Private markets strategies and greater distribution are within reach for fund managers as the AIFM model matures, says Kavitha Ramachandran of Maitland.
In July 2019 it will be a full six years since the Alternative Investment Fund Managers Directive (AIFMD) was brought into being. With the EU marketing passport, the AIFMD echoed the cross-border distribution of the Undertakings for Collective Investment in Transferable Securities (UCITS) for professional investors in alternative investment funds. There is no doubt that the AIFMD has helped to grow the alternatives business. In Luxembourg alone, reports indicate increases of over 20% from previous years. The growth was boosted through further specialisation, with the establishment of innovative new products, such as the Reserved Alternative Investment Fund (RAIF) and targeted offerings at niche groups of investors, be they “qualified investors”, including pension funds, insurance companies or family offices.
Along with the rise in the number of alternative investment funds has been growth in the ManCo industry, with a model for this now firmly established in the form of AIFMs. The third-party AIFM model has proven popular with smaller to mid-sized fund managers looking for a cost-effective, outsourced solution to compliance and distribution which allows them to focus on alpha generation. Many have started to ask AIFMs to add further value through select services, expand their skills set and get involved in the sales process.
This third-party AIFM model has proven its success in UK and European alternative fund distribution for over six years now. In short, it’s a game-changer. What is more, as a result of its maturity, it has been able to withstand the vagaries that have come with Brexit. Regardless of which way the penny drops come the deadline of October 31, opportunities present themselves to AIFMs, precisely because the model is now so established. Fund managers, uncertain of their future for so long now, will hopefully finally know where to domicile themselves to best avail themselves of the marketing passport when it comes to distribution. Those AIFMs with a presence in multiple jurisdictions will be well placed to serve them, regardless of their domicile.
Growth into Asia
It would appear that the next growth area for European fund cross-border distribution might well be Asia. The markets of Hong Kong, Singapore and even Japan are starting to gain traction. In a November 2018 report by Deloitte, Navigating Asia: Investment Fund Distribution – Challenges and Opportunities, authors Lou Kiesch and Mark Evans examine distribution possibilities from Europe into Asia and vice versa, various Asian fund passport initiatives and the delegation of Asian securities portfolio management.
They state: “The European Securities and Markets Authority’s 2016 advice to the European Parliament, the Council and the Commission on the application of the AIFMD passport to non-EU AIFMs and AIFs found no significant obstacles regarding investor protection, competition, market disruption or the monitoring of systemic risk.”
Of course China has always been regarded as a huge growth market too, but what about India? This massive sub-continent with its sophisticated financial services industry might just be a further market to consider.
Kavitha Ramachandran is senior manager, business development & client management, at global advisory, administration and family office firm Maitland
Maitland is licenced as required for the services it offers. For further information on the licence permissions applicable to your jurisdiction please visit our website at www.maitlandgroup.com. In Luxembourg, the marketing of AIFs should be performed in accordance with the laws and regulations in force in the Grand Duchy of Luxembourg.
The information and opinions herein are for information purposes only. They are not intended to constitute legal, financial or other professional advice, and should not be relied upon as such or treated as a substitute for specific advice relevant to particular circumstances. Maitland as a group or any of its member firms or affiliated entities accepts no responsibility for any errors, omissions or misleading statements in this publication, or for any loss which might arise from reliance on the material. No mention of any organisation, company or individual, whether on these pages or not, shall imply any approval or warranty as to the standing and capability of any such organisations, companies or individuals on the part of Maitland. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
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