The AIFMD and its financial implications : an analysis

Abstract

PURPOSE : This dissertation studies the Alternative Investment Fund Managers Directive (AIFMD) and its financial implications. The key research objectives of this study are to identify the Directive’s requirements and the implications on costs of setting up and running a Maltese Alternative Investment Fund (AIF), comparing it to the Professional Investment Fund (PIF) regime. Third party Alternative Investment Fund Manager (AIFM) platforms will also be studied. These elements will be studied within the Maltese context. DESIGN : Research was conducted through a number of sources, such as articles and journals, where an analysis of the two regimes was made. Malta as a fund jurisdiction and its benefits and weaknesses were also studied. The study went also into different cost assumptions and implications that were expected from the Directive. Semi-structured interviews were conducted with a group of sixteen local firms, comprising from, fund managers, legal firms, depositories, audit firms and fund administrators. Questionnaires were distributed to the remaining. FINDINGS : The study revealed that within the local context, the majority of funds are in the range of €6 to €20 million Asset Under Management (AUM). It appeared that Malta still remained popular for the PIF regime. The depository requirement resulted to be one of the most onerous requirements hindering set up of AIFs. As it was expected, given the additional requirements, an increase in costs have been experienced. Particular due to the small size of funds in Malta and the inadequate substance within the fund industry, especially in terms of depositories, the AIFMD was perceived of no benefit for the local fund industry. CONCLUSIONS : The study concluded that both set up and running fees are more expensive for an AIF structure, mainly because of the new requirements imposed by the Directive. Although third party platforms offer lower cost opportunities, these still lack in their popularity. IMPLICATIONS : In this respect, it is clear that the AIFMD is more appropriate for the larger funds and fund managers which are present in the other fund jurisdictions. Undoubtedly, if no measures will be taken to recoup the present situation, the AIFMD would not become popular within the local context, requiring Malta to explore other opportunities in the fund environment.