Contributed By Travers Smith LLP
The question of who may invest in funds essentially turns on the rules which determine to whom these funds may be marketed. The two main investor categories in relation to the distribution of funds in the UK are "professional investors" and "retail investors".
For instance, in keeping with the focus of AIFMD generally, the AIFMD marketing provisions are predicated on the marketing of AIFs to "professional investors" within the EEA. Individual member states are granted discretion as to whether to allow AIFMs to market units or shares in AIFs to "retail investors" in their territory, ie investors who are not "professional investors". The UK has exercised its discretion to allow such marketing to certain categories of "retail investors" (eg, high net worth investors, sophisticated investors and employees). Open-ended funds can only be distributed to retail investors.
Certain additional requirements are imposed under the terms of the AIFMD (in respect of closed-ended funds) and the UCITS Directive (in the case of open-ended funds). Marketing can only be undertaken following the manager giving the FCA the required notice of the proposed marketing and filing the relevant documents with the FCA. Certain pre-investment disclosures must also be made to investors.