The granting of licences under the new Alternative Investment Fund Managers Directive (AIFMD) is taking much longer than expected, leading to fewer being issued, according to sources.
July 22 is the deadline by which managers should be complaint with the onerous conditions under the Directive, which was brought into force in July 2013. However, a backlog of applications with national regulatory bodies plus the fact that this is the first time such organizations have been faced with requests for licences has led to firms not being able to receive the required approval.
One UK-based fund administrator approached by PERE said that four or five of its 20 client firms had received a license so far, “so it is still delayed.”
Another well-placed source added: “I understand that [national regulatory bodies] have received more applications than they anticipated, as a significant number of fund managers not required to apply for authorization are electing to opt in. In addition, the information required to be submitted during the application process is quite extensive, and regulators are being very thorough and ensuring they understand the fund managers’ structures and operations.”
The European Commission introduced the AIFMD in 2009 to help protect investors in the wake of the Bernard Madoff scandal and the 2008 global financial crisis. This month – five years since its introduction – the grace period during which existing fund managers need to become compliant in order to fit in with Europe’s new regulatory regime ends.
Indeed, the July 2014 deadline caused a mad scramble last year to submit applications for licenses, experts noted, in the knowledge that firms no longer would be permitted to access capital through a real estate fund after July 22 without being licensed in accordance with the AIMFD. However, they are now suggesting that, in most cases, regulatory bodies such as the UK's FCA are taking a pragmatic approach by telling managers that, so long as a fund manager has applied for a license and is compliant, it wouldn’t be stopped from operating if the licence hadn't been received by the July 22 deadline.
A search of the alternative investment manager database of the European Securities and Markets Authority (ESMA) and country-specific bodies such as the UK's FCA reveals that at least 35 real estate managers have gained the license so far, with their stated headquarters being mainly in Germany, the UK and France. Those that have gained the license so far include Bouwinvest Real Estate, Hines, Grosvenor Investment Management, Meadow Partners, LaSalle Investment Management, Moorfield Group, Legal and General Property Partners, Patrizia, BNP Paribas Real Estate Investment Management and ECE Real Estate Partners. At least another 15 large multi-asset management groups with real estate franchises have also gained a license.
One of the most recent examples include CBRE Global Multi Manager, which manages $12.3 billion of real estate assets. It said on June 10 that it had become one of the first property fund managers to have been granted authorization from the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. It also has been granted a ‘passport’ to market its funds across Europe without the need to regard each country’s private placement regime – one of the main benefits to gaining a license.
Also on June 10, Stockholm-based Genesta said it had become the first Nordic-focused real estate fund manager to be accepted. Genesta explained that it wanted to meet the July 2014 deadline, so it submitted its application in Luxembourg in mid-October. However, it did not want to submit its application too early because it wanted to wait until the regulator and advisors had understood what was required to obtain an AIFMD passport. Such a passport has gained much attention as a positive aspect to the regulation because it unifies the regulatory fundraising framework for all of Europe’s financial regulators.
Overall, some 200 applications had been submitted by alternative asset managers, of which 58 had been formally approved, according to an AIFMD expert at a large accountancy firm. Another 20 have been ‘informally’ approved.
“We are in the final phase of European managers with European funds getting their authorization,” the source said. “In the next wave of activity, US private equity managers in particular will need to figure out how to access European investors. Many are considering co-investment vehicles.”
See this month's issue of PERE for more.