EUROPE – The Alternative Investment Fund Managers Directive (AIFMD) must clarify the requirement for day-to-day control over portfolio assets to avoid penalising real estate joint ventures with an inappropriate structure, according to INREV.
In a submission as part of a consultation that closed last week, the body urged ESMA to rethink draft guidelines on collective investment undertakings to avoid capturing joint venture agreements.
However, it resisted a tighter definition of what might constitute a joint venture.
INREV's sticking point comes over the definition of day-to-day control over a fund's assets.
The broadly worded definition, were it to include real estate funds, could require a level of activity inappropriate to an illiquid asset class – especially in joint ventures split between financial and management partners.
INREV public affairs director Jeff Rupp said: "It's critical that they understand how it works in real estate – on an infrequent basis. It wouldn't take much – just a slight clause, or even a footnote, to say real estate is different and to clarify that the day-to-day management of portfolio assets would not mean doing something with those assets every day."
Although Rupp largely welcomed the draft, INREV resisted attempts to define 'joint venture'.
"Our biggest concern is that interpretations across member states will not be consistent, but I've been quite complimentary about ESMA's willingness to take comment and adjust as necessary," he said.
"They've come up with a regulation that applies to four different asset classes. That's not easy, God knows."
Meanwhile, the European Public Real Estate Association (EPRA) in its submission expressed concern that REITs would be wrongly attributed fund status despite an explicit commitment that property companies would fall outside the directive's scope.
Pointing to a "significant grey area", EPRA instead suggested redefining funds as intermediaries providing investment exposure to assets.
In related news, the UK Treasury has confirmed that UK fund managers will have until July 2014 to comply with the AIFMD – in practice, a year longer than expected.
The UK Association of Real Estate Funds, in its submission to a domestic consultation launched on the implementation of the AIFMD, welcomed a softening of the controversial depository requirement on the basis that a shortage of UK depositories would leave specialist and smaller managers struggling to find one, "either at a competitive price or at all".