Six Common Misconceptions U.S. Fund Managers Have About Marketing in Europe

Obtaining European investors has been perceived as prohibitively difficult and costly for U.S. fund managers; consequently, many avoided marketing in the region in favor of pursuing the ample funds available from U.S. investors. As fund managers have recently confronted an increasingly difficult fundraising environment in the U.S., however, many have more seriously considered approaching European investors. See “How Emerging Hedge Fund Managers Can Raise Capital in a Challenging Market Without Overstepping Legal Bounds” (Aug. 4, 2016). Unfortunately, after avoiding the region for so long, many U.S. fund managers have a limited understanding of the array of requirements for them to validly market in Europe. To help our readers navigate these choppy waters, Hedge Fund Law Report has identified the six most pervasive misconceptions expressed by U.S. fund managers about marketing to European investors. This article outlines, and suggests ways to correct, those common misconceptions, including with respect to European domiciliation requirements; the slippery standards for when managers have marketed to, or reverse solicited, investors; and the availability of the E.U.’s Alternative Investment Fund Managers Directive (AIFMD) third-country passport and each country’s national private placement regime. For more on marketing in Europe, see “Four Approaches to Fund Marketing and Distribution Under the AIFMD” (Jun. 2, 2014); and our two-part series “Application of AIFMD to Non-E.U. Alternative Investment Fund Managers”: Part One (May 23, 2013); and Part Two (Jun. 13, 2013).

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