European Union: Spotlight On AIFM Services

Last Updated: 15 October 2018
Article by Intertrust Group

As an authorised Alternative Investment Fund Manager (AIFM), we provide regulatory compliant solutions to managers (EU and Non-EU) that enable them to market their funds across Europe. We spoke with our AIFM teams in Luxembourg and Ireland to find out more about the benefits of our AIFM service offering and of doing business in Ireland and Luxembourg...

Tell us more about our AIFM offering: how has it developed over the years to what it is today...

We offer AIFM services in two jurisdictions. Our Irish office got their licence in January 2015 and have been growing their operation ever since. We then extended our offering by providing the service from our Luxembourg office, who will celebrate the one year anniversary of obtaining their AIFM license in December this year. The Luxembourg AIFM complements and strengthens not just the existing fund administration and depositary service offering locally, but together with our Irish AIFM offers our clients a comprehensive choice.

Our expertise and focus is on managing illiquid alternative asset classes, such as private equity, real estate, private debt, infrastructure, venture capital and funds of funds. Due to client demand, we are in the process of extending our licence to cover less liquid hedge fund and equity strategies.

In both Luxembourg and Ireland, our client pipeline is growing fast with over 40 funds established or in the process of being set up and is diversified across the full spectrum of our license.

How do our AIFM services benefit our clients?

Our AIFM services provide a cost effective, long term outsourcing solution for EU and non EU AIFs as an external management company. The AIFMs are already authorised by the Central Bank of Ireland (CBI) in Ireland and the Commission de Surveillance de Secteur Financier (CSSF) in Luxembourg. Once appointed as AIFM to an Alternative Investment Fund (AIF), we can provide quick and economical access to the EU market which would otherwise be achieved by the investment manager itself becoming authorised as an AIFM. This would entail a significant investment in operational and compliance infrastructure, applying for regulatory approval and of course risk and corresponding liability. Appointing an external AIFM allows clients to focus on their core competencies of capital-raising, deal sourcing and asset management.

Why is our AIFM service offering a key differentiater for our funds business?

Our AIFM provides managers with a tailored and risk based governance partner at a competitive cost; delivering independent oversight and risk management for investors and monitoring and managing the changing regulatory landscape for alternative managers. 

Who is our target market for AIFM services?

Ireland: Any EU asset manager marketing an EU AIF or preparing to passport non-EU AIFs in the EU who, having assessed their tolerance and appetite for AIFMD-based regulatory compliance and risk management infrastructure, want to outsource their AIFMD compliance obligations to an external EU-authorised management company.

Luxembourg: Our AIFM services are of interest to non-EU based investment managers without a footprint in Europe, or investment managers wanting to launch funds as quickly and smoothly as possible. We also target clients who choose not to set up their own AIFM for the reasons mentioned earlier. 

What are our core service areas and the clients we typically work with? 

Ireland: Our Alternative Investment Fund Managers Directive (AIFMD) related services provide the requisite substance, infrastructure, resources, capital, systems, reporting disclosure and supervision of service providers and delegated activities to comply with the AIFMD. We leverage our extensive investment management and regulatory experience to create a streamlined structure that allows clients to focus on managing portfolios and raising capital. We typically work with AIFs including private equity, real estate and private debt.

Luxembourg:  In particular, the two core services of an AIFM are risk management and portfolio management. The risk management function is performed internally whilst for the portfolio management function, we have two models: it can be either performed internally with the client appointed as investment adviser or it can be fully delegated if the client is a regulated investment manager. Additional services we normally provide for clients are managing the marketing passport process for selling their fund in Europe, and taking responsibility for the fund's regulatory reporting.

Similar to Ireland, we have a wide variety of clients investing in private equity, real estate, private debt, infrastructure and funds of funds, ranging from blue-chip managers launching follow-on funds to smaller managers setting up their first fund. These clients come from around the world, reinforcing not just our global coverage, but also the attractiveness of Luxembourg as a place to do business.

What makes Intertrust an interesting place to do business?

In an increasingly complex regulatory environment, we support our clients in fulfilling their legal, administrative and regulatory business in multiple jurisdictions. We're a global leader in delivering fund services, with more than 2,500 specialists based across 41 offices in 29 jurisdictions. We're servicing some of the largest and most experienced fund managers in the world, as well as some of the most dynamic and skilful venture capital groups.

Where do you see the growth and opportunities?

Ireland: There's increasing demand for risk assets which is driving increased activity in private equity and real estate on a global basis.

Luxembourg: Locally, we also see private equity and real estate on the rise as alternative asset classes.

Are you seeing any trends in AIFM?  

Ireland: We're benefiting from the growing market in real risk assets and the need for regulated vehicles to house these assets, in particular private debt and real estate funds.

Luxembourg:  Over this year we have seen a strong increase in demand for two types of funds: Luxembourg Reserved Alternative Investment Funds (RAIFs) and unregulated AIFs. The RAIF is not supervised but indirectly regulated through its AIFM. Since its introduction in 2016, it's proved a popular choice (around 500 funds) for fund managers and investors thanks to the simpler, faster time to launch.

Besides the RAIF, we're seeing an increasing demand for unregulated AIFs not being subject to a specific fund regime. Those unregulated AIFs are structured as unregulated partnerships (SCS or SCSp). These are often setup as parallel funds to existing Cayman/UK funds.

What are the unique things about doing business with Intertrust?

Both Luxembourg and Ireland benefit from our strong presence in those jurisdictions in the corporate and fund services domains. Intertrust provides a comprehensive regulatory compliance solution with substance to private equity and real estate funds with a multi jurisdiction presence and allows investment managers to focus on their core business.

We can offer a fully integrated system, covering AIFM ManCo, AIFMD depositary, fund administration and corporate services as a complete solution or as standalone services. We also, of course, benefit from our whole global network.

To learn more about our AIFM ManCo services, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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