AIFM & Regulated Funds

Alternative Investment Fund Managers (AIFMs) manage Alternative Investment Funds (AIFs) such as hedge funds, private equity, real estate, and infrastructure funds.

These funds are governed under frameworks like the AIFMD in Europe, which set regulatory standards for managers and, in some cases, the funds themselves.

Regulated funds are investment vehicles supervised directly by financial authorities, such as the CSSF in Luxembourg. Examples include Specialised Investment Funds (SIFs) and UCITS, although UCITS are not technically AIFs.

These funds must comply with strict rules concerning risk management, investor protection, and detailed reporting.

They are suitable for both retail and professional investors and are eligible to be marketed across the EU using the AIFMD passport.

The main advantages of regulated funds are greater investor confidence and easier access to a broader fundraising market.

However, they entail higher costs and a longer time to market due to stringent regulatory requirements. A good example of a regulated fund is the SIF, which requires prior approval from the CSSF and must comply with risk-spreading obligations. 

On the other hand, unregulated funds are not directly supervised by a financial authority, although the AIFM managing them must still comply with full AIFMD obligations.

Examples of unregulated funds include Reserved Alternative Investment Funds (RAIFs) and private investment partnerships. Unregulated funds offer greater flexibility in terms of investment strategy and can be launched quickly, often within weeks.

They are targeted exclusively at professional or well-informed investors.

The benefits of unregulated funds include lower setup and operating costs and a faster time to market. However, they rely heavily on the AIFM's compliance with regulatory standards and are generally limited to private placement marketing strategies.

An example of an unregulated fund is the RAIF, which, while not requiring CSSF approval, benefits from the EU marketing passport through its AIFM.

To compare the two, regulated funds like SIFs offer direct supervision, appeal to a broader investor base, but require longer setup times and involve higher costs.

In contrast, unregulated funds like RAIFs prioritize speed and flexibility, with regulatory oversight focused on the AIFM rather than the fund itself.

In conclusion, regulated funds provide greater investor assurance but come at a higher cost and slower setup speed.

Unregulated funds offer more flexibility and lower costs, but they place a stronger emphasis on the AIFM's compliance with AIFMD rules.

Regardless of the fund type, any AIFM managing assets above €100 million (€500 million without leverage) must adhere to AIFMD standards.

This support is prepared for presentation or internal use, offering a comprehensive yet concise overview of the differences between regulated and unregulated AIFs.

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