $82,376,343,878
LDI Solutions Plus ICAV Insight Investment AIF $62,679,291,437
iShares III plc Blackrock UCITS - ETF $58,537,128,560
LGIM Liquidity Funds plc Legal & General UCITS $47,538,488,796
iShares VII plc Blackrock UCITS - ETF $47,454,167,249
iShares II plc Blackrock UCITS - ETF $46,470,980,400
LGIM (Ireland) Risk Management Solutions plc Legal & General AIF $43,467,991,062
Insight Liquidity Funds plc Insight Investment UCITS $43,134,876,328
Vanguard Funds plc Vanguard Group UCITS - ETF $38,934,790,846
BlackRock Index Selection Fund Blackrock UCITS $38,906,407,360
HSBC Global Liquidity Funds plc HSBC UCITS $37,715,583,839
Aviva Investors Liquidity Funds plc Aviva Investors UCITS $35,892,291,838
MGI Funds plc Mercer Global Investments UCITS $34,407,502,530
Mercer QIF Fund plc Mercer Global Investments AIF $32,888,771,283
State Street Global Advisors Liquidity plc State Street UCITS $31,368,782,483
Marshall Wace Investment Strategies Marshall Wace AIF $29,342,963,667
Legg Mason Global Funds plc Legg Mason Group UCITS $29,146,420,764
Northern Trust Global Funds plc Northern Trust UCITS $26,582,716,005
GAM Star Fund plc GAM UCITS $26,318,975,214
Mercer QIF CCF Mercer Global Investments AIF -CCF $25,457,208,599
Standard Life Investments Liquidity Fund plc Standard Life Aberdeen UCITS $25,258,024,366
Top 25 Promoters with Irish Domiciled Product
Promoter US$ TNAV 30-Jun-18
Blackrock $562,392,230,024
PIMCO $179,133,996,236
Vanguard Group $132,158,412,043
Insight Investment $128,076,092,017
Goldman Sachs $111,298,486,310
Mercer Global Investments $97,835,737,881
Legal & General $97,606,542,606
State Street $80,610,527,811
HSBC $45,157,415,929
Deutsche Asset Management $44,001,427,626
Russell Investments $43,158,218,882
Northern Trust $41,456,899,657
Mediolanum $41,062,472,622
Aviva Investors $35,892,291,838
Marshall Wace $34,708,933,708
Standard Life Aberdeen $34,612,212,175
Barings $34,019,126,034
Invesco $32,982,306,761
Legg Mason Group $32,053,920,268
UBS $28,378,112,686
GAM $26,396,638,922
M&G $25,842,034,909
Hewitt Risk Management Services $25,503,767,099
Old Mutual $25,337,781,101
Neuberger Berman $25,000,141,999
Source: Monetary Ireland Fund Report 2018
Eversheds Sutherland | June 2019|
Greater China – Promoters in Ireland
Source: Monterey Ireland Fund Report 2018 (June 18 Data) – Promoters/Initiators domiciled in Greater China
Eversheds Sutherland | June 2019|
What Investors Want? – Alternatives?
17
• Alternatives are rapidly becoming mainstream, with over $8trillion in Alternative assets Globally
• PwC’s 2017 report: “Asset & Wealth Management Revolution: Embracing Exponential Change” -
Estimate that Alternatives will account for 15% of Global AUM by the year 2025 (Reference Graph)
• Investment in multiple alternative asset classes is now the norm for institutional Investors
• Funds are moving to onshore jurisdictions with strong tax transparency and regulatory infrastructure
– Ireland has been a strong recipient of open ended liquid funds holding liquid strategies like hedge
funds and liquid alternatives.
– Luxembourg tends to be the go to for illiquid funds (closed ended commit and contribute fund
structures), such as buy and hold private equity and real assets including real estate and
infrastructure.
0
10
20
30
2018 2025
PR
OJE
CT
ED
AU
M
IN
TR
ILL
ION
S
YEAR
Eversheds Sutherland | June 2019 |
UCITS
18Ref: Irish Funds
Passporting
Eversheds Sutherland | June 2019 |
Notification procedure
AIFMDPassporting
• Status of Fund: Standalone, sub-fund or umbrella
• Name of the fund and domicile
• Following details of the AIFM:
– Management of AIFs (portfolio management & risk management)
– Management of portfolios of investments, including those owned by pension funds and institutions for occupational retirement provision in accordance with Article 19(1) of Directive 2003/41/EC, in accordance with mandates given by investors on a discretionary, client-by-client basis.
