Alternative Investment Funds (AIFs) are funds investing in any assets other than transferable securities. This includes hedge funds, private equity, real estate, venture capital, oil & gas, mining and infrastructure funds.
Prior to 2013, most AIFs were self-managed. Investment decisions were made by the board or the employers of the fund, with external advice sought from an investment advisor.
The EU AIFM directive introduced stricter requirements on management services, and lead to the introduction of the regulated AIF Management Company, (“AIFM”).
Under the new laws, alternative investment vehicles fall into three categories:
- Unregulated investment vehicles
- Exempt AIFs
- AIFs managed by a regulated AIFM
While large fund groups have set up in-house management companies, the cost is prohibitive for small fund promoters. The preferred option in this case is to outsource the management services to an authorised AIFM.
Whitmill is able to advise fund promoters on the options available:
- Structuring of unregulated investment vehicles and AIFs
- Registration with the regulator of exempt AIFs (small funds and certain closed-ended funds)
- Introduction of applications to the regulator for management of regulated AIFs
Whitmill’s Management Company Services
For funds requiring a regulated AIFM, Whitmill can help with the setup of a dedicated Management Company, which would be administered as a “Regulated Managed Entity”, whereby Whitmill will provide
- Risk management and related regulatory reporting;
- Portfolio management;
- Portfolio valuation (Whitmill may act as valuation agent for the AIFs, or may delegate this function to specialist companies, or the promoter, according to the asset class);
- Support functions: accounting, internal audit.
The Management Company may act as portfolio manager under three models:
Delegating all portfolio management functions to the fund promoter, subject to suitable authorisation of the fund promoter.
Managing the portfolio under advice from the fund promoter’s adviser.
Full management on the portfolio, (subject to the Board of the Management Company being able to demonstrate the requisite experience, skills and technical knowledge).