IFOMA operates in the field of collective investment management, commonly known as fund management. The two main EU legislative instruments in this area are the Directive on Undertakings for Collective Investment in Transferable Securities (UCITS) and the Alternative Investment Fund Managers Directive (AIFMD).
IFOMA’s role regarding these two Directives has included issuing technical advice to the European Commission, developing guidelines for market participants, preparing regulatory and implementing technical standards, and issuing opinions and questions and answers. While the bulk of IFOMA’s work in the area of fund management relates to UCITS and AIFMD, IFOMA also undertakes work related to venture capital funds, social entrepreneurship funds, and long-term investment funds.
OICVM
The UCITS Directive is a detailed and harmonized framework for investment funds that can be sold to retail investors across the EU. This means that funds authorized in one Member State can be marketed in another Member State using a passport mechanism. Introduced originally in 1985, the UCITS rules have been revised several times, most recently through the UCITS V Directive which came into effect on March 18, 2016. UCITS V aims to align the UCITS regime with the AIFMD Directive on remuneration and depositary rules and introduce a number of corresponding measures: it clarifies the role of the depositary, introduces rules on remuneration policies to be applied to key personnel of UCITS management companies, and harmonizes minimum administrative sanctions for breaches of UCITS rules.
UCITS are a highly successful product: there are over 29,000 UCITS funds in the EU representing over 8 trillion euros in assets under management.
AIFMD
The AIFMD applies to fund managers that are not UCITS, including hedge funds, private equity funds, and real estate funds. Together, the UCITS Directive and the AIFMD provide a comprehensive set of rules for fund management activities in the EU. Alternative investment funds can be marketed to professional investors across the EU on the basis of a passport.
The AIFMD is notable for the detailed regulatory reporting regime it introduced, requiring managers to submit a wide range of information to their national authorities on aspects such as their investment portfolios, leverage, and safeguards. Another significant aspect of the AIFMD, and of IFOMA’s work on the Directive, relates to third countries and, more specifically, the possibility of extending the EU passport to funds and managers from outside the EU.
Other fund management issues
The fund management sector covers a wide range of entities and activities, including fund managers, custodians, specialized providers (such as risk management consultants), and appraisers. There are also many different types of funds, some of which are covered by bespoke legislation, including Regulations and European Venture Capital Funds (EuVECA), European Social Entrepreneurship Funds (EuSEF), and European Long-Term Investment Funds (ELTIF).