Regulatory reform of private equity : the AIFMD and its implications

  • Private equity has grown remarkably in the last 30 years. Given its rise to prominence, exceptional profitability and a more prolific and publicly visible buyout activity, regulation in the private equity space seemed inevitable. The 2007 global financial crisis furnished an opportunity to doubt the industry’s role and magnify the key concerns, providing momentum for calls to regulate the industry more aggressively. Ultimately, the regulatory change came from the Alternative Investment Fund Managers Directive (AIFMD), which has been described as one of the most rigorously debated and controversial pieces of financial regulation to ever emerge from the European Union (EU). The AIFMD is unique and unprecedented, yet there has been very little written about it in the context of private equity. Therefore, this thesis makes a contribution to this area of research by examining the implications of AIFMD for private equity and arguing that this EU Directive has a re-shaping effect on the industry that inevitably marks the end of the light-touch regulation in this area. Whilst the desire of policymakers to act and intervene decisively during market downturns is understandable, there is a risk that the response may not be appropriate and result in a crisis-induced over-reaction. This thesis demonstrates, amongst other things, that the AIFMD has created a particularly complex regulatory regime which for the hitherto unregulated or lightly regulated fund managers has had a significant effect in the EU and beyond. Examples of the most impactful provisions relate to authorisation, marketing, depositaries, acquisition of control, remuneration, and transparency and disclosure. The implication are wide-ranging, and there is a clear conflict between the opportunities (e.g. EU passport, AIFMD as a global brand) and threats (e.g. excessive compliance costs, exodus of fund managers from the EU), which depend on a firm’s size, domicile and the gap needed to be aligned between the pre- and post-AIFMD regime. Although there will be no stark triumph of one position over another in the assessment of the AIFMD until all of its elements are fully implemented, overall the impact of the Directive has been material, requiring substantial work to comply with (or adapt to) the requirements, which in some cases are not only particularly onerous and costly, but also a bit misguided, discouraging, or fairly irrelevant.

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Author:Robert K. Rajczewski
Referee:Brigitte Haar
Advisor:Brigitte Haar
Document Type:Doctoral Thesis
Date of Publication (online):2021/10/07
Year of first Publication:2021
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Granting Institution:Johann Wolfgang Goethe-Universität
Date of final exam:2021/03/19
Release Date:2021/08/23
Tag:AIFMD; Private Equity
Page Number:289
Dewey Decimal Classification:3 Sozialwissenschaften / 34 Recht / 340 Recht
Licence (German):License LogoDeutsches Urheberrecht