Comment by Joy Dunbar
When the Alternative Investment Fund Managers Directive (AIFMD) became law in 2010 it would appear that the demarcation point between it and the more established UCITS Directive had been established.
This is because UCITS framework, which has a pedigree dating back to the 1980s, was intended for retail investors while the AIFMD is designed for professional investors.
Does the implementation of the AIFMD, which is expected to be enforced by all EU member states in July this year, mean that the bifurcation is now complete?
Some in the industry have predicted that that UCITS will revert to being solely a retail fund structure and institutional money will start to flow to AIFMD structures.
This is because the fund structure siblings have more similarities than differences – with extra restrictions applying to UCITS because it is aimed at non-professional investors.
In theory bifurcation will happen once the AIFMD has been implemented.
But uncertainty, in terms of costs and implementation, could put the cat among the pigeons.
The asset management industry does not know how much implementing the new directive will cost and the costs of running a UCITS-compliant fund are a lot clearer.
But anecdotal evidence suggests that UCITS could become increasingly attractive for those asset managers who want to launch funds because of its certainty and as it has built up a reputation since the first fund launched using the framework 25 years ago.
Investors will ultimately decide which structure they prefer and the direction of investment flows.
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