Fundraising to improve despite AIFMD

John Bakie
08 March 2013

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European fundraising is expected to improve in 2013, despite the regulatory burden of the AIFMD, according to a panel of experts speaking at the Jersey Finance London Funds Conference.

However, certain jurisdictions are expected to be impacted by AIFMD more heavily than others, which could have an impact on foreign investment inflows.

Speaking in London yesterday, Simon Witney, SJ Berwin partner and chairman of EVCA's tax, legal and regulatory committee, said: "Global private equity fundraising is well down on its 2008 peak and this is particularly felt in Europe at a time when the continent needs investment.

"However, the AIFMD is not going to improve things for the fund industry as it makes it more expensive to raise a fund in Europe."

Despite the impending arrival of the AIFMD, Witney expects fundraising to improve in 2013, with significantly more momentum seen so far this year.

The panel was particularly encouraged by the return of foreign investors, despite growing regulation in Europe. Anne Holme-Ranaleet, senior adviser at IK Investment Partners, said: "American investors are coming back as the eurozone crisis becomes less of an issue."

Vincent Gombault, managing director of funds-of-funds and private debt at Axa Private Equity, added: "People said the industry was dead a few years ago, but today GPs are raising funds and this is a strong asset class. If you're an LP, where are you going to make money? On German bonds or French bonds? No, and this is why private equity is needed."

The impact of the AIFMD is set to differ considerably between countries depending on the existing level of regulation and the way national regulators are implementing the change.

"The extent to which AIFMD will affect the market varies from country to country," Witney explains. "France and Jersey already have a lot of the regulatory structures in place, whereas Germany has virtually none, and the UK falls somewhere in between."

Panellists were concerned that some regulators, including those in Germany, were taking the opportunity to use the AIFMD to implement even tougher regulation than is required by Brussels, as Holme-Ranaleet noted: "If your market is mainly domestic, such as in Germany, then you tend to find your investors will just put up with the increased regulation. However, if you want to be more open and encourage outside investment, then tough regulation can be a problem."