European private equity real estate compliance under the AIFMD

Publication Date05 March 2018
Date05 March 2018
AuthorMaiia Sleptcova,Heidi Falkenbach,Wisa Majamaa
SubjectProperty management & built environment,Real estate & property,Property valuation & finance
European private equity real
estate compliance under the
Maiia Sleptcova and Heidi Falkenbach
Aalto University, Espoo, Finland, and
Wisa Majamaa
ICECAPITAL REAM Ltd, Helsinki, Finland
Purpose The purpose of this paper is to investigate the effect of Alternative Investment Fund Managers
Directive (AIFMD) on European private equity real estate (PERE) industry.
Design/methodology/approach The paper draws upon a set of 12 semi-structured interviews with
European PERE fund managers to explore their views on the reporting and risk management under the
AIFMD, the costs and benefits associated with the AIFMD compliance and the effect of the AIFMD on
European PERE industry.
Findings Aone size fits allapproach adopted by the AIFMD results in difficulties in understanding and
implementing the AIFMD requirements by PERE managers. Due to the limited applicability of the AIFMD
risk reporting requirements to PERE funds, PERE managers have developed their own risk metrics, which
they report internally. The formalization of risk management process and the separation of risk management
function constitute the two most significant changes experienced by PERE managers. The managers
recognize a positive branding effect from the authorization and improved risk awareness in their
organizations due to the AIFMD.
Research limitations/implications The current paper focuses on PERE fund managers and does not
address other real estate funds falling under the AIFMD.
Practical implications PERE fund managers require feedback and guidance from authorities and best
practice recommendations from industry organizations to enable proper compliance. Industry-specific
reporting requirements would benefit both the industry players and authorities.
Originality/value Given the broad scope of the AIFMD, it is of interest to look at how PERE fund
managers have adapted to the regulatory change.
Keywords Governance, Risk management, Fund management, Real estate funds,
Alternative investment fund managers directive, Private equity real estate
Paper type General review
1. Introduction
The Alternative Investment Fund Managers Directive (2011/61/EU, later AIFMD or
Directive) is a European Union (EU) directive that establishes a harmonized framework
for regulating alternative investment fund managers (AIFMs) in order to increase investor
protection and reduce systemic risk. It is one of the packages of measures drawn up by the
European Commission to regulate financial services in the aftermath of the global financial
crisis. Prior to AIFMD, alternative investment industry had been largely unregulated in a
number of EU countries.
AIFMD regulates fund managers (AIFMs), which are legal entities, whose regular
business is managing one or more alternative investment funds (AIFs). The term AIF
includes all the funds that are not already regulated by the UCITS Directive (2014/91/EU),
such as hedge funds, private equity funds and real estate funds, among others. Although the
Directive primarily focuses on fund managers instead of funds, there are knock-on
impacts at fund level.
Journal of Property Investment &
Vol. 36 No. 2, 2018
pp. 210-216
© Emerald PublishingLimited
DOI 10.1108/JPIF-05-2017-0035
Received 3 May 2017
Revised 1 August 2017
Accepted 4 August 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
This work was supported by Tekes (Grant No. 1349/31/2015).

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