How investors can avoid AIFM costs

Author: | Published: 8 Dec 2010

Some might say that an institutional investor should understand what he (or she) is buying or at least pay someone more expert to understand what he is buying. Surely an investor can be deceived by fraud or misrepresentation, in which case the traditional institutional investment maxim of caveat emptor might be properly set aside by a court.

However, the caveat emptor principle, so long undermined in the case of retail investment, has now been wholly undercut for institutional investors by the Alternative Investment Fund Manager directive (the AIFM directive).

This directive, on which the ink has not dried and may not fully dry until 2013 (not least because there are a significant number of items in the level one Directive that are postponed into level two delegated legislation), is in a number of important respects all about the regulator knowing better than the institutional investor as to how that institutional...