Securing a third-country passport to access European investors is no longer viewed as the go-to solution it once was by the UK investment fund sector, according to Tim Hames (pictured), Director General of the British Private Equity & Venture Capital Association (BVCA).
Hames was speaking at the recent Guernsey Funds Masterclass in London on the impact of Brexit on fundraising, alongside Phil Bartram, Partner at Travers Smith. They agreed that Brexit had called into question what the best way to market to European investors would be going forward.
Under the Alternative Investment Fund Managers Directive (AIFMD), investment managers based in the UK are entitled to a passport with which to access European investors. Without it, they would rely on the pre-existing national private placement regimes (NPPRs), which many jurisdictions are considering phasing out and replacing with the passport, despite NPPR offering a more efficient route to market for many investment managers.
“It’s worth emphasising the point that even before the referendum occurred, industry sentiment had become more ambiguous as to what it really wanted,” said Hames.
“At the beginning of the AIFMD passport, industry sentiment was very much that the passport was the silver lining in the cloud. Three or four years into the regime and a closer inspection of what the silver lining actually was, people have already started to say, ‘Well, could we keep both systems running for a bit longer, please, and perhaps not put all our eggs into this particular basket?’.
“It’s not as if some sort of ‘get out of jail free’ card has been taken away from us by the referendum result. It was a more complicated evolving debate anyway.”
Bartram said: “A third-country passport is not a panacea for the UK industry as we go into Brexit”. He described his experience in relation to non-EU funds using NPPR as largely positive.
“I think it’s a very successful, very workable route to market. It’s predictable and certain for the time being. Not every European jurisdiction has a national private placement regime, but all of the important ones, from the perspective of having significant numbers of active limited partners and investors, do have them.”
He referenced Apax Partners, Cinven, BC Partners and CVC as non-EU funds that had raised significant sums recently or were in the process of doing so.