CP12/32: Implementation of the Alternative ... - BVCA admin

CP12/32
Implementation of the Alternative Investment Fund Managers Directive
Annex 1X
the investment strategies of their funds. We expect that some firm business models will be
directly affected by the delegation, marketing, remuneration, depositary rules and others.
69. The delegation provisions may impact business models, but a detailed discussion of the
impact of the delegation provisions is beyond the scope of this CBA because the Level 2
Regulation has not yet been adopted.
70. Additionally, AIFMs may decide to curtail investment strategies such as certain global
macro and commodity trading advisor strategies that involve extensive use of FX and
interest rate derivatives. The definition of leverage in the Directive is broad and requires
looking through to the nominal values of derivatives. Extensive calculation and reporting
of significant leverage amounts by certain AIFs may also increase the costs of such
strategies. Disclosure of new gross leverage amounts without historical numbers for
comparison may also affect investor appetite in these strategies.
71. Currently some investment managers in the UK that are authorised under MiFID provide
services to an UK-authorised operator. Because of the delegation provisions, some of these
operators which lack investment management expertise and other substance required by the
Level 2 Regulation may no longer be able to offer such services. On the other hand, those
operators that can meet the delegation requirements may increase business by acting as
AIFMs in some structures so that certain firms may remain MiFID-authorised rather than
become AIFM-authorised.
72. Some firms are currently performing AIFM functions as well as extensive MiFID business
such as brokerage activities which are beyond the permitted MiFID business in the
Directive. 23 These firms will need to make changes to their business model, e.g. a separation
of their ‘prohibited’ MiFID business from their AIFM functions, before becoming an
authorised AIFM.
73. Some private equity fund managers may be affected by the prohibition against assetstripping
in Article 30 AIFMD. This provision will generally prohibit asset-stripping for a
period of 24 months from non-listed companies or issuers that are controlled by an AIF
or a group of AIFs. This prohibition will in particular affect the business models of firms
focusing on specific private equity opportunities such as management buy-out and rescue/
turnaround investments.
Competition impacts
74. Overall, the increase in compliance costs may have the effect of forcing firms to withdraw
from the UK market if it is no longer profitable to operate here. Respondents to the
Deloitte firm survey indicated that compliance costs are particularly likely to affect
medium-sized AIFMs above the Article 3 thresholds, as compliance costs are likely to
constitute a larger proportion of total costs for them compared to larger firms. This means
that larger firms may have a cost advantage compared to the medium sized firms. Some
23 Article 6(4) AIFMD
A1:18 Financial Services Authority November 2012