United States

Alternative Investment Fund Managers Directive


The Alternative Investment Fund Managers Directive (AIFMD or Directive) was finalized in July 2011 and became effective on July 22, 2013. The Directive significantly changes the regulatory and reporting requirements for fund managers and their primary outsourced service providers – depositories, administrators and valuation specialists.  Although the brunt of the Directive affects investment managers in the European union (EU), managers outside the EU are advised to assess their current investment management and marketing activities to assure compliance.

This Directive applies to the managers that provide portfolio and risk management to most hedge funds, private equity funds, fund of funds and registered mutual funds which:

  • Are based in the EU
  • Are based outside of the EU and manage EU funds
  • Are based outside of the EU but market their funds to investors in the EU.  This would include Cayman Island registered funds. 

It is fair to say that several working provisions and the application of the Directive in individual EU Member States are still subject to completion as technical issues are being finalized and guidance is being developed by those states and by the European Securities and Markets Authority.  Subject to the finalization of such provisions (including transitional guidance, marketing protocol and cooperation arrangements with other regulatory bodies, e.g. the SEC and the Cayman Islands Monetary Authority), non-EU managers will most likely be required to provide more disclosures in annual reports, audited financial statements and other periodic disclosures.  Although much of the required disclosures are common for U.S. based managers, there are some significant changes, such as:

  • The manager’s aggregate remuneration, with separate disclosures of fixed and variable remuneration to its staff (including the number of recipients), with separate disclosure of remuneration paid to senior management and certain members of staff and, separate disclosure of the breakdown of remuneration for each fund.
  • More specificity of the fund’s investment strategy and objective.
  • Professional indemnity insurance levels.
  • Preferential treatment to investors (e.g., side letters, reduced fees, etc.).

Periodic disclosures of:

  • Material changes from the original prospectus
  • Liquidity disclosures
    • Percentage of assets subject to special arrangements
    • New arrangements for managing liquidity
  • The current risk profile of the fund and risk management systems employed
  • Total leverage employed
  • Transparency – new reporting requirements to the AIFMD similar to the SEC’s Form PF (Although this seems to be for the manager and not for each fund managed by the manager.)
  • Private equity funds have additional requirements, such as:
    • Disclosure requirements after material investments in unlisted companies
    • Restrictions on distributions, capital reductions, share redemptions, and purchasing of own shares during the first two years of ownership by the fund

We encourage fund managers to assess their current situation and stay tuned for further international developments.

For more information, please contact a RSM professional or John Hague, Partner, 321.634.3354