– Investment Advice
– Safekeeping and administration in relation to units of collective investment undertakings
– Reception and transmission of orders in relation to financial instruments
19
Eversheds Sutherland | June 2019 |
Fund Raising in Europe
20
Eversheds Sutherland | June 2019 |
Overview of the Alternative Investment Managers’
Directive – A Distribution Perspective
• AIFMD provides a framework for harmonising the management
and marketing of Alternative Investment Funds (“AIFs”) (i.e. all
“collective investment undertakings” other than EU UCITS
funds) in the European Union (“EU”).
• The options for non-EU AIFMs raising capital from EU
investors are:
– Rely on “Reverse Solicitation”;
– Register country by country under the national private placement rules
(“NPPRs”); or
– Set up an EU AIF and an EU manager in order to obtain the right to
“passport” into all 28 EU jurisdictions Engage a 3rd party AIF and/or
AIFM ‘platform’ in order to obtain the right to “passport” in all 28 EU
jurisdictions.
– Engage a 3rd party AIF and/or AIFM ‘platform’ in order to obtain the
right to “passport” in all 28 EU jurisdictions.
21
Eversheds Sutherland | June 2019 |
Reverse Solicitation
• In EU, reverse solicitation (or reverse enquiry) is not
unanimously defined, nor is there a detailed guidance in
relation to this area.
• However it is not considered “marketing” under AIFMD.
Responding to unsolicited enquiries from investors in EU
and/or following up with information memoranda and
subscription documents will not trigger an obligation to register
under AIFMD, in contrast with active “marketing.
• Examples for some jurisdictions’ guidance on when reverse
solicitation can be relied on include when the solicitation is
specific to the fund in question, rather than a general approach
to the manager. Note that however different EU states may
have different standards towards the acceptability of reverse
solicitation.
22
Eversheds Sutherland | June 2019 |
Reverse Solicitation• ESMA recently published a proposal for a new Directive:
– unless a fund is registered in the relevant jurisdiction, any investor who is approached on
a ‘pre-marketing basis’ may never be admitted to any fund of that manager which has the
same or a similar investment strategy.
– This would only apply to EU AIFMs but it would be expected that many EU states would
apply a similar interpretation to non-EU AIFMs also.
• Given its limited scope, EU regulators will not tolerate a situation where the regulatory
protections they have implemented are being ignored.
• Reverse solicitation requires that there has been no direct or indirect solicitation by or on
behalf of the AIFM. Procedures (e.g. materials on website) must be in place and records
should be kept to ensure:
– promotion has not be taken in a way which would trigger an enquiry
– how the investors first contacted the AIFMs and how they came to make an investment in certain funds are
properly recorded, in response to EU regulators’ increasing concerns
– investors are asked to sign a declaration that the investment was made on foot of an unsolicited enquiry from
them.
• Reverse solicitation therefore has significant limitations, is not a ‘marketing strategy’ and
should be considered on a case by case basis. The evidential burden will be on the AIFM
and there are criminal sanctions and fines for non-compliance and investors effectively have
a “free option” if they were illegally approached and lost money.
23
Eversheds Sutherland | June 2019 |
Reverse Solicitation
24
Country Official guidance Must be Product
specific?
Other
marketing
allowed?
Separateenquiry for each
transaction
Significant problems
Belgium No Yes Yes Yes
Denmark No No No No
Finland No No No Yes
Germany Yes Yes Yes Yes
Netherlands No Yes Yes Yes
Spain No No No No
Sweden No Yes Yes No
Proceed with caution, restrictions
apply
Austria No Yes Yes No
France Yes Yes Yes No
Norway No Yes Yes No
SwitzerlandYes Yes Yes No
No issues
Ireland No No Yes No
Italy No No Yes No
Luxembourg No No Yes No
UK Yes No Yes No
Eversheds Sutherland | June 2019 |
Pre-Marketing
25
• “Pre-marketing” is generally considered to refer to activities
which fall short of making a formal offer to potential investors –
e.g. by presenting offering memoranda, subscription
documents or other materials which would allow investors to
make a decision to invest or to actually do so.
