Guidelines on key concepts of the AIFMD - Esma - Europa

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c) both private equity and venture capital funds, though more frequently the latter, invest in lifesciences.57. Some respondents suggested to add to the list resulting from the mapping exercise the following funds:a) non‐UCITS funds that invest in asset classes that are similar to those in which UCITS invest,and which respect UCITS diversification and leverage requirements, but which are closed‐endedor are not open to the public; andb) non‐UCITS that are not labelled as UCITS for the simple reason that their managers decided notto subject them to the UCITS Directive (for example because they do not use the passport).4. Proposed Criteria to identify an AIFQ5: Do you agree with the orientations set out above on the content of the criteria extractedfrom the definition of AIF?58. A banking association asked to clarify whether the listed criteria are absolute preconditions for anentity to be considered as an AIF or are merely of indicative nature.59. A couple of respondents suggested to clearly state that the proposed criteria to define an AIF have to belooked at jointly: it is not because one of them is fulfilled that the structure under consideration is necessarilyan AIF. Similarly, a banking association asked to clarify whether all criteria have to be metsimultaneously or if only the majority of criteria have to be met.Raise Capital60. A real estate asset managers association broadly agreed with the approach taken by ESMA, but was ofthe opinion that further criteria could be developed to identify the types of capital raising that a normalcompany undertakes versus that which a fund more typically takes, including the fact that ashareholder in a company will typically buy or sell shares through the secondary markets rather thanthrough specific company issuances.61. A private equity and venture capital association mentioned that the notion of ‘raising capital’ impliessome kind of activity geared towards collecting funds for the purpose of making collective investmentin order to generate returns and it is not necessary to refer to the commercial nature of this activity asdone in paragraph 25 of the DP since the intrinsic purpose renders this activity commercial per se.62. The same association expressed specific agreement with the views set out under paragraphs 25 and 26of the DP. This respondent added that ‘raising capital’ must involve a person (who might be called a“sponsor”, but who may or may not be the AIFM, and may or may not itself be an investor or otherwisea participant in the fund) taking active steps by way of business to procure the commitment of thirdparty (i.e. external) capital (which commitment must be more than merely nominal) with a view to thesponsor, or someone affiliated with the sponsor, making a profit (which could be income or capitalgains but which must be more than merely nominal or de minimis) from the management of capitalraised from the third (or external) party. Such notion would imply that vehicles solely for participationby those connected with the manager in order to align their interests with the third party investors willnot be treated as AIF.34
63. Furthermore, according to a couple of respondents, ‘carried interest’ vehicles, which certain seniorexecutives of the AIFM participate to with a modest capital contribution in the private equity contextand the purpose of which is to regulate the rights of the executives among themselves, would not beconsidered as AIFs. These respondents argued that there is no ‘capital raising’ (or external capital) inrespect of these carried interest limited partnership as well as in respect of similar or different vehiclesused to effect executive co-investment in transactions alongside the AIF with an executives’ commitmentwhich is more than merely nominal, on the assumption that the only investors in the carried interest/co-investmentvehicle are executives of the private equity firm, or members of their family. Furthermore,they argued that employee savings and participation schemes that are excluded from theAIFMD may encompass such arrangements.64. An asset managers association was of the opinion that the land example in paragraph 25 of the DPshould be removed as it could imply that a “time share” arrangement marketed by a promoter to investorscould conceivably fall within the scope of the definition.65. Some respondents disagreed with the statement in paragraph 27 of the DP that the absence of capitalraising is not conclusive evidence that an entity is not an AIF since they argued that ESMA may notremove an element of the definition of AIF in the text of the AIFMD. However, one of these respondentsagreed that indirect capital raising should be covered, but was of the opinion that, in case an existingcompany formed a new subsidiary in order to purchase assets from the first (liquidated) AIFwithout raising further capital and the cash it paid for those assets was distributed to the investors inthe liquidation of the first AIF, there would have been any capital raising (direct or indirect) sufficientto make the acquiring company an AIF.66. A private equity and venture capital association pointed out that the linking of the capital raising toboth:investing in accordance with the defined investment policy; andthat investment being for the benefit of those investing the capital raisedis very important in the definition of AIF given by the AIFMD and the interrelationship of the individualelements of such definition is also crucial to the definition.67. A stakeholder asked to further elaborate on the relevance of nominee arrangements and mentionedthat a look-through approach should be undertaken only to determine whether there is on one level ascheme that fully qualifies as AIF (i.e. all the criteria must be met by this scheme).Collective Investment68. Several respondents agreed with the views expressed by ESMA in paragraph 28 of the DP, but mentionedthat it should be legitimate for AIF to have the general purpose of generating return for investorsregardless of whether such return is achieved by sale and/or continuous management of its investments(with the latter generating income on a regular basis) and that the return to the AIF duringthe lifetime of the product should be taken into account. Therefore, some of these respondents suggestedthe following amended wording: “A collective investment undertaking should have the purposeof generating a return for its investors through its investments or the sale of its investments as opposedto an entity acting […]”.35
Page 1 and 2: Consultation paperGuideline
Page 3 and 4: Table of ContentsI. Executive Summa
Page 5: I. Executive SummaryReasons for pub
Page 9 and 10: 18. Furthermore, ESMA also confirms
Page 11 and 12: 28. Therefore, ESMA proposes to cla
Page 13 and 14: Annex I - Summary of questionsQ1: D
Page 15 and 16: Annex II - Cost-benefit analysis1.
Page 17 and 18: Belgium More than 100 funds No subs
Page 19 and 20: Benefits19. The expected benefits o
Page 21 and 22: tomatically imply that they should
Page 23 and 24: i. this respondent asked to confirm
Page 25 and 26: 16. An association of publicly list
Page 27 and 28: tion of “marketing” in Article
Page 29 and 30: 35. A respondent considered not nec
Page 31 and 32: stitutional investors) in order to
Page 33: clarifying how the group exemption
Page 37 and 38: 78. A banking association asked to
Page 39 and 40: 85. A real estate asset managers as
Page 41 and 42: Q7: Do you agree with the details p
Page 43 and 44: 116. A respondent agreed in broad t
Page 45 and 46: 133. A real estate asset managers a
Page 47 and 48: with respect to limited partnership
Page 49 and 50: Member States are allowed or even u
Page 51 and 52: IV. Compliance and reporting obliga
Page 53: (b) if a sole investor invests fund

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