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4th Feb 2020

Wednesday 29 January 2020, the European Parliament officially approved the United Kingdom’s (UK) exit from the European Union (EU).

In October 2019, the UK and the EU agreed a Withdrawal Agreement covering the terms of the UK’s departure from the EU.

On Friday 31 January 2020, at 11 p.m. GMT the UK left the EU and now enters into an implementation period during which the UK will negotiate its future relationship with the EU.

The implementation period is due to operate until 31 December 2020.

During the implementation period, EU law would continue to apply in the UK. Passporting would continue, as would consumer rights and protections derived from EU law. New EU legislation that takes effect before the end of the implementation period would also apply to the UK.


The EU’s passporting rights enable asset managers established in EU countries to operate and sell most of their fund products across the EU with minimal additional regulatory burden in the host countries.

Presently, the UK is the largest centre for asset management in Europe.

Whilst UK AIFMs will retain passporting access during the implementation period, subject to negotiations with EU, they eventually face the prospect of relegation to third party status under AIFMD.

Third party access to the EU capital pool is, however, a fairly well-trodden path for non-EU managers in the US, Asia, Middle East and offshore jurisdictions.

Many UK managers have already established relationships with reliable third party EU-based AIFM’s, such as JTC’s Luxembourg-based Global AIFM Solutions business, making use of their marketing passport to retain access to Europe. A fewer number have even taken steps to establish their own European-based AIFM’s, despite the high costs and ongoing administrative burden associated with this approach.

The advantages of opting for a third party AIFM are not limited to the marketing passport alone. Access to high quality technical expertise in the fund domicile, particularly in the areas of Portfolio Management, Risk, Governance and Regulatory Oversight, use of market leading IT infrastructure and access to the AIFM’s expertise in fund structuring and network, are some of the benefits of taking this approach.


An alternative option is the national private placement regime (“NPPR”).

AIFMD allows for third country based structures to gain access to the EU domestic market through Member States’ NPPR, which non-EU managers and structures have been utilising since the enactment of the legislation in 2012.

This was further echoed in the EU Commission’s report on the Report on the Operation of the AIFMD, which was produced for the EU Commission by KPMG at the start of 2019. Amongst comments on a number of operational issues relating to the AIFMD in practice, it was also notable that owing to the success of the NPPR regimes, a number of member states called for the NPPR regime to be retained, even in the event that a third country passporting regime was also introduced.

Parallel Structures

UK private equity managers may find the route of establishing a parallel Luxembourg partnership, taken by many third country managers, an attractive option for retaining passporting access to the EU investor pool.

A tax transparent Luxembourg partnership is set-up as a parallel vehicle to the third country AIF, generally investing on a pro-rata basis, which is required to appoint an EU AIFM and accordingly gains access to the passporting regime.

Flexibility in these arrangements allows for continued access to European markets for capital raising.

Structures set-up in Delaware, Cayman, Guernsey and Jersey have been employing this strategy with success for a number of years.


The European Council adopted a cross-border directive on distribution of collective investment undertakings (“CBDF Directive”) and a related regulation (“CBDF Regulation”) (collectively, “the Omnibus Proposals”) on 14 June 2019 which, amongst other things, amend the existing marketing regime under AIFMD.

The Marketing Regime amendments attempt to address market ambiguity regarding pre-marketing, and reverse solicitation, whilst adding additional notification requirements for AIFMs in the pre-marketing phase of fund raising.

These amendments are expected to come into force in 24 months allowing the EU Member States time to implement the amendments into their national regimes.


The EIF, which is part of the European Investment Bank group, has for a long time been a significant investor into funds which are investing into venture and growth businesses in the EU. Whilst the position of the EIF has naturally been in flux through the period of the Brexit negotiations, particularly as regard to opportunities in the UK, it remains a significant player in the European market generally.

This commercial approach was further bolstered by an updated EIB policy in March 2019 confirming no impediment to private equity firms in the Channel Islands continuing carrying out ‘business as usual’ with the EIF. This updated policy replaced an interim approach that had been in place whilst the EU Code of Conduct Group on Business Taxation undertook a comprehensive screening process of jurisdictions, which culminated in EU Finance Ministers (ECOFIN) formally confirming Jersey’s position, also in March 2019, as a cooperative “white-listed” jurisdiction.

It has been encouraging that the EIF has continued to invest in Channel Island based funds throughout 2019, including not only follow on funds for existing managers but also new CI funds coming to the market for the first time.


Whether you are contemplating opting for an EU onshore fund in Luxembourg with a parallel structures in Delaware, Cayman, Guernsey, Jersey or UK. JTC can assist. JTC can provide a comprehensive, flexible and cost-effective one-stop-shop solution for alternative fund managers needing to navigate the requirements of the EU Alternative Investment Fund Managers Directive (AIFMD), with AIFMD-compliant onshore and offshore Management Company solutions in Luxembourg and Guernsey, as well as AIFMD-compliant Depositary services in the UK and Luxembourg.

Our unique culture, shared ownership, guiding principles and core values, means that you need look no further to find the perfect partner to manage and administer your funds.

JTC fund services have offices in: Cayman; Guernsey; Jersey; Luxembourg; The Netherlands; Mauritius, South Africa, UK and US.

We are regulated by GFSC, JFSC, CIMA, CSSF, DNB, MFSC, FSCA and FCA.

We will tailor our solution to meet your needs, offer you a range of services including domiciliation, fund administration, fund accounting, host AIFM and depositary services.

To learn more about our fund services and team please visit Alternatively, if you would like us to provide you with a proposal for the ongoing running cost for your fund please get it touch, we are here to help.