Regulation and Fund Domiciles
Explore the articles from our special report
Firming up foreign direct investment
You think you have got to grips with the ins and outs of the latest set of regulations, then along come more to keep the compliance team on its toes. This has been the norm for the private funds sector since the global financial crisis and there is no sign of things changing any time soon. The AIFMD review is coming round the corner. Yes, again! The directive was not popular the first time round and some trepidation is already sensed about the prospect of an AIFMD II.
A more imminent arrival – and somewhat timely given the current Facebook/Cambridge Analytica furor – is the EU’s General Data Protection Regulation. It comes into force in May and any company falling foul of it can expect to be slapped with harsh penalties. Investors and managers should be on top of this already. Yet one expert I spoke with earlier this year sees a lack of preparedness but no real sense of panic, particularly among many non-EU based managers.
Given the climate and the increased use of big data in private real estate, GDPR is likely to be just one in a long line of data protection-related legislation for the sector to get its head round in the near future. As one interviewee in this report puts it, the interplay between this issue and regulation is “not for the faint-hearted.”
Certainly the managers responding to the PERE and RBC survey featured in this report are acutely sensitive to the disruptive impact of regulation. But another recent survey suggests that in the US the regulatory climate is somewhat more relaxed than it is internationally due to a lessening of enforcement. A positive Trump effect for once? Surely not!
With the global regulatory environment only set to get tougher and the political climate, especially in Europe, still uncertain, it is not surprising to find fund managers are sticking with safe and familiar domiciles for new funds. Delaware and the Cayman Islands continue to be favored and, in Europe, AIFMD has ramped up interest in Luxembourg as a domicile. The Channel Islands are also rapidly capitalizing as the Brexit game plays out.
Despite the continued regulatory pressures and anticipated disruptions from it, money is continuing to flow into the private real estate space, and from an increasingly diverse range of sources. As our survey shows, eyes are turning to Asia in particular as a capital source. Overall, growth expectations for the next decade are high and there is much to be positive about.
Enjoy the report!
Special Projects Editor