Following a very challenging 2023, managers throughout the market are planning their fundraising strategy and timelines for 2024. Europe will be a key target for many. We are seeing a lot of interest already, including from managers who have never previously chosen to raise from Europe.

‍

To summarise, for any non-EU manager looking to raise capital from Europe, there are only two routes in which you can “market” a fund in line with the prevailing AIFMD regulation. These are a) marketing a non-EU fund (typically Delaware) or b) marketing an EU fund (typically Luxembourg). This has been the position for 10 years. However, ahead of selecting either route, managers should strongly consider implementing a formal “pre-marketing” phase ahead of marketing. Since August 2021, pre-marketing in the EU now requires notification to regulators of the relevant country.  By leveraging Langham Hall’s approval as a regulated AIFM in the EU, we can register for a  pre-marketing campaign covering all EU countries. This is not possible for non-EU fund managers.

‍

Hosted Pre-marketing is the fastest way to start speaking to investors. The chronology is as follows:

1. Undertake pre-marketing;
2. Undertake formal marketing by either:*
   a. Marketing a non-EU fund via the National Private Placement Regimes (‘NPPR’) where accessible in that country; or
   b. Marketing an EU domiciled fund via the EU marketing passport

_{*For structural reasons some managers may decide to use both options to maximise routes for bringing in European capital.}

‍

Hosted pre-marketing

‍

This approach is being used as a pathfinder to European LPs. It facilitates conversation with LPs throughout Europe allowing discussion and document sharing (drafts only), up to but short of, executable subscription documents. This can also be conducted for a “potential” EU fund i.e. before establishment, as part of a global fundraise. In this scenario, pre-marketing is conducted for a potential Lux fund as part of the decision making process to determine what level of EU LP interest exists. Once pre-marketing has been completed and LP interest quantified, the fund sponsor/manager can then elect the more appropriate route of the two set out above to circulate final fund documents and admit investors.

‍

Hosted pre-marketing can be up and running in 2-4 weeks.

‍

1. Marketing a non-EU fund via the National Private Placement Regime (NPPR)

‍

Marketing via NPPR is still the preferred route to admit investors from the EU for the majority of non-EU managers. It has been used successfully for 10 years, though some managers are yet to explore this option. It allows targeted country by country marketing, and is the required regulatory step to bring European investors into a non-EU fund. Certain regulatory requirements are triggered by formal marketing, including annex IV reporting (similar to Form PF) and a depositary-lite service (triggered by investors in Germany and Denmark). We provide these services from our London office.

‍

Timelines vary, but managers should factor in 1-3 months to identify jurisdictions and get marketing permissions in place. Because of this, careful sequencing of pre-marketing and marketing applications should be considered so not to delay investor commitments.

‍

2. Marketing an EU fund using a marketing passport

‍

This requires establishing a (typically) Lux parallel fund usually managed by a Lux host-AIFM, with Lux fund administration and depositary services. It is a viable option for anyone raising more than $300m from European investors. While introducing some operational complexity, this is the natural progression for those with sufficiently strong LP demand or strategic needs and opens the fund for (professional) investors throughout any EU country.

‍

The timeline to establish a Lux fund and getting a formal marketing approval to circulate final Lux fund documents and accept investors is usually circa 2.5 months.

‍

A note on reverse solicitation

‍

Managers considering European fundraising should bear the following in mind. In an increasingly competitive fundraising environment, reverse solicitation is less predominant than it once was. Reverse solicitation does not constitute a marketing strategy, and is undertaken at the sole risk of the GP and manager if it should be proven later that it was not a genuine reverse solicitation from the investor. EU regulators are putting more scrutiny on reliance on reverse solicitation and IR teams and placement agents are at risk of being in breach of EU regulations for pre-marketing or marketing a fund without regulatory approvals/notifications. GCs and CCOs are wary of investor DDQs increasingly asking about exposure to reverse solicitated investors. Case law now exists in which a distributor has been prosecuted for marketing activities relying on reverse solicitation.

‍

If you are considering any European fundraising at all, please contact either Hanny Tirta (hanny.tirta@langhamhall.com) or Joe Hime (joe.hime@langhamhall.com) and we can walk you through the details of premarketing, NPPR and establishing and operating a Lux fund.

