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Guide to setting up alternative investment funds

2016 Guide to setting up an Alternative Investment Fund in Europe
2016 Guide to setting up an Alternative Investment Fund in Europe

Thu, 07/07/2016 - 14:15

As the alternative fund management industry grapples with the post-Brexit world, AIF start-ups need to tread carefully. How do traders and prop desk alumni take the first the steps to setting up their own AIFs in the transparent and correct format required by investors and regulators? And, given Brexit and sharpening regulatory differences on either side of the Atlantic and across Europe, where should these funds be domiciled?

The '2016 Guide to setting up an Alternative Investment Fund in Europe' special report comprises 14 separate articles listed below, these can be read individually or as a sequence.

Sunil Gopalan

2016 Guide to setting up an Alternative Investment Fund in Europe - Introduction

Thu, 07/07/2016 - 14:25

The publication of this Guide comes as shockwaves from the UK's decision to withdraw from EU membership continue to reverberate across the world, raising several challenges for UK-based asset managers distributing across the EU. »

Claude Niedner, Arendt & Medernach

Chapter 1: Legal & fund structuring

Thu, 07/07/2016 - 14:39

Over the years, Ireland has built out its financial services industry to become Europe's de facto onshore alternative funds domicile.  »

Donnacha O'Connor

Irish ICAV continues to gather momentum

Thu, 07/07/2016 - 14:42

Since the Irish Collective Asset Management Vehicle (ICAV) came into effect on 18 March 2015, more than 157 vehicles had been authorised by the Central Bank of Ireland (through March 2016), according to the latest statistics released by Irish Funds, the representative body for Ireland's cross-border investment funds industry. In total, these funds have more than EUR8.4bn in AUM and have attracted net positive inflows every single month.  »

Gerben Oldekamp

The Netherlands - A cost efficient option for start-up managers

Thu, 07/07/2016 - 14:46

Whilst the Netherlands might not be foremost when people think about choosing their preferred European jurisdiction, there are many advantages it has to offer. The Dutch regulator, the Authority for the Financial Markets ('Autoriteit Financiële Markten', or 'AFM'), is proactive, swift at processing licenses for full-scope AIFMs, and easy to approach if the manager has anything that needs clarifying.  »

Dr Isabelle Agius

Assessment of Malta’s AIF fund structuring environment

Thu, 07/07/2016 - 14:52

By Dr Isabelle Agius, Senior Manager, MFSA Regulatory Development Unit  – The transposition in Malta of the Alternative Investment Fund Managers Directive1 ('AIFMD') strengthened the Maltese regulatory framework applicable to Alternative Investment Fund Managers ('AIFMs') and further reinforced the integrity of the financial system. Even though the AIFMD focussed on establishing a European framework aimed at regulating and supervising AIFMs, the Malta Financial Services Authority ('MFSA') went beyond the AIFMD and made provision for a structured framework for the regulation and supervision of Alternative Investment Funds ('AIFs').  »

European flags

Chapter 2: Regulations & compliance

Thu, 07/07/2016 - 14:57

Such is the complexity of the regulatory landscape in Europe that it is enough for any new start-up manager to resemble Edvard Munch's `The Scream'. Alongside the Markets in Financial Instruments Directive (MiFID), is the Alternative Investment Fund Managers Directive (AIFMD) and just to add to the complexity, MiFID II is scheduled to go live in 2018.  »

Daniel Maycock

Brexit unlikely to impact outsourced AIFM model for UK AIFs

Thu, 07/07/2016 - 15:02

For start-up managers wishing to run an onshore European AIF, the compliance and regulatory complexities might, at first glance, appear overwhelming. There are significant reporting obligations under Annex IV and regulatory capital considerations, whilst risk management is far broader in scope, extending into every facet of a fund manager's operations. »

Andrew Whittaker

Guernsey ready for third country AIFMD passport

Thu, 07/07/2016 - 15:11

On 30 June 2016, the European Securities and Markets Authority ('ESMA') is expected to announce further details on the timing and the composition of the third country passport for the first wave of countries that include Guernsey, Jersey and Switzerland. This follows ESMA's announcement last summer that Guernsey had demonstrated the ability to satisfy the criteria required under AIFMD.  »

Owain McNeill

Chapter 3: Selecting service providers

Thu, 07/07/2016 - 15:19

For those wishing to set up a standalone Alternative Investment Fund, getting the right service providers in place is crucial to the manager's long-term success and reputation. The following sections detail what to look for when it comes to appointing four key service providers: »

Jerry Lees

Full service solution to start-up hedge funds

Thu, 07/07/2016 - 15:22

There are a multitude of costs that a start-up alternative fund manager faces today, especially with respect to those looking to establish a hedge fund under AIFMD. From regulatory costs and waiting to receive FCA authorisation, to office and IT and staffing costs, the amount of burn capital that managers initially account for can rapidly disappear down the drain.  »

Suryanshu Mishra

Understanding the role of the depositary

Thu, 07/07/2016 - 15:26

There are a number of important considerations for a fund manager, especially a start-up, when it comes to selecting an onshore depositary to an onshore AIF. But before these are explored, it is perhaps worthwhile explaining exactly what the role of the depositary is under AIFMD, given that alternative fund managers have never had to use one before. »

Praveen Joynathsin

Chapter 4: Marketing & distribution

Thu, 07/07/2016 - 15:32

A recent survey by Preqin revealed that 60 per cent of hedge funds have less than USD100 million in AUM and that only five per cent of hedge fund flows go to funds operating below that AUM level. »

Dean Hill

For start-ups: Four pillars of cyber security defence

Thu, 07/07/2016 - 15:38

By Dean Hill, Executive Director, Eze Castle Integration - There is no shortage of threats to financial services firms, and the list of requirements from investors and regulators alike is growing at a rapid pace. As a startup, it's important to demonstrate to investors that you take your business seriously, hence, investments in operational excellence are required. On the cybersecurity front, that means leveraging technology infrastructure with robust, security-rich features including intrusion detection and ongoing traffic monitoring, regular vulnerability assessments and next-generation software, firewalls and patches to keep hackers out and firm assets secure. »


Chapter 5: Technology considerations

Thu, 07/07/2016 - 15:44

Cloud technology - The scale of a manager's IT infrastructure will largely depend on the type of trading strategy. A quantitative market neutral statistical arbitrage fund is likely going to spend more capital on front-office portfolio management, risk management systems and server storage capabilities than a specialist credit strategy that trades infrequently.  »


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