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AIFMD - Coggle Diagram
AIFMD
Application of AIFMD
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Applies equally to open and closed ended funds and does not matter what the legal constitution of the fund is
To be authorised as an AIFM, the fund manager will have to be authorised by its home regulator to perform the functions of portfolio management and risk management and its home regulator must be satisfied that it can comply with the Directive, that it has sufficient capital and it is directed by those with sufficient experience and who have a good reputation
AIFMD regulates AIFMs not AIFs directly therefore its obligations apply to in-scope managers, not the funds themselves, broadly a fund manager will be captured as an AIFM where it
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The full provisions of the AIFMD will only apply if the AIFM has AUM in any AIF above the thresholds of
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€500 million if the AIF does not have any leveraging within it and where the investors are locked in for a period of five years or more
As the appointed AIFM of an AIF, the AIFM can undertake any of the activities that are set out in Annex 1 of the AIFMD itself, so long as it has the necessary regulatory approvals in its home jursidction
A AIFM may choose to delegate some of the activities to third parties rather than undertake all of the work required of them
Any appointed third party does not necessarily have to be authorised to manage an AIF, but they will need to be regulated in their home country to undertake the activity that they are doing although the AIFM retains responsibility
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The global financial crisis resulted in the near collapse of financial markets worldwide and sparked the bail out of banks by governments around the world
There were a number of contributory factors to the global financial crisis but the impact from a fund perspective was that asset values in certain types of funds, in particular real estate, plummeted and the liquidity within funds disappeared, giving rise to investor protection issues
The EU decided that for all AIFMs operating in Europe they wanted to ensure greater transparency, reporting and oversight by regulators, both nationally as well as at European level through ESMA (European Securities and Market Authority)
Until the implementation of the Directive there was no oversight at EU level of these activities and each member state regulator operated in its own silo with varying levels of supervisory oversight applied
With the implementation of the Directive, it ensured a consistent approach to all AIFMs operating within the EU, it also introduced greater protection to investors in AIFs that was not previously available