EU AIF Marketing Explained: Three Ways to Conduct Funds Marketing in Europe

Europe remains one of the world’s top destinations for fund expansion, offering significant growth opportunities for fund managers. However, the region’s highly regulated environment presents unique challenges, particularly in fund marketing.

For fund owners eyeing the EU market, understanding the complexities of marketing Alternative Investment Funds (AIFs) is essential. The rules are far from straightforward, and failing to navigate them correctly can result in costly setbacks.

We recently interviewed Pascal Loscheider, Head of Legal and Compliance from Ocorian’s Fund Services team in Luxembourg, about effectively marketing alternative investment funds across Europe.

Understanding the AIFMD Marketing Framework

In the European Union (EU), marketing Alternative Investment Funds (AIFs) is strictly regulated under the Alternative Investment Fund Managers Directive (AIFMD). 

The AIFMD establishes a legal framework for cross-border marketing. It requires fund managers to comply with national private placement regimes (NPPRs) or obtain a marketing passport to distribute their funds across multiple EU countries. 

The process fund managers must follow depends on a variety of factors, including:

• Whether the AIF is marketed to professional investors or retail investors.
• The jurisdiction of the AIF and its manager (EU-based vs. non-EU-based).
• Whether the manager opts to use the AIFMD passport system or private placement.

All of these factors make the marketing of AIFs across Europe more complicated and time-consuming compared to other regions, like the U.S., where the regulatory landscape is more unified.

How to Market Alternative Investment Funds in Europe

There are three primary ways to market your fund across Europe:

• Reverse solicitation
• Private placement
• Full AIFMD passports 

Reverse solicitation is the least intrusive method and involves responding to unsolicited requests from investors. 

Private placement is a common method used by U.S. managers and involves country-by-country regulation compliance. 

Finally, the AIFMD passport allows managers to market their funds across the entire European Union but is only available to those with European-domiciled funds who meet specific requirements.

Let’s explore those methods in more detail:

What Is Reverse Solicitation?

Reverse solicitation refers to the situation where an investor approaches a fund manager without the manager having marketed their product or service to the investor. So, technically, it’s not really a ‘marketing strategy.’

Also, while fund managers can accept investments through reverse solicitation, this strategy carries a heightened risk. 

To avoid potential legal issues and maintain compliance with the AFIMD, fund managers must document the investor’s approach and prove there was no prior marketing or contact. 

It is important to note that European regulators have significantly reduced the ability to rely on reverse solicitation through the introduction of pre-marketing rules in the form of Directive (EU) 2019/1160 on the cross-border distribution of funds.  This prevents the reliance on reverse solicitation during a period of 18 months following the notification for pre-marketing of a fund project.  

💬 Pascal’s Take: Exercise utmost caution when using reverse solicitation. It’s generally recommended to limit it to only those investors who genuinely approach the fund manager. And remember that the route to reverse solicitation is blocked once a formal pre-marketing process has been undertaken.

What Is Private Placement?

Private placement is a way to raise capital by offering to a specific type/number of investors.

It is typically used by managers who are marketing to Europe for the first time. This method is suitable when you have either a European AIF with a non-European AIFM or a non-European AIF such as a Delaware or Cayman Island fund, for example. 

Each European country has its own private placement regime, which can range from a relatively simple registration process at one end of the spectrum to extremely difficult or, in some cases, prohibited on the other end. 

💬 Pascal’s Take: As a general rule, it makes sense to follow the private placement strategy only if your target investor profile aligns with countries with a light or moderate regime, such as the Nordics or the Benelux states.

What Is an AIFMD Passport?

An AIFMD passport is a legal mechanism that allows fund managers in Europe to market their funds throughout the European Union by registering with their home member state and notifying the host state regulator. 

With an AIFMD passport, fund managers can market their funds to any professional investor in any country within the European Economic Area (EEA) without worrying about local private placement regimes. 

However, to obtain an AIFMD passport, a fund manager must have a European-domiciled AIF and a European-domiciled AIFM. 

This mechanism is considered the most facilitative, but depending on the level of interest from Europe, the costs involved must be considered.

💬 Pascal’s Take: The AIFMD passport is most beneficial for fund managers with a strong focus on European markets who want to expand their investor base across multiple EU countries without navigating separate local rules.

Which AIF Marketing Route Should You Choose?

The cost and complexity of marketing AIFs in Europe vary greatly depending on the approach fund managers take. From our experience, many firms prefer to start cautiously before committing to the full AIFMD passporting route. Below is a typical progression that we often see:

1. Initial Interest from Europe. Typically, we might see a firm start receiving a few reverse solicitations from European investors without the manager having performed any active marketing in Europe, and they may have a couple of European LPs in their funds.
2. Exploring the Private Placement Route. As interest from European investors grows, fund managers typically decide to pursue a private placement to determine which jurisdictions they wish to focus on for raising further capital.
3. Opting for the AFIMD Passport. Finally, if the firm sees more substantial demand from across Europe, it may ultimately decide to go down the full AIFMD marketing passport route, which would provide it with broader access to professional investors in the European Economic Area (EEA). 

With all this in mind, choosing the right AIF marketing pathway depends on the level of European investor interest and the firm's ability to meet regulatory demands, balancing growth opportunities with compliance obligations.

🛑 Considering Investor Restrictions
A key thing to consider is the increasing number of investors who won’t or can’t invest in non-European (offshore) funds or might be prohibited from investing in funds that cannot provide certain reporting or disclosures, such as KIIDs or SFDR. 

How Can Ocorian Help with Funds Marketing in Europe?

As a fully licensed alternative investment fund manager (AIFM), Ocorian can be appointed through a marketing agreement to facilitate the pre-marketing and marketing of your AIF to LPs and other possible investors in the EU and the UK. 

This ensures that when your fund project is realised, all marketing activity has been captured and will be notified in due course. Combined with our fund administration and AIF depositary capabilities, we are able to provide a true end-to-end solution to help fund initiators realise their investment strategies.

Contact the fund services team to find out more.