EUROPE – The clock is now ticking for real estate fund managers needing to adapt to the Alternative Investment Fund Managers Directive (AIFMD), as one lawyer warns that the process of implementation is dogged by inconsistencies.

EU states were officially required to cast the directive into national law by 22 July 2013.

It requires EU managers of alternative investments to be regulated in their home state.

While new managers will need to comply with the regulations straightaway, there is a one-year transitional provision for managers already operating on yesterday's implementation date, exempting them from the requirements until 2014.

Jeff Rupp, director of public affairs at INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, said: "Real estate fund managers need to focus on the ticking clock.

"They need to review their current systems and procedures and compare them with the directive's requirements to ensure they'll make the necessary changes."

Specifically, UK fund managers need to appoint depositaries and valuers, or review their current contracts to make sure they will be in compliance, Rupp said.

More broadly, fund managers in the EU will need to rethink the delegation of portfolio and risk-management activities, given the directive's requirements or restrictions, he said.

Glynn Barwick, regulatory lawyer at law firm Goodwin Proctor, warned that managers would have to check the rules in each country before marketing alternative investments.

Barwick said: "Although it is intended to create a standard set of regulatory requirements in all member states for European and, separately, non-European managers, in fact, some states – such as Norway, Finland and various Mediterranean countries – will be late in implementing the directive."

On top of this, states implementing the directive have been unclear or inconsistent about whether the one-year transition provision would be available to non-European managers.

They have also been hazy on whether and how fund managers from outside the union should register funds they want to market in the EU, Barwick said.

Additionally, important countries such as France and Germany are requiring the appointment of a depositary, which is unusual in a private equity or real estate fund context, Barwick said.
"Frankly, managers are going to be operating in uncertain waters for some time to come and will need to check the private placement rules in each country before approaching investors there," he said.

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