European Commission Proposals on Regulation of Alternative Investment Fund Managers: The Effect on US Managers and Their Funds

August 20, 2009
The European Commission, the executive branch of the European Union (“EU”), has published a draft Directive on Alternative Investment Fund Managers. The Directive sets out a supervisory framework for the regulation of managers of alternative investment funds (“AIFM”) and the management and marketing of both EU and non-EU alternative investment funds (“AIF”) within the EU. The definition of an AIF under the Directive would cover most, if not all, private funds, both closed- and open-ended, that are not UCITS qualifying, therefore covering hedge funds, private equity funds, real estate funds, commodities funds, and non-UCITS retail funds.

This update examines the key provisions of the Directive that may impact U.S. AIFM and the AIF they manage, and discusses the Directive in the context of other steps being taken by the U.S. government to regulate the alternative investment sector.