AIFMD passport not worth the hassle, GPs say

Regulatory uncertainty and higher compliance costs are capping enthusiasm for the pan-EU marketing passport, according to delegates at PEI's Women in Private Equity Forum 2015.

A significant percentage of managers do not feel the benefits of obtaining a pan-EU marketing passport under the Alternative Investment Fund Managers Directive (AIFMD), are worth the cost, concluded delegates at Private Equity International’s Women in Private Equity event in London.

For non-EU managers with only a handful of investors in Europe, it would be easier to continue marketing nationally through each country’s individual private placement regime rather than go through the efforts of getting a passport, participants on an AIFMD panel commented.

The European Securities and Markets Authority (ESMA) is currently reviewing 10 non-EU countries, including the US, to determine whether managers from those countries should be allowed to seek the passport. Jersey and Guernsey were given the green light in July, as reported by PEI.

“You have to balance the ease of marketing against the weight of further regulation and reporting… I don’t think the benefits outweigh the costs,” noted one GP.

Due to increasing compliance costs related to AIFMD, one US-based delegated interviewed on the forum noted that her firm was questioning whether it would be better to steer clear of marketing to European investors entirely rather than risk the threat of even more regulation later on down the line.

AIFMD was the forum's most heavily discussed regulatory item, delegates also revealed that the European Commission’s Capital Markets Union (CMU) action plan is not yet on the radar of most GPs. A show of hands illustrated that very few in the audience were aware of the CMU initiative, which proposes improvements to existing venture capital regulation and the process of creating pan-European, venture-focused fund of funds.