Everything you need to know about AIFMs

FAQs about AIFMs

Alternative Investment Fund Managers (AIFMs) have become an integral part of the investment funds market, responsible for managing alternative investment funds and ensuring compliance with the AIFMD regulations. While these regulations were brought in post-financial crisis to add an extra level of protection to investors and increase transparency within the market, the role of AIFMs can often be confusing to those unfamiliar with the industry.

We recently sat down with Kevin Curtis, Head of AIFM Oversight – Dublin, to discuss everything you need to know about AIFMs, their services, who needs them, and why they are required.

What is an AIFM?

AIFM stands for Alternative Investment Fund Manager. An AIFM is a regulated legal entity responsible for, at a minimum, the portfolio management and risk management of one or more Alternative Investment Funds (AIFs).

Put simply, an AIFM is a management company whose business it is to manage alternative investment funds. 

What is an AIF?

AIF stands for Alternative Investment Fund. It is a collective investment undertaking, or fund, that raises capital from professional investors and invests the capital according to a specified investment strategy or investment policy.

What are AIFM services?

At a high level, the AIFM is responsible for ensuring compliance with the Alternative Investment Fund Managers Directive (AIFMD) regulations in respect of each AIF it manages.

An AIFM is generally authorised to carry out two primary functions: portfolio management and risk management.

The AIFM may also carry out additional services including valuation oversight, compliance, governance, outsourcing and delegation oversight and can also assist with the selection of service providers for investment managers. It also monitors and manages the ever-changing regulatory landscape in which the funds operate, and is responsible for the range of regulatory filings required in each jurisdiction in which the AIF operates.

Why is an AIFM required?

AIFMD regulations were implemented in 2013 to add an extra level of protection to investors and increase transparency within the funds market following the financial crisis. For example, AIFMs often assist in the preparation and submission of financial statements to the regulator, provide risk management services (overseeing and implementing both fund and operational risk frameworks), analysing investment restrictions and risk limits of the AIFs which they manage, carry out oversight and due diligence on the delegates/service provider of the funds, and carry out operational resilience assessments and business continuity planning for the funds under management, adding an extra level of protection to both the investor and the financial market itself.

Who needs an AIFM?

EU and non-EU investment managers who are looking to set up and distribute AIFs to European professional investors will need an AIFM. Any individual or entity targeting European professional investors will be subject to AIFMD regulations and will require an AIFM in place before going live with their fund, whether it is their own proprietary AIFM or a third-party AIFM.

What is the difference between an AIF and an AIFM?

The AIF is the fund itself, that raises capital and invests it according to a specified investment strategy or investment policy. The AIFM is the regulated legal entity responsible for the portfolio management and risk management of the AIF. In other words, the AIFM manages the AIF.

What is the difference between an AIFM and a ManCo?

A ManCo, or management company, is a broader term that is a catch-all for all fund management companies that include AIFMs. AIFMs specifically look after alternative investment funds (AIFs). However, other types of ManCos also exist in the industry, for example, UCITS management companies and ‘Super ManCos’ (authorised to manage both UCITS and AIFs). An AIFM is essentially a subcategory of the overall broader term of ManCo.

How can Ocorian help provide AIFM solutions?

Ocorian is a specialist provider of AIFM services for private capital alternative investment managers.

We have extensive expertise in managing private equity, real estate, infrastructure, and private debt funds.

Our AIFM teams are based in Dublin and Luxembourg. By having sector specialists amongst its team, the AIFM can ensure a smooth alignment on investment processes with the fund manager and offer expertise on complex risk and compliance matters.

Ocorian is also authorised to provide fund administration services and real asset depositary services.

As a result, we can provide a seamless one-stop-shop solution to help fund managers realise their investment strategies and deliver value to their investors.