Fund manager and funds regulation

The Alternative Investment Fund Managers Directive (AIFMD)
The Alternative Investment Fund Managers Directive (AIFMD or Directive 2011/61/EU) is the primary piece of European regulation that affects the private equity and venture capital industry. It was adopted by the European Union in July 2011 and took effect on 22 July 2013.

AIFMD creates a pan-European regulatory framework for alternative investment fund managers, including managers of private equity, venture capital and real estate funds, among others. The directive covers a wide range of areas, including the operation, reporting and marketing of funds.

The AIFMD applies to Alternative Investment Fund Managers (AIFMs) whose total assets under management do not exceed the following thresholds: €500 million, provided the AIF are not leveraged and investors have no redemption rights for the first five years; or €100 million (including assets acquired through leverage). Certain reporting and notification obligations still fall on AIFMs that are not fully in-scope.

Fully authorised AIFMs are able to utilise an EEA passport which allow EEA AIFMs to market and manage EU Alternative Investment Funds (AIFs) in other EEA countries. The European Commission is currently considering whether to extend the passport for non-EEA AIFMs and non-EEA AIFs following positive advice on certain jurisdictions from ESMA. The timetable for this has slipped as the decision was initially expected in 2015.

Non-EEA and sub-threshold AIFMs are able to market to EU investors via EU Member States’ National Private Placement Regimes (NPPRs). The operation of the NPPRs and the AIFMD passport is not straight-forward and the Commission could decide to phase out NPPRs in the future once the AIFMD passport becomes available to third countries (the AIFMD had envisaged a three-year period for this decision). It is still within Member States’ discretion to switch off NPPRs and this could therefore happen sooner.

This last point is pertinent in light of the UK’s decision to leave the EU. A key priority for the BVCA is to ensure that UK private equity and venture capital funds can continue to operate across the EU. The timing of this is also significant as Brexit coincides with the decision on the extension of the passport to third countries and the scheduled review of the AIFMD in second half of 2017.

BVCA and pan-European submissions on AIFMD

Marketing and the third country passport

Other post-implementation consultations

Consultations on the implementation of AIFMD

Links to European legislation
The European Venture Capital Fund Regulation (EuVECA)
The European Venture Capital Fund Regulation (EuVECA) is a voluntary regime and introduces a marketing passport regime for venture capital fund managers.

This enables UK fund managers that fall below the threshold at which AIFMD would apply to them (€500 million assets under management, provided the AIF are not leveraged and investors have no redemption rights for the first five years) to market their EU funds across Europe without having to comply with the more onerous requirements that come with the AIFMD passporting regime.

The take up of EuVECA by the venture capital sector has been slow, largely owing to restrictive eligibility criteria.

EuVECA is currently under review as part of the Capital Markets Union initiative. A proposal published by the European Commission includes modest improvements to liberalise the eligibility criteria and reduce the administrative costs associated with the regime. Challenges remain, however, including restrictions on the size of company funds may invest in, a lack of flexibility to determine the appropriate mix of debt and equity used to grow a company, and the absence of a passporting regime for third countries that would allow managers and funds based in non-EEA countries to invest in jobs and growth across Europe.

Further information


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