What is an AIFM?
- John Wilson
- Jan 15, 2024
- 2 min read
An AIFM, or Alternative Investment Fund Manager, refers to an entity responsible for managing one or more alternative investment funds (AIFs). In the European regulatory framework, particularly under the Alternative Investment Fund Managers Directive (AIFMD), AIFMs play a critical role in the oversight and administration of AIFs, which include hedge funds, private equity funds, real estate funds, and other types of investment vehicles that do not fall under the traditional umbrella of regulated investment funds like mutual funds.
Key responsibilities of an AIFM include:
Portfolio Management: Making investment decisions on behalf of the AIF, including selecting investments and managing assets according to the fund’s strategy.
Risk Management: Implementing systems to identify, measure, manage, and monitor risks associated with the fund’s investments.
Liquidity Management: Ensuring that the fund maintains sufficient liquidity to meet its obligations, including redemption requests by investors.
Compliance: Ensuring that the fund complies with all applicable laws and regulations, including those specific to the markets and geographies where the fund operates.
Valuation: Providing accurate and regular valuations of the fund’s assets, ensuring transparency for investors.
Fund Administration: Overseeing the day-to-day operations of the fund, including accounting, investor communications, and reporting.
Regulatory Compliance: AIFMs are subject to strict regulatory requirements to ensure they operate transparently and in the best interests of investors. This includes:
Registering with or obtaining authorisation from national regulatory authorities in the EU member states where they operate.
Adhering to rules about capital adequacy, remuneration policies, and conflicts of interest to protect investors.
Reporting to authorities on the activities and performance of the AIFs they manage, as well as on matters related to systemic risk.
The AIFMD also facilitates the cross-border marketing of AIFs within the EU to professional investors, provided the AIFM complies with the Directive’s requirements. This creates a standardised framework across Europe, aiming to enhance investor protection and increase transparency in the alternative investment market.