Now that three months have passed since the Alternative Investment Fund Managers (AIFM) Directive became binding law in all European Union jurisdictions, US private fund managers (whether hedge funds, private equity funds or other fund types) should ensure that they understand how the AIFM Directive applies to their activities, if at all, and what they need to do to comply with it. 

As a starting point, US private fund managers should know that they are only within the scope of the AIFM Directive requirements if: 

(1) they are managing one or more EU alternative investment funds (the definition of alternative investment fund (AIF) excludes managed accounts and UCITS funds); or  

(2) they are marketing one or more AIFs to investors in the EU. 

If a US manager does not conduct either of these activities, then the AIFM Directive will not be applicable to that manager at all.

Those US managers who are managing EU AIFs should already be fully compliant with the specific requirements of the AIFM Directive. However, those managers who have only recently begun considering conducting marketing activities in the EU should take advice on a country-by-country basis (depending on where they wish to conduct marketing in the EU) because the act of marketing an AIF in the EU will bring their activities for that specific AIF within the scope of the AIFM Directive. Before any marketing can take place the manager needs to ensure that it registers or files with the appropriate regulator(s), updates the marketing materials and incorporates a list of mandated disclosures, prepares for EU Annex IV filings, which are broadly akin to the SEC’s Form PF, and is prepared to make report disclosures annually, including audited accounts for the AIF and information regarding the compensation of the AIFM and its senior staff. 

Furthermore, if the AIF marketed into the EU together with other funds managed by the same manager takes a control position in certain EU companies (generally defined as 50% or more of the voting rights), then there are far-reaching implications and compliance obligations that have to be complied with, including disclosure obligations regarding the shareholding level, negotiations and disclosures to employee/union representatives, and a requirement in certain circumstances not to facilitate, support or instruct any distribution, capital reduction, share redemption and/or acquisition of its own shares by the EU company. 

For more detail, please refer to Katten’s October 2014 Client Briefing here.