Managers regard AIFMD as business threat says Deloitte poll
Nearly three-quarters (72%) of surveyed managers view the Alternative Investment Fund Management Directive (AIFMD) as a business threat, according to a survey from Deloitte LLP, the business advisory firm.
The AIFMD came into force in July 2011. It regulates how alternative investment fund managers distribute their funds and operate their business. An implementing regulation from the European Commission is expected this month.
The biggest concerns for fund managers are depositary costs (84%), delegation (78%), changes to contractual arrangements and routes to market (67%). Collectively these reduce the attractiveness of Europe as a place to do business, the poll found.
Smaller managers, private equity and real estate funds are more likely to see AIFMD as a business threat. Those companies that regard AIFMD as an opportunity manage at least £1bn of assets.
Stuart Opp, lead investment partner at Deloitte, said managers are facing significant organisational and operational change under AIFMD, with far-reaching business consequences.
“The cost of doing business in Europe is set to rise disproportionately for smaller managers who have less internal resources to deal with the compliance responsibilities. There will clearly be a trade-off for managers to consider in determining their approach to AIFMD and managers will respond differently, depending on their distribution strategy and client profile.”
However, the survey shows respondents feel that AIFMD will increase transparency for investors. More than half (53%) plan to provide investors with additional information as a result of AIFMD’s regulatory reporting requirements. Increased transparency and investor protection will be counterbalanced by less choice and competition in the market, increased expense ratios, confusion over leverage figures and longer redemption terms in some cases.
“Given the widespread concerns with the directive, it comes as no surprise that a sizeable majority of respondents view AIFMD as a business threat,” said Opp. “The depositary, marketing and remuneration rules required under AIFMD will have significant business impacts on fund managers.”
Deloitte surveyed 23 hedge, private equity and real estate fund managers collectively managing £175bn of assets.