• The UK regulator, the Financial Conduct Authority (FCA), has
stated that arranging meetings and undertaking other activities
merely to sound out investor enthusiasm for a proposed
product, including handing over/circulating presentations and
other materials does not technically constitute “marketing”
under AIFMD as “marketing” triggers a filing obligation under
AIFMD and such filings can only be made once a final offer
document is available.
Eversheds Sutherland | June 2019 |
Pre-Marketing
26
• Information provided to an investor in the pre-marketing phase must not:
– Relate to or contain reference to an existing fund;
– Enable investors to make a commitment of investing in a particular fund;
or
– Amount to a prospectus, constitutional documents of a not-yet-established
AIF, offering documents, subscription forms or similar documents allowing
investors to take an investment decision, regardless whether in a draft or a
final form.
• Therefore, by circulating to or negotiating a draft term sheet/partnership
agreement/PPM with potential investors, a draft partnership agreement or
PPM may trigger a “marketing” notification.
• Apart from fully authorised EU AIFMs (and EuVECA and EuSEF managers)
which pre-marketing is permissible, whether the conditions under which pre-
marketing is permissible for non-EU AIFMs and sub-threshold EU AIFMs is
uncertain.
• General industry views hope for a final Directive which is less onerous than
the draft proposals so as to reduce the impact for how AIFs are promoted
currently.
Eversheds Sutherland | June 2019 |
Pre-Marketing
27
Country Official
guidance
Pre-offer
documents
allowed?
Type of investor who can be approached
Significant
problems
Austria Yes No N/A
Belgium No No N/A
France YesYes but only in
very limited
circumstances.
1. Professional investment managers in the
context of a portfolio management agreement
for a third party, provided that such financial
instruments are allowed/authorised in the
management of the portfolio of the investor;
2. French funds provided that such financial
instruments are allowed to be included in the
assets of the AIF. So in practice pre-marketing
in very restricted.
Ireland No No N/A
Italy No No N/A
Norway No No N/A
Spain No No N/A
Eversheds Sutherland | June 2019 |
Pre-Marketing
28
Country Official
guidance
Pre-offer
documents
allowed?
Type of investor who can be approached
Proceed with
caution,
restrictions apply
Denmark NoYes but very
restricted
Professional investors as defined under MiFID; or to persons
permitted under private placement rules if closed end fund being
broadly, professional institutional investors; offerings with a
minimum commitment per investor of at least EUR100,000 and
offerings to less than 150 individuals (other than qualified investors)
in Denmark.
Luxembourg No Yes
Closed ended funds they must comply with the Luxembourg regulator of
the financial sector (“CSSF”) requirements under AIFMD and
Luxembourg’s prospectus rules:
• the offer is made to EU professional investors (as defined under annex
II of directive 2004/39/EC (MiFID));
• the securities have a high nominal amount (equivalent or in excess of
EUR 125,000);
• the offer is made to a small circle of persons (the CSSF will consider
cases on an individual basis, there is no maximum number of
investors to fulfil the criteria)
• the form of the offer must be appropriate - e.g., targeting existing
customers, high sales amount, no general advertising; The CSSF
requires to be informed in advance of the marketing of any closed
ended AIF by an EU AIFM within Luxembourg territory.
Sweden No
Yes but provided
the AIF does not
exist
Professional investors as defined under 2007 Swedish Securities
Market Act.
Switzerland Yes
To 'regulated qualified investors’; and ‘unregulated qualified
investors’ provided a Swiss representative and paying agent is
appointed in the case of ‘unregulated qualified investors’.
Eversheds Sutherland | June 2019 |
Pre-Marketing
29
Country Official
guidance
Pre-offer
documents
allowed?
Type of investor who can be approached
No Issues
Finland No
Yes but no
offering
memoranda or
subscription
agreements
Professional investors as defined under MiFID
Germany Yes Yes
Professional investors as defined under MiFID;
marketing to semi- professional investors can only
take place once there is a fully AIFMD-compliant
AIFM.
Netherlands No Yes
• Professional investors as defined under MiFID; and
• For closed ended funds, other persons subject to a
minimum commitment per investor of at least EUR
100,000 and offerings to less than 150 individuals (other
than professional investors) in the Netherlands.
