A discussion paper on the Alternative Investment Fund Managers Directive (AIFMD) published this week by the UK regulator leaves significant questions unanswered, critics have warned.
The Financial Services Authority (FSA) offered "provisional thinking" on the Directive ahead of a consultation document to be published later in the year, and asked for comments on issues including the definition of joint venture and the costs of compliance.
Sam Kay, investment funds partner at law firm Travers Smith, said it was clear real estate funds would be affected, but that he expected no more clarity from the FSA until the second half of the year. "In some areas, the FSA can't do anything except implement the Directive, but other areas allow for national variations – including how you define a joint venture", he said.
Although the FSA document outlines some characteristics of a joint venture – that it involves two parties in day-to-day operations, with no external fundraising – it falls short of a definition.
Although offshore operations will effectively fall outside the Directive in the short term, smaller real estate funds could find it hard to adapt, unless implementation includes some concept of proportionality.
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