When it comes to the marketing of alternative investment funds in the European Union, fund managers need to choose between the AIFMD “passport” and the National Private Placement Regime.

Subject to certain conditions, managers authorised in the EU may utilise the AIFMD passport. Those outside of the EU may be able to employ NPPR.

Here’s a straightforward explanation of what each option entails.

What is the AIFMD Passport?

The Alternative Investment Fund Managers Directive (AIFMD) passport is a regulatory framework that allows EU fund managers to market their alternative investment funds (AIFs) across the European Union (EU) once they are authorised in one EU Member State.

Once authorised, you can market your funds in all EU Member States.

Careful consideration should be given to the costs of obtaining AIFM status, as well as the on-going requirements of a fund manager e.g. the potential need for a Depositary, Custodian etc. etc.

What is the NPPR?

The National Private Placement Regime (NPPR) is a flexible option for non-EU fund managers who want to market their funds in specific EU Member States.

In practice, what would this look like?

If you have a Guernsey (non-EU) general partner (a Guernsey AIFM), managing a Guernsey fund (a Guernsey AIF), the AIFM would lodge a notification to the Guernsey regulator to notify them on the intention to market the Guernsey fund, which is completed by your local administrator, and your international counsel can apply to your selected member states directly for an application to market.

The applications may vary per jurisdiction, and advice should be sought as to which Member States permit NPPR.

On an on-going basis you may be required to submit an Annex IV report periodically to members states with your fund’s data. This is a task completed by your fund administrator or a bespoke Annex IV reporting provider, but is a cost-effective task in comparison to the AIFMD passport as, by and large, there are no Depositary / other third parties and services required.

Why can the NPPR Be More Efficient for Fund Managers

• Cost Efficiency: NPPR allows managers to avoid the higher costs associated with full AIFMD compliance.
• Administrative Simplicity: NPPR generally involves a lighter regulatory burden and fewer ongoing reporting obligations.
• Targeted Distribution: NPPR enables managers to focus on specific countries where there is demand for their funds, without needing to navigate the full EU market.