‍

For all US fund administration requirements, please contact Joseph Hindi (joseph.hindi@langhamhall.com) our Head of US, based in New York.

Effective 31 January 2024, the Financial Conduct Authority (‘FCA’) Handbook’s thresholds on high net worth individuals (‘HNWIs’) and ‘sophisticated investors’ has changed. These changes are a result of the FCA consultation response on financial promotion order (‘FPO’) exemptions for HNWIs, which was published in November last year. These exemptions have not been substantively updated since 2005.

‍

The new thresholds for each of the criteria are;

• High Net Worth Individuals: The net annual income requirement will increase from £100,000 to £170,000. Additionally, the threshold for net assets will rise from £250,000 to £430,000 or more.
• Self-Certified Sophisticated Investors: There will no longer be a requirement for individuals to have made more than one investment in an unlisted company in the prior two years. The exemption for company directors will change, requiring the company’s minimum annual turnover to be £1.6 million or greater, from a previous minimum of £1 million.

The exemption for individuals that have been part of a network of business angels, and/or have worked in the private equity or SME finance sector for two years remains unchanged.

‍

If a person relies on the above categories for financial promotion of a non-retail fund, there may also be further regulatory considerations (e.g. the production of a Key Information Document (‘KID’), risk warnings, 24 hour cool off periods, etc) subject to appropriate legal advice as investors in these categories are still a sub-set of retail investors. Alternatively, these investors may very well elect to opt-up to professional status if they meet the MiFID criteria for professional investors for the most straight forward financial promotion.

‍

For fund sponsors that are not regulated to distribute products to “retail” investors, it is important to note these new thresholds especially where they are relying on the relevant FPO exemptions in relation to these investor classes. It is important to note that these thresholds will also be applicable in the context of “friends and family” raises. Appointed Representatives undertaking financial promotions will also be required to consider these new definitions, in case they don’t have permissions to market to pure retail clients.

‍

Blog updated 18/03 – These amendments were met with harsh criticism by many in the venture capital and start-up community and on the 6 March the UK Government reversed its decision. Read more here.

As you approach the end of your university degree and you start considering what career path would be suited to your interests and skills, there is a wide selection of opportunities to look into following graduation. One of these options is joining a Graduate Programme.

‍

We have spoken with two of our 2023 Graduate Trainees, Melissa Hilling and Oscar Pringle, who shared their experience of their application process and what advice they would share to anyone considering staring a career in the funds world.

Melissa and Oscar joined Langham Hall in September 2023.

‍

Why did you decide to join the Graduate Programme at Langham Hall?

‍

MH: I have always been interested in analysing how businesses and investment funds are impacted by economic change, especially in the real estate sector. This paired with my interest in accounting is what drew me to pursue a career in fund accounting. When I was applying for graduate programme, it was important to me to work somewhere which would support my professional development, especially as I did not have a finance-based degree, having studied English at University. Langham Hall’s extensive focus on learning and development whilst also having a hands-on approach with practical exposure is what really stood out to me.

‍

OP: I wanted to work in private markets and Langham Hall’s graduate programme offered me the chance to explore this interest. The graduate programme sets you up well for a successful career in the fund industry, allowing you to gain an in-depth understanding of fund operations, whilst acquiring practical skills and knowledge through sitting the ACCA exams. This is a valuable qualification and all being well you become a chartered accountant after three years, with a wealth of knowledge in the fund industry. For me, this was a very attractive offering, and it has definitely proved its case so far!

‍

Q: How did you find the Assessment Centre Day and application process?

‍

MH: The application process was straight forward and really painted a picture of what life at Langham Hall was like. The interviews were in person at the office which I really liked. There was no need to know the ins and outs of what fund accounting entailed. It was also a chance to find out more about Langham Hall and the type of clients they work with.

‍

OP: While studying for an economics degree at the University of St Andrews, I applied for the graduate programme and within two months of submitting my application, I had been offered a full-time position to take up on graduation. I was very impressed by the speed and efficiency of the whole application process. Having completed tests and online interviews, I attended the final stage of the application process, the Assessment Centre Day. This was an insightful day whereby I was able to meet some of my future colleagues and visit the London office.

‍

Q: What’s the best piece of advice you could give to someone who’s considering applying for the 2024 Programme? Any tips?

