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Bermuda Positions for AIFMD

Bermuda Capital City Hamilton Skyline and PortRe-post from Oyster Consultant Allen Foley’s LinkedIn site – Jul 21, 2015

Recent amendments to Bermuda’s Investment Business Act have laid the path for recommendation by ESMA to passport Bermudian AIFMs into the EU.

Bermuda has a long history of being a center for the management and administration of global Hedge, Private Equity and Real Estate funds. More recently the jurisdiction has become a prime location for the set up of Insurance Linked Security funds, an alternative investment class uncorrelated from traditional financial investments.

November 2014 ESMA issued a call for for evidence and mentioned its recommendations will not treat all non-EEA countries as a single block. Prior to this a few Bermuda based Investment Managers moved forward and set-up EU structures, the majority have been on hold for the 2015 ESMA guidelines and EC decisions. Certainly the latter is counter to the possibility of launching now in an EU Member State of Reference (MSR), but on the other hand understandable as the Bermuda Monetary Authority (BMA) is highly regarded and viewed as having the capability to address the requirements of the AIFMD in tandem with EU MSRs.

Hypothetically one possibility is that BMA may be able to authorize AIFMs subject to notifications and approval of a MSR. Operationally the depository could be located in the MSR and such depositories would be subject to the MSR’s oversight.  The status of assets in sub-custody and the types of prime brokers involved will need to satisfy the depositories requirements located in the EU.

If the recommendation is affirmative, Investment Managers will need to analyse the pros and cons of getting authorized as an AIFM in the EU vs authorized in Bermuda. We will find out shortly what those ESMA recommendations are to the EC.

(ESMA announced it intends to publish its opinion and advice to the EC during the week of 28 July rather than 22 July as previously expected.)