Understanding the role of Alternative Investment Fund Managers

AIFs encompass a wide range of investment strategies and asset classes, including hedge, private equity, real estate, venture capital, commodities and infrastructure funds. Generally targeted at institutional investors or high-net-worth individuals, AIFs offer opportunities for diversification, high returns, and access to unique investment opportunities not available through traditional investment funds.

Why is Luxembourg a hub for AIFs?

Luxembourg boasts the largest fund centre in Europe with €5.2 trillion in assets under management, making it the second largest worldwide. The Luxembourg financial framework allows non-EU asset managers to raise funds in Europe through the use of parallel funds.

What is the AIFMD?

The EU Directive 2011/61 on Alternative Investment Fund Managers (AIFMD) regulates the alternative investment fund industry at the EU level. Luxembourg was one of the first EU member states to successfully implement this directive on 12 July 2013.

The AIFMD framework was established to protect investors, ensure the stability of the financial system, and mitigate systemic risks. In essence, it provides a robust governance structure for alternative funds.

The AIFMD has increased the number of professional and institutional investors, boosted capital-raising capacity, and expanded the AIF industry across Europe.

What is an AIFM?

An Alternative Investment Fund Manager (AIFM) can be defined as any legal entity whose primary business involves managing one or more alternative investment funds. These roles ensure the professional and regulated management of AIFs.

Their primary responsibilities include:

• Fund Management: Overseeing portfolio management and risk management.
• Compliance: Ensuring adherence to regulations and reporting to authorities.
• Administration: Handling daily operations, valuation, and accounting.
• Investor Relations: Communicating with investors and managing subscriptions/redemptions.
• Marketing: Promoting the fund and ensuring accurate marketing materials.
• Custody: Safeguarding the fund’s assets.
• Strategic Planning: Developing and adjusting the investment strategy.

How does a Luxembourg based AIFM deliver value to investors?

A key responsibility of an AIFM is to ensure compliance with all AIFMD regulations, providing clients with various benefits. This includes the European marketing passport, which allows AIFs domiciled in Luxembourg to be marketed across all EU member states without additional regulatory hurdles.

Additionally, AIFMs offer clients economies of scale in human resources and financial costs. As a result, the AIFMD serves as a gateway for the alternative funds business in Europe, ensuring comprehensive operational maintenance and governance while accelerating time to market.

By administering funds through a management company platform, the directive allows clients to focus on their core competencies, such as asset management and investor relations, while the AIFM handles administrative duties.

How ZEDRA can help

To learn more about how ZEDRA can help you manage your alternative fund operations and governance so you get more from your investments, contact Charles-Alexandre Houillon.

Zedra Alternative Management S.àr.l will be incorporated under the laws of the Grand Duchy of Luxembourg as an Alternative Investment Fund Manager (AIFM) upon authorisation by the CSSF.