More than 550 private equity and hedge fund managers from outside the EU have registered to market their funds in the UK following the introduction of a Europe-wide disclosure regime.
Figures from the Financial Conduct Authority, the UK regulator, obtained by Bovill, a regulatory consultancy, show 552 alternative managers have registered with the UK’s national private placement regime since its introduction in July.
However, Bovill said many more houses that were previously active in the UK, particularly from the US, have pulled back from the market rather than signing up to the placement regime, which was introduced to make the UK compliant with the EU’s Alternative Investment Fund Managers Directive.
Just under half of those that have registered, roughly 263, are from the US. Guernsey, the Cayman Islands, Jersey and Bermuda supply the next-largest contingents. Despite the growth of Asian financial centres, just 14 are from Hong Kong and Singapore each, 13 from Japan and none from mainland China.
However, the legislation appears to have driven some foreign managers out of the UK market.
“Many US managers are either completely stopping their marketing activity in the UK because of the directive or they are relying on reverse enquiries from institutional investors, in which case they do not need to register,” says Richard Cross, a consultant at Bovill.
According to Mr Cross, some US groups have been deterred by the “painful job” of having to report to the FCA on their investment strategy, assets, leverage and principal markets. Others are being put off by a need to file an annual report to investors that outlines the remuneration of fund managers and other senior staff.
“Particularly for smaller groups, it is easy to work out [who is getting paid what]. Not all participants are happy to disclose that,” Mr Cross says.
Other US groups are getting around this by signing up to a “host” AIFM platform, typically run by an outsourcing company. This allows them to use the host’s marketing passport, but have the actual investment management delegated back to them.
The number of alternative managers registered with the UK’s national private placement regime; 263 are from the US
Mr Cross described this as a “ruse”. “[The hosts] are passing themselves off as the fund manager when they are not. We expect these arrangements to receive a little more attention from regulators at some point,” he added.
The FCA declined to comment.
Aside from the US, the largest contingents of alternative managers registered in the UK to date are the 181 from Guernsey, the Cayman Islands, Jersey and Bermuda.
This is likely to be reflective of funds that are domiciled in those offshore locations that, under the AIFMD, are considered to be the “asset management entity”, rather than the management company, which will typically be based elsewhere.
The tally also includes 13 managers from Australia, 11 from Switzerland, five from Canada and just two from Brazil.
Under the AIFMD, fund houses from outside the EU need to register separately in each jurisdiction in which they want to market. Mr Cross believes more will choose to do so in the UK than elsewhere.
“The UK is an open jurisdiction. It has made it as easy as possible to market funds in the UK,” he says. “In a lot of southern European states, such as France, Spain and Italy, it is almost impossible. It was always difficult; the AIFMD has added some additional difficulties to that.”
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