Source: Global Financial Strategy

The European Council has today adopted the European Parliament’s text of the Alternative Investment Fund Managers Directive which will harmonise EU rules for hedge funds and private equity firms.

Member states will have two years to implement the directive into national law once it comes into force later this year.

It will allow alternative investment fund mangers to market their services throughout the EU single market under a passport system¸ subject to compliance with strict rules.

It also establishes common rules for supervising and authorising AIFM in order to reduce risks to financial stability in Europe.

The directive was due to enter force earlier in the year but wrangling over the third country passport issue delayed the agreement of the text in the European Parliament.

Real estate funds¸ commodity funds and other funds not covered by the collective investment funds directive are included under AIFMD¸ in addition to hedge funds and private equity funds.

Managers will have to be authorised by the relevant authority in their home member state in order to operate in the EU. The AIFM will be required to hold a minimum level of capital in the form of liquid of short-term assets.

An independent depositary will be responsible for overseeing a fund’s activities and will ensure the fund’s assets are properly protected.

Greater transparency and disclosure requirements are also set out in the directive.

Source: Global Financial Strategy