Upcoming Events :
Housing Seminar: Partnerships with the Public Sector – Avoiding the pitfalls
Thu 31 May 2012
Minerva House, 5 Montague Close, London, SE1 9BB
Property sector raises concerns with AIFM Directive
Tue 01 Mar 2011
Rules that affect the way in which private equity firms, real estate investments and hedge funds can operate have prompted particular concerns in the property industry.
The Alternative Investment Fund Managers Directive (AIFMD) was designed to make the derivatives market more open and transparent. It was initially hoped that managed real estate and private equity investments would be exempt but this did not turn out to be the case.
Under the new system regulated managers will be required to disclose data on remuneration to regulators every year, giving investors greater access and transparency to manager information. Non-exempt property funds will also be required to appoint a depositary to hold investment assets as custodian.
Tighter curbs on manager performance fees will also be put in place along with restrictions on borrowing and the short term return on investment following the acquisition of non-listed targets.
The British Property Federation believes the new rules could prove very costly for funds in the property industry, including high net worth individual funds as well as large listed REITS.
Members of the European Union have to implement the AIFMD within the next two years. However, the original start date for the two-year implementation period has now been delayed until at least June, following what even the European Commission has admitted is the "significant workload" needed to bring the AIFMD into force.
ESMA (the new peak EU authority to regulate alternative investment managers) is considering submissions from interested parties.
James Duncan, funds partner at Winckworth Sherwood, commented: "The new AIFM Directive is, as always, a statement of overarching principles at this stage. The devil will be in the detail of the implementation legislation. Considering the very different nature of the alternative investment market in London relative to the rest of Europe it will be interesting to see what balance is achieved.
"Despite the two-year implementation period non-exempt property funds will need to consider their position in light of the longer term illiquid nature of their investments."