UK Yes
Yes subject to
compliance with
UK 'financial
promotion' rules.
Professional investors, large corporations and
‘sophisticated’ and
other qualifying individuals if marketed by an FCA
authorised firm.
Eversheds Sutherland | June 2019 |
The National Private Placement Regimes
30
• AIFMD does not implement a harmonised regime for privately
placing AIFs in the EU.
• Rather, each Member State is permitted to retain its own
domestic rules which means it is necessary to consider and
take advice country by country as to what forms and methods
of marketing are permitted.
• AIFMD does impose a harmonised obligation, however, to
register non-EU AIFs marketed by EU and non-EU AIFMs to
EU investors in each EU state and to comply with various
information and ongoing reporting obligations.
Eversheds Sutherland | June 2019 |
The National Private Placement Regimes
31
• Other jurisdictions, however, only allow marketing to commence after a specified period. A number of the Nordic countries have followed this route. While the applications are not unduly cumbersome, approval can take several months to achieve, thus potentially impacting upon marketing and closing timetables.
• Some jurisdictions, although of a small number, have introduced significant additional requirements. Examples include Austria, Denmark and Germany. On top of custodial type obligations, these countries also require the appointment of a depository to the AIF with regulatory oversight responsibilities, which may lead to substantial operational cost increase.
• Some jurisdictions effectively ban private placements of non-EU ‘unregulated’ funds including Italy, France and Spain.
• Some non-EU AIFMs tend avoid marketing in the EU completely or restricting marketing to a very small number of jurisdictions, typically the U.K., the Netherlands and the non-EU country Switzerland, as a result of:– initial and ongoing cost of registering state by state,
– complying with national reporting obligations and
– the inability to access investors in certain countries at all.
• On the other hand, other non-EU AIFMs are forming EU AIFs and EU AIFMsor ‘outsourcing’ to third party platforms offering EU AIFs and/or EU AIFMfacilities.
Eversheds Sutherland | June 2019 |
AIFMD National Private Placement Regimes
32
Country Marketingeffective immediately?
Gold plating? Fees
Significant problems
Austria No - up to 4 monthsYes – full depo and local legal agent.
• Application fees: EUR 4,500
• Annual supervision fee: EUR
2,500 pa
Denmark NoYes –depo lite and additional publication
requirements. Closed ended funds may also be
subject to prospectus regulations.
• Application fees: DKK 5,000
• Annual supervision fee: DKK
5,000 pa
France No
Yes. Non-AIFM must comply with same
regulations as EU AIFM. Non-EU open ended
funds generally cannot comply with French
rules on equivalency. Must appoint a local
agent to deal with subscriptions and
redemptions.
• Application fees: EUR 2,000
• Annual supervision fee: EUR
2,000 pa
• Local agent EUR 2,000
Germany No – up to 5 months
Yes - depo lite; evidence of how marketing
will be conducted to avoid retail;
appointment of local tax agent. Non-EU AIFM
must be regulated on home state.
• Application fees: EUR 6,852
• Annual supervision fee: EUR
6,852 pa
Italy No Yes – non-EU AIFMs cannot market in Italy. N/a
Spain NoYes. Significant additional information required
by CNMY regarding ‘equivalency’ of non-EU
jurisdiction.
EUR 1,800 – 72,000 (for umbrellafunds)
Eversheds Sutherland | June 2019 |
AIFMD National Private Placement Regimes
33
Country Marketingeffective immediately?
Gold plating? Fees
Proceed with
caution,
restrictions apply
Finland YesYes. Additional publication and auditrequirements.
• Application fees: EUR 2,600• Annual supervision fee: EUR
2,600 pa
Norway NoYes. Non-EU AIFM must beregulated in homestate.
• Application fees: none• Annual supervision fee: none
Sweden NoYes. Must evidence how marketing will beconducted to avoid retail.
• Up to SEK 16,000
Switzerland Yes
Yes. Marketing restricted to 'regulatedqualified investors’; "unregulated qualifiedinvestors can only be approached if a Swissrepresentative and paying agent is appointed.
• Swiss rep: SFR 8,500 – 12,500• Paying agent: SFR 1,500
Eversheds Sutherland | June 2019 | 34
Country Marketingeffective immediately?
