10 October 2013

JAC response to the CBI Consultation on types of alternative investment funds under AIFMD

By structured issues we are referring to (1) transferable contractual securities negotiable on the capital markets which are (2) issued by a special purpose vehicle as a form of intermediation between a bank or other financial counterparty and investors and (3) where there is no entity with day-to-day discretion and control over the management of the assets of the special purpose vehicle.

Reasons for structured issues to fall outside the scope of the AIFMD include the following:

 Structured issues are capital markets issuances and not funds

 Structured issues are for raising capital for a bank or other financial counterparty i.e. financial intermediation. If structured issues were characterised as AIFs this would have a negative impact on the real economy

 Structured issues have a defined payment profile: not an investment policy

 In structured issues, assets are acquired for hedging the payment profile, not as pooled investment

 Structured issues are already regulated

 Structured issues are comparable to ordinary bond issues/normal debt financing (e.g. Sukuk and LPNs)

 Many structured issues should fall within the securitisation special purpose entity exemption (but are at risk of not doing so because of separate ECB guidance on the securitisation definition unrelated to the AIFMD)

Given that some market participants have raised questions specific to structured issues2 which have not been fully answered in the final “Guidelines on key concepts of the AIFMD” published on 13 August 2013 (ESMA/2013/611, the ESMA Guidelines on Key Concepts), in the interests of ensuring a uniform and consistent application of the AIFMD, it would be helpful for the CBI to issue guidance or expand its existing FAQs on the AIFMD to affirm that structured issues fall outside the scope of the AIFMD.

Full response

© ISDA - International Swaps and Derivatives Association