An alternative investment fund

AIFMD/the Directive:
Alternative Investment Fund Managers Directive

An alternative investment fund manager

Central Bank of Ireland

Commission de Surveillance du Secteur Financier is responsible for the financial regulation in Luxembourg

This a legally separate organisation where the formal documents showing who owns shares, bonds, etc. can be kept safely. A depositary generally has three core functions:

  • The safe-keeping of the assets of the fund (the depositary holds the title of the assets where they are transferable instruments such as shares, or operates as a book-keeper complementing a broker’s job when it comes to derivatives);
  • The day to day administration of the assets of the fund (the depositary receives the income generated by the assets);
  • The control of the funds operation (compliance with investment policies, notably proper creation/redemption/cancellation of the units/shares issued to the investors)

The European Union is a politico-economic union of 28 member states.
(a) An AIF which is authorised or registered in a member state under the applicable national law; or
(b) An AIF which is not authorised or registered in a Member State, but has its registered office and/or head office in a Member State.

An AIFM which has its registered office in a Member State

The European Securities and Markets Authority is an independent EU Authority that contributes to safeguarding the stability of the European Union’s financial system by ensuring the integrity, transparency efficiency and orderly functioning of securities markets, as well as enhancing investor protection.

External Valuer:
In relation to an AIF, means a person who performs the valuation function. Described in article 19 of the AIFMD, and is independent from the AIF, the AIFM which manages the AIF and any other person with close links to the AIF or the AIFM.

Internally managed AIF:
Where the legal form of the AIF permits internal management and where the AIFs governing body chooses not to appoint an external AIFM.

Means using techniques to increase the returns offered by an investment strategy, for example through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means.

Marketing is defined in the Directive as “directive or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF it manages to or with investors domiciled or with a registered office in the (European) Union”. The definition is broad and will therefore catch activities undertaken by placement agents and other intermediaries on behalf of an AIFM as well as the AIFM itself.

Member State:
A country that is part of the EU.

An AIF which is not an EU AIF.

An AIFM with its registered office outside the EU.

A passport allows an individual the right to move freely from one country to another after having registered and provided various personal details to the authorities of his country. Once he has a passport, he does not need to register in other countries.

Private Placement:
Private placement (or non-public offering) is a way of raising capital through a sale (offering) of shares without an initial public offering, usually to a small number of chosen private investors. Purchasers are often institutional investors such as banks, insurance companies or pension
Funds. Such an offering is exempt from many of the reporting and information requirements necessary in the case of a public offering.

Professional Client:
A client who possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs.

Professional Investor:
AIFMD defines ‘professional investor’ as an investor which is considered to be a professional client or may, on request, be treated as a professional client within the meaning of Annex II of the MiFID directive.

Regulatory assets under management:
Are the gross assets under management, without the subtraction of borrowings, short sales or other forms of leverage?.

Undertakings for Collective Investment in Transferable Securities (UCITS) are a particular class of investment funds that comply with the terms of an EU directive of the same name. The EU rules allow fund managers to market their UCITS EU-wide without needing to register in each of the member states they are marketing in. These funds are typically sold to retail investors.