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Over a year in the making, the Alternative Investment Fund Managers (AIFM) directive - widely known as the "hedge funds" directive - is reaching the final stages of approval. This note answers some basic questions about what is to be regulated and why. It also explains some more technical issues to do with the "passport" system for marketing funds across the EU. Finally, it also compares the EU institutions' starting positions, and shows the final outcomes, on the most controversial issues.
What are alternative investment funds?
Put simply, "alternative investment funds" (AIF) covers a wide range of funds, none of which are covered by the Directive on Undertakings for Collective Investment in Transferable Securities (UCITS) [1] . It is estimated that in 2009 AIF managers were responsible for over €1,000 billion in assets.
The best-known AIFs are hedge funds and private equity funds, but others include real estate funds, commodity funds, industrial funds and infrastructure funds.
Most AIFs are not schemes sold directly to small investors. Instead, investors in these funds tend to be institutions such as pension funds, or very wealthy individuals or families. However, their impact on the real economy and the man in the street may still be very tangible as is shown by the example of pension funds.
[1] A collective investment scheme is a way of investing money with others to participate in a wider range of investments than is feasible for most individual investors, and to share the costs and benefits of doing so.
Table of contents of the Background :
- What is the reason for the proposed directive?
- What will the directive regulate?
- Why should these funds be regulated at EU level?
- What is the marketing "passport" and how will it be made available?
- Can ESMA or the Commission grant a passport to a non-EU AIFM?
- Differences between Commission, Parliament and Council texts
