Private fund managers, particularly those in the Asia-Pacific region (APAC), have faced a challenging fundraising environment in recent years. Many APAC-based managers are beginning to look to Europe as a new source of capital, with Europe representing an attractive market for alternative funds. However, market nuances and regulatory requirements need to be considered as part of the overall fundraising strategy.
Private funds in Europe are more tightly regulated than domiciles more familiar to APAC managers. The Alternative Investment Fund Managers Directive (AIFMD) is meant to function as a “passport” allowing complying firms to market their funds across the EU. However, it’s not as easy as simply showing up and selling shares in an existing foreign-domiciled fund structure. First, you must set up an AIFMD-compliant entity in a European domicile like Luxembourg, Ireland, the UK, or the Channel Islands of Jersey and Guernsey. The fund must also have:
- A registered, EU-based alternative investment fund manager (AIFM).
- A local depositary allows you to market within a jurisdiction.
- An approved fund administrator licensed by the EU authorities.
Beyond setting up the fund in compliance with EU regulations, managers must also consider what investors are looking for. Given the Sustainable Finance Disclosure Regulation (SFDR) requiring funds doing business in the EU to report ESG measures among their portfolio holdings, institutional investors are inclined to look at energy transition strategies. European investors also tend to view broader investment outcomes as having more weight than short-term returns. By understanding the needs and wants of your prospective investors, you can build a fund with the operational setup and reporting capabilities needed to deliver on those expectations.
Choosing the right fund administrator can help you meet investor expectations and compliance requirements. Choose an administrator that is already approved under AIFMD, as well as maintaining a presence in your home market. This facilitates timely delivery of information while easing into a new jurisdiction. With an AIFMD-approved administrator who has experience in your target market, you can speed up your capital-raising timeframe.
SS&S is one of the few fund administrators and operational service providers with a truly global network. With APAC operations in Hong Kong, Singapore and Australia, as well as headquarters in the US and an extensive team of experts across Europe, we have specialized expertise in all fund types.
To learn more about strategies for fundraising in Europe, download our "Asia Pacific Fund Managers - Understanding the European Market" whitepaper.
