The following article is written by Lauren Widmaier, who operates out of PitchBook's London office.
I recently attended a debate with PitchBook’s partner, ACG, regarding the upcoming European Union (EU) referendum vote. The debate was lively as the topic is drenched in uncertainty despite what numerous leaflets, targeted social media ads, and politicians will tell you. While I will not have a vote in this matter, I found it particularly interesting as either outcome has global implications. During the debate and conversations beforehand, some of the questions that came up were:
- What is the immediate and long-term post-vote reality if the U.K. stays in the EU? And if the U.K. leaves?
- Is the U.K. better off negotiating its trade agreements alone than as a member of the EU with China, the U.S. and other countries? Is trade even a main issue at hand (one vehemently pleaded with the audience this is not a central issue in the vote)?
- Will France scoop up overseas rugby talent that may have otherwise played for clubs in the U.K. (gasp)?
One topic I found especially interesting was the impact of the U.K. leaving the EU regarding AIFMD (Alternative Investment Fund Managers Directive), the EU framework affecting the alternative fund business. Leaving the EU will not mean avoiding AIFMD immediately nor altogether, as the scope of AIFMD casts a broad net applying to any manager that meets one of the citerion below:
- Alternative fund managed by EU entity
- Alternative fund domiciled in the EU
- Alternative fund sold in the EU
Although it may be possible for some U.K. managers to avoid AIFMD in some cases due to criteria 1 and potentially 2 in the outcome of Brexit, this doesn’t necessitate alternative managers rush to the polls next month to vote leave. AIFMD is, like other EU directives, protected in U.K. law. Therefore, leaving the EU will not mean AIFMD goes away immediately for U.K. managers. A strong centralized desire from the U.K. to repeal AIFMD post potential Brexit would be a slow and cumbersome process (as with most government initiatives globally), with elements of AIFMD likely remaining. Leaving the EU will also mean the U.K. will no longer have a vote in policies such as AIFMD that will continue to effect the U.K. in the immediate term.
No matter what, as the directive stands, the manager will remain subject to AIFMD regulations if they are selling their fund into the EU (in the same way managers outside of the EU, in location such as the U.S., must comply).
The EU referendum vote will take place on the 23rd of June. Stay tuned.