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NEW YORK –
December 19, 2012 – With
the compliance deadline for one of
the most complex regulatory reform
agendas ever introduced into the
asset management industry only seven
months away, a KPMG International
survey of more than 70 alternative
investment fund managers reveals
that nearly half have not taken any
concrete steps to analyze the impact
the Alternative Investment Fund
Managers Directive (AIFMD) will have
on their businesses, or to make
changes to their operations.
Today, the European Commission
adopted the implementing rules for
the Directive, which will now be
subject to a three- or six-month
scrutiny period by the European
Parliament and the Council, and will
enter into force, provided that
neither co-legislator objects, at
the end of this period.
The Directive may have long-term
implications for investment managers
in the U.S. and globally, who are
looking to raise capital in Europe.
“Every asset manager worldwide who
raises capital in the EU has to
comply with AIFMD, including
alternative investment managers
based in the U.S.," said Mikael
Johnson, Lead Partner of Alternative
Investments for KPMG LLP U.S. “Yet
many of these firms have taken no
significant action, with the July
2013 deadline fast approaching. The
time to prepare is now. Delaying
preparations any longer may have
significant negative impacts on
their operations, fundraising
activities and long-term
profitability.”
Despite the impending deadline to
comply with the Directive, just 52
percent of Alternative Investment
Fund Managers (AIFMs) surveyed have
conducted an impact analysis that
takes into account the advice from
the European Securities and Markets
Authority (ESMA), which was
published in November 2011. In
addition, 63 percent of those same
AIFMs have not appointed a
depositary, which is a key
requirement of the legislation.
The KPMG survey also found that
nearly half (45 percent) of AIFMs
surveyed say they have not yet
considered how the Directive’s
remuneration requirements will
affect their businesses. And,
two-thirds (66 percent) are waiting
to see what is included in the final
Implementing Measures from the EU
before deciding how to proceed.
The time to act is now
According to Charles Muller, Head of
the KPMG European Centre of
Excellence for Investment
Management, AIFMs that continue to
delay preparations for the AIFMD
could be faced with operational
problems, higher costs and the
potential loss of clients. The
larger the firm, the more pronounced
these implications are likely to be,
given their higher risk profiles,
higher flows and the challenges they
may have adopting their operations,
technology and even business
strategy under AIFMD.
“The arguments in favor of getting
AIFMD preparations underway as early
as possible are compelling,” said
Muller. “Those firms that have not
already conducted an in-depth impact
analysis of the AIFMD for their
business would be well-advised to do
so without delay, as the business
implications are significant, the
amount of work to be done is
substantial and the timelines for
preparation are becoming
increasingly short,” Muller added.
According to Johnson, the negative
impact facing AIFMs that continue to
delay their preparations for the
Directive includes, but is not
limited to, fundraising activities,
operations and business models.
Fundraising activities:
AIFMs that fail to achieve
compliance with the Directive by the
July 2013 deadline will be prevented
from raising new funds in Europe. If
non-EU managers choose to follow
those private placement regimes
which remain in effect, investment
managers need to be aware that these
regimes are also changing (as of
July 2013) by moving requirements
closer to the provisions of AIFMD.
Based on discussions with clients,
many non-EU firms are not aware that
the private placement regimes are
changing along with the
implementation of AIFMD. Firms that
choose to wait to conduct their
assessments and to embark upon their
implementation plans are likely to
find themselves racing against the
clock and paying higher costs.
Operations: The
Directive will require AIFMs to
introduce a host of operational
changes to their businesses. The
process of implementing these
sweeping changes to areas such as
leverage calculation, remuneration,
reporting and others promises to be
much more costly and complex for
those AIFMs that continue to delay
their preparation activities.
Business Models:
The AIFMD may also bring about
significant changes to AIFMs’
business models, including the area
of taxation. KPMG’s survey revealed
28 percent of respondents feel the
Directive will have tax implications
on some of their fund structures,
while 8 percent said it will have a
significant tax impact.
The AIFMD is one of several
high-profile regulatory programs
AIFMs are being asked to implement
over the next few years (e.g. the
Dodd-Frank Wall Street Reform and
Consumer Protection Act, CRD, MiFID).
Delaying their preparations for the
AIFMD may stress their capacity to
simultaneously implement the other
regulatory changes underway.
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