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FastTrack to accessing the European market via an AIFM

 

As of December 2021 global sustainable assets have reached USD2.74 tn, driven by continued investor demand in environmental, social and governance (ESG) investments along with further regulatory guidance on ESG investing. Year on year, the global sustainable fund universe has grown by 53% and the global number of sustainable funds has reached 5,9321. By 2025, sustainable assets are set to soar to USD50 tn, according to Bloomberg Intelligence2.

Europe continues to dominate the global sustainable fund landscape. The region accounted for 79% of global flows in the last quarter of 2021, amounting to USD113.1 bn. For the whole of 2021, European sustainable funds attracted USD472 bn – an uptick of 63% compared with 20203.

This means that the European market remains the largest opportunity for ESG-oriented private fund managers who are looking to diversify their portfolios and raise capital from a new pool of ESG savvy investors. Yet finding a fast, cost-effective and compliant route into the European market has long been a challenge for international managers, whether for private equity, real estate, private debt, infrastructure or funds of funds.

1 Morningstar Manager Research, 31 January 2022

2 ESG by the Numbers: Sustainable Investing Set Records in 2021, Bloomberg, 3 February 2022

3 Morningstar Manager Research, 31 January 2022

Read on to learn how Intertrust Group can help you navigate the complexity of accessing the European market via an AIFM.

What are we seeing in the market

Fund raising in Europe for private fund managers

The EU regulatory landscape allows non-EU private fund managers to reach European investors without creating a European fund structure.

Many fund managers coming to Europe take advantage of the third-party alternative investment fund manager (AIFM) model, which offers a single entry point via the EU marketing passport to all 27 EU nations.

This bypasses the need to set up an entity in Europe, which can be costly and complex – and requires the fund manager to be authorised as an AIFM. Fund managers setting up a parallel fund in Europe still need to appoint an AIFM to gain access to the marketing passport – and, under this model, would still need to fully comply with the European regulatory environment4. By opting for the third-party AIFM model, fund managers gain access to an established infrastructure, bringing economies of scale.

4 US fund managers see Europe as a global ticket, Intertrust Group, 15 July 2021

The EU marketing passport at a glance

The EU marketing passport, a cornerstone of the Alternative Investment Fund Managers Directive (AIFMD), allows alternative investment funds to be marketed to professional investors across the EU with a single authorisation5.

In other words, once the AIFM is authorised in one of the EU member states, it can also gain access to other European markets through a single notification to the regulator in the country in which it is authorised.

The EU marketing passport, therefore, gives fund managers the opportunity to market funds and raise capital across Europe without committing a significant portion of their own resources in each respective member state.

Partnering with a third-party AIFM gives managers immediate access to a cross-border marketing passport, leaving the appointed AIFM to deal with the regulator. This route equally benefits first-time funds as well as experienced non-EU managers looking to launch funds for investors within Europe.

5 Directive on Alternative Investment Fund Managers (‘AIFMD’): Frequently Asked Questions, European Commission, 11 November 2010

Why choose a third-party AIFM?

Using a third-party AIFM not only provides substance for non-EU fund managers but gives them a partner that understands the region and can handle the burdens of regulatory compliance, risk management and other services.

How can Intertrust Group help fund managers?

Intertrust Group has been authorised as an AIFM by the Central Bank of Ireland (CBI) since 2015 and by the Commission de Surveillance de Secteur Financier (CSSF) in Luxembourg since 2017. In both Ireland and Luxembourg, our services provide the requisite substance, infrastructure, resources, capital, systems, reporting disclosure and supervision of service providers and delegated activities to comply with the AIFMD.

We leverage our extensive investment management and regulatory experience to create a streamlined structure that allows clients to focus on managing portfolios and raising capital. As an authorised AIFM we work with clients investing in private equity, real estate, private debt, infrastructure and funds of funds, ranging from blue-chip managers launching follow-on funds to smaller managers setting up their first fund.

With our new special asset depositary license approved by the CBI, we expand our offering to clients by providing 360-degree support across fund administration, depositary and AIFM services in both Ireland and Luxembourg. We can also provide full corporate, reporting and compliance support to SPVs/HoldCos as part of the fund structure across our global network of offices.

Our advantages

  • We have established track record, already providing more than 70 clients with AIFM service, helping them to successfully navigate the ever-changing regulatory environment
  • We are authorised as an AIFM in Ireland and Luxembourg, embracing the opportunities these jurisdictions have to offer, and providing clients with a ‘one stop shop’ of fully integrated fund services.
  • Our proprietary risk and compliance technology solution covers all quantitative and qualitative aspects of the Annex IV reporting as part of AIFMD requirement.
  • We have one eye on the future of AIFMD – our capital markets team is already prepared for the possibility of the directive to cover special purpose acquisition companies (SPACs).
  • By working closely with the regulators – the CBI in Ireland and the CSSF in Luxembourg – we provide highly responsive support to our clients.

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