Hedge fund European ‘quality mark’ still a long way off

Quality_stampOffshoring of alternative investment funds has remained stable despite regulatory changes that were expected to see more managers set up in Europe to obtain the ‘Aifm’ quality mark.

Not only this, but offshore centres in Asia and the Middle East are expected to grow.

The findings – published this week in an Oliver Wyman report commissioned by the Association of the Luxembourg Funds Industry (Alfi) – suggest that creating a ‘gold standard’ for alternative funds similar to the Ucits stamp for traditional funds is further from reach than many imagined.

The Alternative Investment Fund Managers (AIFM) directive was widely expected to encourage more managers to domicile in Europe, partly so they could become ‘Aifm-branded’. But though the Alfi report found that Aifm will lead to some onshoring of mainly European-based managers, offshore centres of Cayman Islands and Delaware will continue to be major domiciles for alternative funds.

There is also expected to be greater co-domiciliation and clone fund structures between offshore and onshore jurisdictions.

Another finding is that there is a clear demand from investors and fund managers for an alternative fund centre in Asia and/or the Middle East.

Marc Saluzzi, chairman of Alfi, said: “Whilst it was widely believed within Europe that a consequence of the [Aifm directive] and the related regulatory pressure exercised by the G20 countries, would be widespread re-domiciliation of funds into EU domiciles, and a fall in the number of offshore funds, this report demonstrates that the offshore landscape in the last two years has remained stable.”

He added: “Whilst Europe has established Ucits as a global fund brand, we have a long way to go if we are to achieve the same in the alternative fund industry.  We need to work hard to ensure that we have the right regulation and infrastructure to attract funds here.”

©2011 funds europe