The EU Commission (EC) published the text of a draft Directive on Alternative Investment Fund Managers (AIFMs) (the Directive) on 30th April 2009. The Directive applies primarily to any AIFM which is established in an EU member state and which provides management and administration services to one or more alternative investment funds (AIFs), a term which includes both hedge funds and funds of hedge funds. However, it will also apply to the marketing of AIFs within the EU by AIFMs which are established outside the EU, or third country fund managers.

This note examines the consequences of the current Directive text for third country fund managers and considers the probable impact (intended or otherwise) of the draft provisions on EU investors. The Directive is merely at the start of the EU’s legislative process and it is inevitable that amendments will be made to its text before the Directive comes into force. It is to be hoped that such amendments will resolve a number of areas (indicated below) where greater clarity is needed. This note seeks to provide indicative guidance only – if you require legal advice on any issue, you should seek appropriate professional assistance.

1. As a third country fund manager, can I market funds within the EU under the Directive?
An EU member state may authorise a third country fund manager to market an AIF of which it is the manager across the EU, provided a number of conditions are satisfied.

(See paragraph six below in respect of the conditions referred to; see paragraph 10 below for the meaning of the term “marketing” under the Directive.)