For US fund managers, Europe should be an alluring prospect. It’s home to many large sovereign and institutional investors, all looking for new investment opportunities.
So why do so many see the prospect of raising capital in Europe as anything but alluring?
Is it because they fear it will be an expensive and time-consuming process.
US managers often believe they have two options:
- Create an in-house EU manager to target EU investors. This is likely to cost around $1m and take a year or more to arrange. A year of back-and-forth with regulators, hiring EU employees, and other logistics.
- Appoint a third-party manager in the EU through which to market the fund. This will probably cost around $500,000 and take at least six months. This option also involves a lot of regulatory paperwork.
The problem is these options are only really viable if there is certainty in raising capital in Europe.
For everyone else, it’s easier to put the decision off for another day. Which in many cases means never.
But what if there was a third option?
A lower-cost and more flexible option.
An option that allows managers to strategically target individual European countries, including the UK.
An option that allows them to “test the water” of EU investor interest before making a larger commitment.
There is.
National Private Placement Regimes (“NPPRs”) cost just $10,000-$80,000, depending on the complexity of the fund, and can be arranged in a matter of weeks.
They allow individual EU member states to permit US and other non-EU funds to market in their territory, as set out in the Alternative Investment Fund Managers Directive (“AIFMD”).
What markets can be accessed via NPPRs?
NPPRs allow individual EU member states to permit US and other non-EU funds to market in their jurisdiction, exclusively.
Luxembourg, Ireland, the Netherlands, and the Nordic states are all easily accessible via NPPRs. Germany and Denmark are accessible but impose additional registration requirements and the appointment of a depositary, making the process slightly more cumbersome.
And still within Europe but outside the EU, the UK’s NPPR offers a similarly attractive route into that market.
Unfortunately, some EU countries do not have an NPPR – or have regimes so restrictive as to be effectively unworkable.
France, Spain, Italy, and Austria are among the countries that are effectively inaccessible via the NPPR route.
Whichever market you access, you must ensure you meet all regulatory requirements.
What does NPPR registration and reporting entail for managers?
Managers must register with the regulators in their selected countries.
The registration process varies between countries but typically takes between a few weeks and a few months.
Non-EU funds marketing in the EU must comply with Article 42 of the AIFMD.
Each national regulator has its own interpretation of the rules, so the compliance burden varies between countries. Some countries also impose additional restrictions.
All NPPRs must also adhere to the AIFMD’s reporting requirements, as set out in Article 24. These requirements are often referred to as Annex IV reporting, because the reporting template is set out in Annex IV of the AIFMD.
Managers must report statistical information to the local regulators where they operate, much like Form PF reporting requirements in the US.
This entails answering over 300 questions, covering factors such as the instruments they trade, strategies, and geographical and investor focus.
Reporting frequency may be annual, semi-annual, or quarterly, depending on the fund’s size, strategy, and use of leverage.
You should also be aware that the rules around NPPRs are changing in the coming months.
How are NPPR rules set to change?
Some of these changes are relatively big, some much smaller. But we do not believe any of them undermine the case for using NPPRs to access the EU.
The changes are part of wider reforms to AIFMD rules that were announced in April 2024. National governments must reflect the changes in national laws by April 2026.
The most significant changes are not expected until April 2027, when new reporting documentation and requirements are due to come into effect.
The specifics are still being confirmed, but the aim is to allow regulators to collect more detailed information about a fund’s activities. This includes leverage employed and any investment or risk functions that have been outsourced to third parties.
The UK is not updating its AIFMD and NPPR rules before April 2026, as the Financial Conduct Authority remains in the consultation stage. New rules to simplify the process for non-UK managers are expected to be announced later in 2026 or 2027.
This is major opportunity
But there’s a lot of steps to cover, and the regulatory environment remains fluid. We are here to help.
With our team at your side, you could be out raising capital in a matter of weeks.
We have deep experience working with EU regulators and helping US funds access the EU through NPPRs.
Talk to us about accessing EU markets.
Download the NPPR eBook
Ready to explore NPPR in more depth? Download Unlocking European capital: a guide for non-EU fund managers on NPPR.