‍

MH: Show that you are eager and willing to learn! Try to gain an understanding of what Langham Hall does before the interviews. Do some research on the firm and fund accounting so that you can speak about it at a high level. It’s also important to have some commercial awareness and be able to give some real-life examples. I found the Insights section on the Langham Hall website really useful!

‍

OP: Really research what Langham Hall does and highlight points of interest. If it ticks the boxes for you, then just go for it! If you make it to the interview stages, ask lots of open-ended questions and be engaging.

‍

Q: What do you hope to be doing in three years’ time?

‍

MH: A qualified fund accountant managing a team of my own!

‍

OP: I hope to have completed my exams and be a fully qualified fund accountant! I want to take on more responsibility within the private equity team, becoming that focal point for my clients, with a view to leading a team of my own in the future.

Our trainee programmes are aimed at kickstarting your career in the funds sector, covering illiquid asset classes such as private equity and real estate, developing your skills and knowledge to allow you to make an impact in our business and industry.

‍

If you are interested in joining Langham Hall, check out our latest vacancies here.

This is a reminder that AIFMD Annex IV submissions for the period ending 31 December 2023 are due to be filed by 31 January 2024. The requirement to report is in place for:

‍

All EU AIFMs, UK AIFMs and non-EU AIFMs which:

1. Have active funds with commitments from EU/UK LPs marketed to under AIFMD; and
2. Have AIFs currently being marketed under AIFMD in the EU / UK.

We have seen a marked year on year increase in GPs seeking European capital, and expect this to be the busiest filing period of the last decade. With many GPs planning to return to fundraising in 2024, we have also seen a large number of managers seeking to tidy-up any outstanding historic submissions, which may have been missed in the past.

‍

There is no harmonised system for completing and filing these reports across the EU, rather each regulator has its own reporting portal with various nuances in reporting format and process. This reporting burden often falls to fund finance or compliance teams who may be unfamiliar with the reporting process, which will be required for all AIFs by 31st January 2024, and potentially as often as quarterly thereafter depending on the requirements.

‍

Langham Hall has been completing Annex IV reporting for AIFMs and AIFs since 2014. We prepare and file hundreds of Annex IV reports each year and are familiar with the reporting portals across all jurisdictions. Langham Hall is able to set up the portal access for each country, and complete and file these Annex IV reports in the relevant formats required by each regulator. We file these reports directly with the regulator with minimal involvement required from the fund manager.

Farview Equity Partners (‘Farview’), the Europe focused growth investor, continues to deploy capital and now has four deal structures in a range of financial and ESG focused businesses. This includes investments in Evora Global, Unily, Exclaimer and Amplience.

‍

Langham Hall has been appointed to provide administration and accounting services to the deal structures from our Guernsey office, which assisted Farview in transitioning structures from another administrator in 2022.

‍

Guy Sochovsky, founder and partner at Farview said ”Langham Hall has been a valuable partner to us as we continue to execute our investment strategy in Europe. Their communication, responsiveness and ability to problem solve is second to none.”

‍

We look forward to working with Farview as they continue to execute this strategy.

‍

About Farview Equity Partners

‍

Farview Equity Partners invests in growth-oriented enterprise and financial technology companies in Europe. Founded in 2019 by a team of highly experienced professionals with sector-specific growth equity, operational and legal backgrounds, our mission is to empower European enterprise and financial technology companies to grow beyond their current horizons.

The Economic Crime and Corporate Transparency Bill 2022 was passed into law on 26 October 2023 and became The Economic Crime and Corporate Transparency Act 2023(the “Act”).

‍

The Act is designed (amongst other things) to tackle money laundering and strengthen the UKs company registrar, known as Companies House. It will reform the role of Companies House radically, turning it into an active gatekeeper.

‍

As anticipated, as part of these changes the Act introduces an identity verification requirement for:

• all new and existing company directors,
• People with Significant Control (PSC), and
• those delivering documents to Companies House UK.

Filing requirements for limited partnerships and limited liability partnerships have also been reformed under the Act, with part of that reform being that partners will also require verification at Companies House.

‍

To help facilitate verification, the Act introduces the new role of the Authorised Corporate Service Provider (‘ACSP’).

