Written by 4:11 pm EU Investment

More US Fund Managers Establishing Fund Structures In Europe – Fund Management/ REITs


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Ocorian, a global leader in corporate and fiduciary
services, fund administration and capital markets, says more US
fund managers are looking to establish fund structures in Europe,
and it expects this trend to further increase.

Marc van Rijckevorsel, Head of BD for
Corporate & Fund Services, Americas 
said:

“There’s currently a lot of capital available
for US fund managers from investors in other jurisdictions.
Alternative assets surged in 2021, with record levels of
fundraising, investment, exits, and performance across many asset
classes. This is set to continue, with Preqin forecasting assets
under management to grow from $13.32tn today to $23.21tn in
2026. 
Almost half (49 per cent) of that 2026 figure
is expected to sit with private equity and venture capital, whilst
Europe’s alternatives market is predicted to grow at 14 per
cent year-on-year to 2026.

“There is clearly strong demand for raising and
investing capital. However, historically many US fund managers have
focused on US investors. Yet, as the private equity and debt market
has matured and more investors have entered these asset classes,
there is a growing number of investors in Europe and  the GCC
region, who have capital to deploy and are interested in
identifying specialist fund managers.”

Ocorian says it is seeing a growing number of US fund managers
setting up fund structures in Europe. Luxembourg is the
jurisdiction of choice as the largest investment fund centre in the
world outside of the US. And the expectations are that
 Ireland will increase in popularity, following positive
changes in its investment limited partnership (ILP) regime and
several funds successfully having been launched.

Challenges for US fund managers

Ocorian says the challenges that arise for US fund managers
relate to the regulatory perspective: US fund managers are very
familiar with the SEC rulebook but once they get to Europe, they
need to appreciate that they are not dealing with one market, even
though AIFMD is creating a level playing field.

Ocorian says it is also important for US managers to consider
how they incorporate ESG principles into their operations and
investment decisions. European investors and regulators are
increasingly focussed on managers’ commitments to ESG,
evident in the introduction of the EU’s Sustainable Finance
Disclosure Regulation in March 2021, with a second phase expected
in early 2023.

New AIFMD regulation presents challenges for fund
managers on pre-marketing rules

AIFMD introduced rules to regulate the pre-marketing of
alternative investment funds on 2 August 2021. The advantage of
this new pre-marketing directive is there is now guidance on how to
undertake pre-marketing activities across the EU. Before it was
implemented there was already market testing, but there was no
clear legal framework. Any activity that could be considered as
pre-marketing was not defined in the original AIFMD and was left to
the rules of the individual EU member states. That has now been
clarified.

For US fund managers without experience, Ocorian says there was
a discrepancy between jurisdictions in the EU as to what counted as
pre-marketing, and that has now been defined. US fund managers can
test whether there is appetite for a fund strategy, and there is a
process for doing that without having to set up a fund structure
from the start. If a US fund manager intends to test an investment
idea of an investment fund with European investors, they can
appoint an EU-AIFM to do the pre-marketing notification to local
regulators. If there is little appetite, the manager can stop
pre-marketing and they are not obliged set up a fund or incur many
costs. There’s now more clarity about that process.

Marc van Rijckevorsel 
said: “The private capital environment continues to
grow in popularity and large fund managers are tapping into new
investor bases all the time. Most US fund managers see growing
competition for capital and are looking to expand their investor
bases into Europe and other regions such as the Gulf Cooperation
Council (GCC) nations – both markets will continue to present
compelling opportunities.”

“Regulatory challenges are often an issue for US
managers looking to fundraise in Europe, with managers facing
different challenges in accessing investors capital and marketing
their products. In Europe, US fund managers will benefit from
working with the right service providers, whether those are legal
advisers, placement agents or fund administrators.”

As a fully licensed AIFM, Ocorian Fund Management can be
appointed through a marketing agreement to facilitate the
pre-marketing of a US fund manager’s AIF to LPs and other
possible investors in the EU and the UK. This ensures that when a
client’s fund project is realised, all marketing activity has
been captured and regulators will be notified. Combined with
Ocorian’s fund administration and AIF depositary
capabilities, it can provide a true end-to-end solution to help
fund initiators realise their investment strategies.

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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