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

Annex 1
November 2012
CP12/32
Implementation of the Alternative Investment Fund Managers Directive
firms may decide to locate their AIFM in another jurisdiction while keeping minimum sales,
marketing or other presence in the UK and EU.
75. Firms that withdraw from the UK market may move to another EU or non-EEA
jurisdiction. Some respondents to our firm survey were concerned that depositary costs
could force AIFMs to re-domicile to non-EEA jurisdictions.
76. Incentives to relocate will be largely affected by the regimes to be introduced in the other
non-EEA countries. 66% of AIFMs that responded to the Deloitte firm survey think that
AIFMD will reduce the competitiveness of the EU AIF industry.
77. Firms particularly noted Switzerland as a possible location. However, if AIFMs from non-
EEA countries are to continue to serve investors from the European Member States,
countries like Switzerland may have to fall in line with the AIFMD requirements once the
private placement rules are abolished. In fact, Switzerland has implemented regulations that
are at least equivalent with the AIFMD. Both factors may mitigate some of the potential
impact on EU international competitiveness anticipated by firms. Hong Kong, Singapore,
US and offshore jurisdictions may also be of interest to AIFMs seeking to relocate. Many
firms currently doing AIFMD business in the EU are subsidiaries of non-EEA based groups,
and these firms may have multiple options on how and where to restructure.
78. On the other hand, the UK markets for alternative investment funds may become more
competitive if managers from elsewhere in the EU use the new EU marketing passport to
market funds in the UK, though we do not think this is very likely. Moreover, respondents
to the Deloitte survey did not think that the benefits of the passport will be sufficient to
compensate for the increase in compliance costs. The UK already has a flexible private
placement regime for non-UK funds targeting professional investors. Regulating previously
non-regulated firms and requirements for non-EEA AIFMs may also increase barriers to entry.
79. As we explain in Chapter 9 of this paper, we propose to permit authorised professional
firms and other suitably qualified authorised firms to carry on the activity of acting as
a PE AIF depositary in order to facilitate competition in the market. While the capital
requirements for depositaries may serve as barriers to entry for some firms, we hold that
these are necessary for consumer protection.
Impact on consumers
80. The additional compliance costs are likely to be passed on to investors in the form of
higher fees, but the proportion of costs passed on will depend on an AIFM’s ability to
absorb costs and competitive conditions in the market.
81. Due to the specific requirements that affect consumers and some firms and funds
withdrawing from the market, there may be reduced choice for investors as a result of
AIFMD. This may be counter-balanced by entry from other EU AIFMs and AIFs given the
possibility of passporting into the UK. However, the benefit of passporting is likely to be
Financial Services Authority A1:19