‍

There will be a transition period for existing directors and their equivalents, and for PSCs to verify their identity in. This transition period will provide existing directors and PSCs time to comply with the new requirements, whilst ensuring the integrity of data already on the register. Detailed guidance should be issued shortly.

‍

How can Langham Hall help?

‍

Building on our success as one of the top ten verification agents in the country for the Register of Overseas Entities, Langham Hall will be acting as an ACSP and will be able to assist clients with fulfilling these new verification requirements.

‍

If you wish to discuss the requirements and how Langham Hall can assist you please do not hesitate to get in contact: LHACSPServices@langhamhall.com

The Economic Crime and Corporate Transparency Bill 2022 (‘the Bill’) is upcoming legislation designed to tackle money laundering and strengthen the UKs company registrar, known as Companies House. This is a follow on from the Economic Crime Transparency and Enforcement Act 2022, which saw the implementation of the Register of Overseas Entities for those entities holding UK land or property.

‍

The Bill is expected to introduce an identity verification requirement for:

• all new and existing company directors,
• People with Significant Control, and
• those delivering documents to Companies House UK.

Filing requirements for limited partnerships and limited liability partnerships will also be reformed under the Bill, with part of that reform being that partners will also require verification at Companies House.

‍

To help facilitate verification, the Bill will introduce the new role of the Authorised Corporate Service Provider (‘ACSP’).

‍

Building on our success as one of the top ten verification agents in the country for the Register of Overseas Entities,

Langham Hall intends to become an ACSP and will be able to assist clients with fulfilling these new verification requirement.

‍

The Bill is expected to receive Royal Assent within the next month and detailed guidance should be issued shortly after that.

If you wish to discuss the requirements and how Langham Hall can assist you please do not hesitate to get in contact: LHACSPServices@langhamhall.com

ACSP after Royal Assent: What you need to know

The last few years have seen a significant rise in the number of GP-led continuation funds being launched, with the market growing from just $5 billion in 2013 to around $50 billion in 2022. Continuation funds allow existing investors to access liquidity and rebalance or de-risk portfolios, while giving new or rolling investors access to mature, pre-identified companies with a shorter holding period than a primary fund. For the GP, a continuation fund allows the manager to potentially realise higher returns as market conditions improve, whilst continuing to hold strong performing assets and crystalising carry.

‍

Establishing these funds comes with some unique challenges, such as price setting against valuation, conflict management and also LP diligence on the asset or portfolio. Another question we are increasingly getting asked is whether a continuation fund marketed in Europe is classified as an AIF under the AIFMD (‘Alternative Investment Fund Managers Directive’).

‍

The European Securities and Markets Authority defines an AIF as “a collective investment undertaking… that raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors.” In the case of continuation funds, these are often widely marketed by either the manager, or an appropriate agent. Regardless of the existence of a pre-identified portfolio, the activity of marketing to multiple investors and continuance of management in accordance to a defined investment objective means that in our view, a proposed continuation fund would fall under the definition of an AIF where marketing in Europe is concerned.

‍

Implications of marketing an AIF

‍

If defined as an AIF, then a proposed continuation fund marketed in Europe will need to comply with the AIFMD. In practice, this means a continuation fund can be;

‍

a) Pre-marketed in all EU27 – since the harmonisation of pre-marketing rules in August 2021, pre-marketing can be undertaken by a regulated AIFM or MiFID entity in all EU member states, providing a pre-marketing notification is filed with the home regulator within 14 days of the commencement of pre-marketing. Non-EU sponsors are able to engage a regulated AIFM to file this notification, and indeed we have seen a number of North American sponsors doing this. In the case of pre-marketing, only draft documents (excluding subscription documents) may be shared with potential investors.

‍

AND

‍

b) Registered under the NPPRs in the countries in which it is marketed – after any period of pre-marketing (if undertaken), it is possible to undertake formal marketing by way of a country-by-country registration. It is important to note that this is not possible in much of Southern Europe, and countries including Germany and Denmark require a depositary-lite to be named on the registration.

‍

OR

‍

c) Set up as an EU standalone fund – if set up in an EU member state such as Luxembourg or Ireland, a continuation fund can be formally marketed to all EU27 under the marketing passport. Setting up an EU fund would require an AIFM and a Depositary to be appointed.

