The European Commission is seeking to define “pre-marketing” under AIFMD, which could benefit EU real estate and infrastructure managers when gauging appetite for new funds and strategies – although it could also bring to an end the practice of providing draft terms to cornerstone investors.

Under current rules there is no definition of pre-marketing, and local regulators have taken different approaches, making it difficult for managers to know what is permitted without having to submit a formal regulatory notification.

According to law firm CMS, discussing a strategy with potential investors prior to establishing a fund might be allowed in some states, but requires notification in others.

The Commission has proposed the following definition of pre-marketing: “a direct or indirection provision of information on investment strategies or investment ideas… in order to test [investor] interest” in an alternative investment fund (AIF) that has not yet been established.

Pre-marketing information must not relate to, or refer to, an existing fund, it said.

The directive is to be adopted in May 2019 – potentially coinciding with the advent of the Capital Markets Union – and implemented in May 2021.

The move will be welcomed by alternative investment fund managers. Organisations representing the real estate fund management industry, including INREV, have been pushing for greater clarity and harmonisation of marketing rules.

The Commission mandated KPMG to review the efficacy of the AIFMD so far and KPMG has been running an online survey to canvass the industry. It is understood that real estate lobbying organisations had already planned to highlight the issue of pre-marketing before this week’s announcement by the Commission.

But the new definition could bring to an end the practice of providing investors with draft documentation for a potential fund, which is said to be widespread in the UK.

According to the Commission, pre-marketing information must not amount “to a prospectus, constitutional documents of a not-yet-established AIF, offering documents, subscription forms or similar documents whether in a draft or final form allowing investors to make an investment decision”.

In a note this week, CMS said: “According to the recitals, draft offering documents should not be sent to potential investors during the pre-marketing stage.

“This differs from current practice, for example in the UK, where draft fund terms may be sent to cornerstone investors before the fund is established, without triggering regulatory notification requirements.”