Investment managers and investors need to realise that the new regime for regulated alternative funds in place this week is a great opportunity togain broader investment choice with strong investor protection, says Nick Lyster, the European chief executive of Principal Global Investors.
Lyster, in an article for Funds Europe, says the regime forged under the Alternative Investment Fund Managers Directive (AIFMD), which is effective from tomorrow (July 22), allows investors to move into alternative investments with a confidence similar to that offered for traditional investment strategies under Ucits regulations.
“The implementation of AIFMD has been a burden for many fund companies, asset managers and suppliers to the industry, but the end result presents great opportunities for both investors and fund managers, which shouldn’t get underestimated,” Lyster writes. “These include greater investment flexibility, better oversight and governance, and additional safeguards for increased investor confidence.”
Principal Global Investors, which has $317 billion (€234 billion) of assets under management, is part of America’s Principal Financial Group.
Some wealth managers and institutions have in the past restricted investments to Ucits funds because of governance concerns, but funds now carrying the AIFMD “brand” will allow investors to take more risk or to hedge and manage risk.
Major cross-border fund domiciles, namely Luxembourg and Ireland, have been preparing for the new AIFMD regime. For example, Ireland – already a major domicile for hedge funds – has introduced the AIFMD-compliant Qualified Investor Alternative Investment Funds, or QIAIF, to capture the expected new interest in alternative investments from investors.
Custody banks have been obtaining depositary licences to fall in line with AIFMD, and newer competitors have come along from outside of the custody banking sector to provide these services for alternative fund managers who, in many cases, have never needed a depositary before (see separate article).
Lyster’s rallying call for investment managers to grasp opportunities under the AIFMD regulation is one of the few voiced by the fund management community, which has often been presented as being ill-prepared for the changes. BNY Mellon notes today that over two-fifths of investment managers will not have received authorisation under AIFMD for tomorrow’s deadline.
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