EVCA's Michael Collins looks at what the entry into force of the AIFMD signifies for the industry and for the European businesses in which it invests.
The AIFMD is the first time that private equity has been subject to pan-European regulation. Now that’s not necessarily a bad thing. For starters, the AIFMD is designed to create a genuine single market for alternative investments, which include private equity.
In theory, by using the AIFMD as a marketing ‘passport’ a private equity fund should be able to raise funds in any other EU country without having to gain a separate approval from that country’s regulator. That should make fundraising a lot quicker and easier.
Private equity firms raise funds to invest, over the long-term, into Europe’s businesses. Over the five years since the European Commission proposed the AIFMD, the industry has invested more than €270 billion into 22,000 European companies. That investment builds better businesses and drives growth.
So the AIFMD could help private equity to spur Europe’s economic recovery but it can only do that if consistent rules are put in place in every EU country. Today is the deadline for the AIFMD to be put into national law, but not all the countries are ready.
Without consistent implementation of the AIFMD across Europe, there won’t be a level playing field. Private equity firms in one country could have an advantage or a disadvantage, simply because of where they are based. And that means the single market won’t work properly. If that happens the industry will not be able to raise funds across Europe and will find it more challenging to continue investing in businesses.
The EVCA is urging the European Commission to ensure the AIFMD is implemented into national law consistently and is working with our partners in the national associations to try and make sure it is.
It’s true that the AIFMD is not perfect but when you consider it was originally designed for hedge funds, the final Directive is much more appropriate and proportionate than it originally was.
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