What are three factors to consider before raising capital in Europe?

Europe has plenty of capital, a large base of driven LPs and an enthusiasm for overseas assets, especially US ones. The continent can, therefore, be a happy hunting ground for US and non-European alternative fund managers looking to broaden their investor base. 

But there are two sides to this coin. On one hand, European LPs have the most liquidity of any region globally. On the other hand, European alternative fund regulations are among the most demanding in the world. For the uninitiated, the European regulatory landscape can seem daunting, but those with knowledge and support can comfortably navigate a path through the maze.

Three factors to consider before raising capital in Europe:

1. European investors have unique requirements

European investors are not a homogenous group; an LP in the Netherlands might have very different priorities from a counterpart in Italy. That said, US managers might be surprised by the focus European investors as a whole tend to give to ESG and sustainability. Institutional investors may be required by statute to consider the ESG credentials of funds and assets, and many of them are restricted to investing in funds domiciled in the EU.

2. The regulatory landscape is challenging – and inconsistent

EU regulators have done a lot of work to create a consistent set of rules for alternative funds in Europe over the last few years, but there are still local nuances in the way individual member states apply and police laws. In addition, US managers who market in Europe via the National Private Placement Regime (NPPR) will have to follow different rules in each jurisdiction they target. Even those who domicile in Europe and fully comply with the Alternative Investment Fund Managers Directive (AIFMD) regime may face regulatory inconsistencies in some jurisdictions, often over the requirements around third-party support.

3. Some service providers are mandatory, some are just really useful

Overseas managers are sometimes surprised by how much they are required to outsource. You will almost certainly need a depositary. If you want to use the EU passporting scheme for marketing, you’ll also need an Alternative Investment Fund Manager (AIFM). This role can be in-house but in practice rarely is. Legal counsel with local knowledge is also vital. A third party fund administrator isn’t mandatory but many funds would be hard-pressed to navigate the complexities of the European market without one. The same service provider often provides depositary and fund administration services.

A guide to raising capital in Europe

This article is extracted from Ocorian's guide on how to raise capital in Europe, aimed at non-European asset managers.

In this guide, we provide a pragmatic overview of the fundraising process and answer the most frequently asked questions by investment managers, including:

• Should you set up a new fund or use an existing offshore structure?
• What is pre-marketing, and which activities are forbidden?
• What are the pros and cons of the different approaches to marketing in Europe?
• How important is ESG when marketing funds in Europe?

Download the guide using the form below:

Ocorian Fund Services

At Ocorian we have extensive experience supporting US fund managers with setting up alternative investment funds in Europe and administering them throughout their lifecycle.

We have teams across seven jurisdictions in Europe that provide a high touch, technology first approach combined with local expertise.

We offer a full service offering from fund set up and administration through to fund accounting, AIFM, investor services and depositary.

• Fast and efficient set-up of funds in Europe
• Teams based in the UK, Jersey, Guernsey, Ireland, The Netherlands and Luxembourg
• AIFM in Ireland and Luxembourg
• Expertise in administering vehicles parallel to existing US or Cayman structures
• Jurisdiction agnostic
• Full-service provider

Our business development team in the US will be happy to discuss your European requirements and guide you through the process. Contact us for more information.