Chile, October 20th, 2010 Title of Conference here Alternative Investment Funds in Europe Claude Kremer, Vice President, EFAMA
Contents 1. 1. 1. AIF – UCITS, NEWCITS AIF – UCITS, NEWCITS Alternative UCITS The future The future Newcits Newcits Comparison UCITS AIF Comparison UCITS AIF 4. 2. 2. CHALLENGES & AIF AIF 4. 2. Alternative AIFM AIFM OPORTUNITIES DIRECTIVE DIRECTIVE Investments The future? AIFM Directive Alternative Investment Groups Key Dates Key Dates DIRECTIVE DIRECTIVE Funds in Service Providers Why AIFM? Why AIFM? Europe Investors What is AIFM What is AIFM What does AIFMD regulate? What does AIFMD regulate? 3. 3. 3. IMPACT IMPACT Third Countries Passport / No Passport Passport / No Passport Delegation Delegation 2 2 Chile, October 20th, 2010
1. Alternative UCITS • 2001-2007 : extension of the scope of the eligible assets for UCITS (money market instruments, financial derivatives, structured products and financial indices,…) � increased interest of hedge fund asset managers for UCITS funds. Why? � Distribution – Passport � Response to investor demand (regulation, protection, transparency, …) � AIFMD effect 3 Chile, October 20th, 2010
What can be done by Alternative UCITS? Hedge UCITS Investment Possibilities UCITS I UCITS III Funds Short Positions through derivatives √ Long ☺ ☺ ☺ Equity/Bond X Physical short selling Synthetic � ☺ ☺ Equity/Bond Long/short 130/30 Funds √ � ☺ ☺ Leverage Long/Short* √ Absolute Return √ � ☺ ☺ Leverage** Futures/Options √ � ☺ ☺ Absolut Return Hedge Fund Indices/Financial √ Rel Benchmark Indices ☺ ☺ ☺ Return Repos and other derivatives used √ in efficient portfolio management ☺ ☺ ☺ Alpha OTC Derivatives (Subject to √ criteria) OTC Derivatives on commodity √ * Shorting strategy obtained via synthetic shorting using derivatives indices ** No absolute leverage limit for sophisticated UCITS using VAR, leverage limit 200% NAV applies for non-sophisticated UCITS X Derivatives on commodities Source : PrivewaterhouseCoopers 4 4 Chile, October 20th, 2010
2. AIFM Overview - Why did the AIFMD see the light? Credit crisis Driving forces of AIFMD Political will for additional regulation of AIF • To address systemic risk • To enhance investor protection • To ensure all AIFM are subject to regulatory framework • To increase transparency • To improve financial stability • To develop an Alternative Investment Single Market Establish common requirements governing the authorisation and supervision of AIFM in order to provide coherent approach to the related risks and their impact on investors and markets in the EU 5 5 Chile, October 20th, 2010
What is the AIFMD about? • Direct regulation of Alternative Investment Fund Managers (“AIFM”) • Indirect regulation of Alternative Investment Funds (“AIF”) • Creation of a European market for alternative investments via AIFM Passport / AIF Passport 6 6 Chile, October 20th, 2010
What does the AIFMD regulate? At the level of the AIFM At the level of the AIF � Valuation � Authorisation � Depositary obligations requirement (identity of � Liquidity management shareholders, program � Transparency activity, information on requirements (annual AIF, information on report, disclosure to delegation , etc.) investors, reporting to � Capital requirements authorities) � Conduct of business � Obligations regarding rules, including leveraged AIF remuneration � Obligations regarding � Rules regarding conflicts acquisition of controlling of interest influence or significant � Risk Management interest � Marketing provisions � Marketing provisions 7 7 Chile, October 20th, 2010
Key dates: What has happened over the past 18 months? (1) 2 April 2009 G20 meeting in London states that « all systemically important financial institutions, markets and instruments should be subject to an appropriate degree of regulation and oversight. » 30 April 2009 EU Commission issue proposal for Alternative Investment Fund Managers Directive (« AIFMD ») May 2009 EU Council of Ministers To May 2010 Ecofin vote (18 May 2010) September 2009 EU Parliament’s Economic & Monetary Affairs Committee to (« ECON ») May 2010 ECON vote (17 May 2010) May 2010 Trilogues under way , to i.e. discussions between EU Commission, EU Parliament and EU Council to attempt to agree on a text for the AIFMD. Autumn 2010 8 8 Chile, October 20th, 2010
AIFMD – Where are we now? July 2010 Belgium has taken over the EU Presidency The EU Commission, EU Parliament and EU Council have been meeting regularly in the « Trilogue » discussions. October 2010 Possible Vote in European Parliament plenary session to December 2010 Thereafter Council of Ministers must vote after EP plenary vote, to adopt « common position » Early 2011? Legal and translation services prepare the legislation for publication 9 9 Chile, October 20th, 2010
3. AIFM Directive: Impact on Third Countries Different cases are contemplated by AIFM directive an EU AIF { • EU AIFM managing a Non-EU AIF in the EU { With distribution outside EU an EU AIF { • Non-EU AIFM managing a Non-EU AIF With distribution in the EU 10 Chile, October 20th, 2010
Third countries: passport or no passport No fortress Europe � Third country funds and managers will be entitled to benefit from passport subject to conditions (like EU funds and managers) � Private placement regime will also be accessible during a transitional period, subject to conditions. � Third countries will also be required to comply with AML procedure, to sign cooperation agreement and OECD Model Tax Convention. 11 Chile, October 20th, 2010
Delegation - UCITS approach Shall the delegation of management tasks still be authorized? � Delegation is in general permitted but subject to prior notification � Delegation of portfolio and risk management in principle only to authorised or registered entities and subject to prior approval. � In case of delegation of these tasks to third countries entities, cooperation between authorities must be ensured � Sub delegation is permitted 12 Chile, October 20th, 2010
Chile, October 20th, 2010 The Future
4. The Future Alternative Investment Funds in Europe What kind of structure for alternative investments? � Alternative UCITS � AIF 14 14 Chile, October 20th, 2010
Chile, October 20th, 2010 Thank you
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