The term Alternative Investment Fund Managers Directive, or AIFMD, is closely related to AIFM. Therefore, in order to understand the AIFMD, it is important to understand what AIFM means.
AIFM refers to ‘Manager of Alternative Investment Fund’. The concept of AIFMD embraces numerous investment funds which are not currently being regulated by the UCITS Directive. Some examples of such funds include the hedge funds, real estate funds and equity funds. There are other similar funds as well which are encompassed by the AIFM.
Usually, people have the misconception that AIFMD is only limited to hedge and fund directive. In reality, the AIFMD is more than that.
AIFMD is not applicable on the funds managed by government. A prime example of such funds is the funds which support social security pension system such as the supranational institutions. The World Bank and the members of the World Bank Group are again excluded from the AIFMD.
The G20 leaders concluded that it is important to have a secure and stable financial system implied on all the major market players. This system should be subjected to proper regulation and supervision. Today, in the European financial system, AIFM organizations have become an eminent part. They are managing huge quantities of assets on behalf of the pension funds and other similar investors. These investors account for a large part of the trading activities within the financial sectors.
The risks faced by the investors upon investing in AIFM are monitored and controlled. Therefore, the sole purpose of creating a secure financial regulation is met through the AIFMD.
The importance of the AIFMD can be assessed by the fact that it is an important part of the European Commission’s mission to set proper regulations in order to promote a healthy, stable yet secure financial system.