Gold plating? Fees
No Issues
Belgium No No• Application fees: none• Annual supervision fee: none
Ireland Yes No• Application fees: none• Annual supervision fee: none
Luxembourg No No
• Application fees: EUR 2,650 –5,000
• Annual supervision fee: EUR 500 pa
Netherlands No No• Application fees: EUR 1,500• Annual supervision fee: EUR
1,500 pa
UnitedKingdom
YesNo, but UK financialpromotions rules mustbe complied with.
• Application fees:• Full scope - £250• Sub-threshold - £125
• Annual supervision fee: £0-£500 pa
AIFMD National Private Placement Regimes
Eversheds Sutherland | June 2019 |
The AIFMD Passport
35
• At present the AIFMD passport option is only open to EU AIFMs managing and marketing EU AIFs.
− While non-EU managers may consider establishing an EU domiciled fund in order to access EU domiciled investors, the requirement to establish an EU AIFM means that for a lot of non EU managers, the costs outweigh the benefits.
− We see most of our non-EU domicilied clients who are establishing an EU domiciled fund utilise the services of third party ManCo's. Essentially the 3rd party operates as the AIFMof the EU fund but delegates management back to the non-EU manager. Under AIFMD an AIFM is permitted to delegate management provided it retains risk management responsibility.
• Some platform providers also offer a fund platform so that external managers can form a separate sub-fund within their platform fund and which can save time and costs.
Eversheds Sutherland | June 2019 |
Extension of the AIFMD Passport to Non-EU
AIFs and AIFMs
− There has been no real progress on extending the AIFMD
passport to non-EU AIFMs and non-EU AIFs.
− The timing of any such extension is very uncertain.
36
Eversheds Sutherland | June 2019 |
Switzerland
37
Switzerland is an important fund raising jurisdiction but as a non-EU country it has its own private placement regime.
• Non-Swiss persons can market to “Tier 1 Qualified Investors" without making any local notifications or registrations etc. Such investors are regulated financial intermediaries such as banks, broker-dealers, fund management companies and asset managers of collective investment schemes (but not asset managers generally) and regulated insurance companies.
• Non-Swiss persons cannot market to ‘retail investors’ and can only market to “Tier 2 Qualified Investors” if they appoint a local paying agent and distributor. Tier 2 Qualified Investors include: (a) Public law corporations, pension funds and corporations, in each case which cash is managed on a professional basis; (b) high net worth individuals who ask in writing to be treated as such (opting in); and (c) high net worth individuals whose assets are managed under a written discretionary mandate with a bank, broker-dealer or fund manager or with an independent asset manager (x) who is a financial intermediary subject to the Swiss Anti-money Laundering Act, (y) who is a member of an SRO approved by the Swiss regulator (FINMA) and (z) whose discretionary asset management agreement complies with the standard issued by the FINMA approved SRO.
Eversheds Sutherland | June 2019 |
Conclusion
38
• It is complex to raise money for ‘alternative investment funds in Europe. managers and placement agents should take professional advice well in advance of making any approaches to European investors to reserve their ability to accept ‘reverse enquiries’ or prevent triggering registrations which could be avoided or delayed
• Intended to be a narrow exemption, reverse solicitation is not a marketing strategy and should be relied upon only in respect of countries where no active marketing is planned
• In several European countries, ‘pre-marketing’ is also not accepted and can trigger registration obligations; where in certain European countries the marketing person will need to comply with local laws, must be a locally licensed institution and/or must be licensed in its home jurisdiction even ‘pre-marketing’ is permissible.
• An AIFMD registration in each country in which such marketing takes place is required. It is essential to ascertain whether such marketing is permitted and the extent of ‘gold-plating’ which may make such marketing very costly and lengthy in terms of time.
• Where compliance with the NPPRs is impossible or impractical in all countries, managers should consider launching an EU based fund of their own or via a third party platform.
Eversheds Sutherland | June 2019 |
Questions?
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Michelle Lloyd, Maples Group (Moderator)
Caroline Higgins, Northern Trust
Melody He, CSOP Asset Management
Katherine Quinn, BosValen Asset Management
Adeline Tan, Mercer Hong Kong
A deep dive into Distribution
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Conor O’Mara
Closing Remarks
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24 June 2019
Irish Funds Hong Kong Seminar