Over a four-year period, the number of fund managers exempt from an AIFM license under certain conditions has increased by nearly 50 percent, reaching 747 in 2023. During the same period, the number of funds managed by these so-called “light managers” has almost doubled. These managers predominantly invest in private equity.
This is evidenced by a report published by the Netherlands Authority for the Financial Markets (AFM), based on internal data. Since 2019, an average of approximately sixty new light managers have registered each year, according to the regulator.
In 2014, the Alternative Investment Fund Managers Directive (AIFMD) entered into force, at the time also referred to as the “hedge fund directive.” This European directive brought alternative investment funds under regulatory supervision and ensured that such funds were also required to comply with rules relating to transparency and the safekeeping of assets.
'Small' managers of alternative investment funds fall outside the scope of the directive, provided they meet the exemption criteria. Total assets under management may not exceed €100 million, or €500 million provided that the manager does not use leverage and the fund is closed-ended for its first five years. In addition, the minimum commitment must be at least €100,000 per investor (to be called in full), or the offering must be limited to a maximum of 149 investors.
'The AFM observes an increase in the number of light managers investing in crypto-assets.'
This group of light managers is growing rapidly. In 2019, there were 504 such managers; by 2023, this number had risen to nearly 750, representing growth of almost 50 percent. Over the same period, the number of funds managed by these managers increased by as much as 100 percent, reaching 1,542 at the end of last year.
By way of comparison, the population of licensed managers increased by “only” 15 percent between 2019 and 2023. In 2023, there were 110 AIFM-licensed managers, of whom 14 were newly licensed, according to figures published by the AFM.
All roads lead to AIFMD
Among others, IBS Capital Allies, Wijs & Van Oostveen, Trustus Capital Management, WNP, Antaurus, Anthos Fund & Asset Management, and Laaken Asset Management hold a full AIFMD license. Particularly for asset managers seeking to offer or expand products in private markets, it appears that all roads ultimately lead to the AIFMD, as previously evidenced by field research conducted by Investment Officer. According to experts and managers at the time, holding a license provides innovative capacity as well as a mark of quality, thereby creating a competitive advantage.
Private markets —private equity in particular— are especially popular among light managers. According to the research, 62 percent of managers invest in private equity, representing assets of approximately €16 billion. Other investment categories that are well represented include real estate (€3.6 billion, 14 percent) and funds of funds (€2.7 billion, 10 percent).
While the AFM’s research does not compare the current figures with historical data, Joris Rump, Head of New Funds at fund administrator AssetCare, notes that private equity is “certainly” becoming increasingly prominent among this category of funds. AssetCare provides ongoing investment administration services to funds and therefore counts many light managers as well as licensed managers among its client base. According to Rump, the firm’s focus is increasingly shifting towards private equity, a trend that is also visible among peers in the market.
“The share of funds of funds is also increasing. The underlying idea is the democratization of private markets. The very best deals often have ticket sizes of tens of millions of euros and require a high minimum commitment. Such amounts are typically beyond the reach of individual private or corporate investors. As a result, investments by these investors are increasingly pooled and allocated to private markets through a feeder structure or a fund of funds.”
Investing in crypto
Eleven percent of light managers invest in the category “other,” which includes crypto-assets. “The AFM observes an increase in the number of light managers investing in crypto-assets,” the supervisor notes. “Licensed managers, by contrast, appear to invest little or not at all in crypto-assets. A possible explanation is that licensed managers are required to appoint a depositary, and in 2023 the Netherlands did not yet have depositaries that were permitted, under their license, to hold crypto-assets in custody. This depositary requirement does not apply to light managers.”
In this context, Rump points to the Regulation on Markets in Crypto-Assets (MiCAR), which stipulates that as of 30 June 202X, all parties wishing to provide crypto-asset services in the Netherlands will be required to hold a MiCAR license. “Without MiCAR, the transactions executed by crypto funds through crypto-asset service providers are — largely — unregulated, which also entails significant risks for custodians. The question remains whether the AFM will allow a licensed crypto fund to engage with such parties until they hold a MiCAR license,” Rump notes.
In 2023, fund manager Maven11 chose Liechtenstein — a jurisdiction oriented towards digital assets — as the domicile for its digital asset fund. By cooperating with locally regulated parties, M11 Funds is able to offer funds under a European passport through the licenses of the custodian and portfolio manager. Obtaining a “standard” AIFMD license would have taken too long, managing partner Martijn Veen stated at the time in an interview with Investment Officer.
Total assets under management by light managers amounted to €26 billion in 2023, compared with €932 billion for AIFMD-licensed managers. By way of comparison, assets under management of the first group increased by approximately 75 percent, while those of the second group declined by around 20 percent over the same period.
