AIFMD failing to fulfil its objective

A vast majority of respondents in Augentius’ private equity survey say the directive has not delivered on its promise of increasing investor protection.

It’s been more than two years since the Alternative Investment Fund Managers Directive (AIFMD) took effect in Europe, and the private equity industry does not think the regulatory overhaul is fulfilling its goal of providing increased investor protection.

According to a fresh survey from fund administrator Augentius, 70 percent of private equity firms do not think AIFMD has delivered on its promise to protect investors. An even larger majority (75 percent) disagree with the assertion that AIFMD has strengthened the private equity or real estate markets.

This grim view on the impact of AIFMD may have something to do with the daily headaches the directive is causing GPs. When asked about their most challenging day-to-day activities in 2015, respondents’ top answer was market regulation, followed by deal opportunities and then tax regulation.

However, GPs may anticipate getting more comfortable with AIFMD in 2016, because when asked to predict their most challenging day-to-day activity in 2016, deal opportunities rose to the most popular answer, followed by regulation and then fundraising.

More than a quarter of respondents selected deal opportunities as the biggest day-to-day challenge in 2016, while 24 percent found it the biggest challenge in 2015. Fundraising is also expected to be more challenging, with 19 percent of respondents selecting it as their top challenge for 2016; 15 percent found it the most challenging aspect in 2015.

Despite profound negativity on AIFMD and its effectiveness, 50 percent of the survey’s respondents said they would categorise 2015 as a more positive general market climate than 2014, while just 15 percent said they felt it was worse and 35 percent characterised it as the same as 2014.

This sentiment is expected to remain fairly steady into 2016, with 40 percent anticipating a more positive market climate, 40 percent predicting it will stay the same, and 20 percent predicting it will be less positive.

Augentius’ poll reveals that 52 percent of GPs have increased their spend on technology in 2015, and 51 percent expect to increase their spend in 2016. The survey also asked respondents about their plans for outsourcing peripheral activities to allow their top teams to focus their time and resources on their core business. Overall, 31 percent of respondents expect to increase the scope of their outsourcing in 2016; however, 67 percent of respondents in Asian markets expect to increase the scope of their outsourcing next year.

Augentius also polled GPs on what they want from a fund administrator. Respondents said that the most important characteristic of a fund administrator was the strength of the people (37 percent), followed by the administrator’s technology platform and specialisation (both at 17 percent).