The Alternative Investment Fund Managers Directive (“AIFMD”) permits EEA member states to establish a lighter-touch regime for managers with a small amount of assets under management (“AUM”). The relevant threshold for being a small AIFM is either:
- €500 million of AUM where each of the alternative investment funds (“AIFs”) it manages has no leverage and there are no redemption rights for the first five years; or
- €100 million of AUM for all other AIFMs.
In each case the AUM are to be calculated across all AIFs managed by the AIFM.
In the UK, there are two different types of small AIFM: a small registered AIFM (either a small internal UK AIFM, a small property UK AIFM or an EuSEF or EuVECA manager) or a small authorised UK AIFM. The small registered UK property AIFM will be of interest to managers of unregulated collective investment schemes that invest the majority of their assets in land and whose AUM do not exceed the thresholds set out above.
Positives of being a small AIFM are:
- being subject to less compliance and reporting requirements than a full-scope AIFM; and
- not being required to appoint a depositary to its AIFs, and also not having to apply the AIFMD’s requirements to its delegates or agents.
Negatives of being a small AIFM are (and why some may choose to apply for full status straight away):
- many other EEA jurisdictions outside the UK do not fully recognise the small AIFM regime. As a result, it may be difficult to market funds managed by a small AIFM into other EEA jurisdictions; and
- if the value of AUM of the small AIFM increases to over the threshold set out above, it will become necessary for the AIFM to apply to become a full-scope AIFM and for all its existing AIFs to be fully-compliant.
Our more detailed briefing gives an overview of the regulatory regime for small AIFMs and focuses on the small registered UK property AIFM.>/a>