‍

In practice, we have seen recently a number of non-EU sponsors engaging a host AIFM (such as Langham Hall) to act as AIFM for the period of pre-marketing. Once the manager has further clarity on the location of interested LPs, then an informed decision can be made on whether to register a non-EU fund on a country-by-country basis, or set up an EU vehicle.

‍

Who is undertaking marketing?

‍

One important consideration in the marketing of continuation funds is who will actually be undertaking the activity of marketing. Although the regulations mentioned above allow for the proposed fund to be marketed, many countries also require the distributor to be appropriately regulated. In our experience, either;

1. The sponsor undertakes the activity of marketing themselves, and is regulated to do so in Europe or is “chaperoned” by a regulated AIFM/MiFID entity; or
2. The sponsor appoints a placement agent that is appropriately regulated to distribute products in Europe

Again in practice, many non-EU sponsors will engage specialist secondaries focused placement agents who themselves should be appropriately regulated in Europe, but this is an important consideration.

‍

What next?

‍

For sponsors considering launching a continuation fund, it is important to consider the regulatory implications before going to market. We expect the GP-led market to continue to grow, particularly as LPs continue to allocate capital to these opportunities. We are working with a number of sponsors to help them navigate the European regulatory environment, assisting with both pre-marketing, but also later formal registration either via the NPPRs or the EU passport. Please do get in touch if you would like to discuss further.

Langham Hall is committed to giving back to the communities in which it operates. We champion our staff to be involved in a variety of activities to widen their life experiences and perspectives.

‍

Our global offices have undertaken a wide range of charity and fundraising activities over the past six months, ranging from white collar boxing to career coaching in local schools.

‍

Check out what our teams have been up to:

‍

Jersey

‍

This year, the Jersey office has partnered with two local charities, Jersey Hospice Care and Dementia Jersey. To raise well needed funds, they have taken part in a variety of initiatives in the last few months including raising money for Dementia Jersey by manning their stall in town and donating their monthly collections to both Dementia Jersey and Jersey Hospice Care.

‍

Guernsey

‍

The Guernsey office selected Guernsey Alzheimer’s Association as their chosen charity of the year and have since taken part in a variety of initiatives to support the charity with fundraising and volunteering. This included taking part in the annual Guernsey Alzheimers’ Golf Day with former professional rugby player Kyran Bracken. During early June staff took part in “The Saffery Rotary Walk,” which saw them go around the island in a 39-mile walk. The initiative raised money for 25 local charities including the Priaulx Premature Baby Foundation, GSPCA and Les Bourgs Hospice.

‍

USA

‍

For the first half of the year, the USA office partnered with the Association to Benefit Children (‘ABC’). ABC provides early childhood education and early intervention programs for children aged 0-5, providing a nurturing foundation to children from New York City’s most vulnerable families. The team collected hundreds of books which were presented to the charity during an engagement day with the students. The Langham Hall team took part in classroom activities and presentations.

‍

Luxembourg

‍

The Luxembourg office has been focusing their efforts on humanitarian aid for the Turkey-Syria Earthquake Appeal. Through direct transfers, employees generously contributed to AHBAP and OXFAM. Langham Hall Luxembourg matched their donations with an equal contribution to further support employees’ commitments. In addition to monetary support, the team collected clothing and different essential items delivered to the Embassy of Turkey.

‍

UK

‍

The UK office has this year renewed its partnership with Future Frontiers, an award-winning education charity that exists to ensure young people fulfil their potential at school and when transitioning to education, employment or training at age 16. The initiative saw young people attend a 4-week programme of face-to-face coaching delivered by a team of 10 volunteers from our London office. The office also matched employee contributions for the Turkey and Syria DEC Appeal as well as made donations to the employee’s quarterly chosen charities CALM, Shelter and Dog’s Trust.

We also encourage our staff across all jurisdictions to take on their own challenges and initiatives.

• Kiera Lisle from Jersey arranged a 15 mile walk in aid of Brighter Futures Jersey
• Kiera Lisle and Tara Duncan from Jersey took part in the Jersey White Collar Boxing raising funds for Brighter Futures Jersey and Jersey Hospice Care
• Members of the UK office took part in several charity runs and marathons

We look forward to continuing all our global charity initiatives during the second half of 2023.

‍

We are proud to stand together and extend a helping hand to those in need.

‍