By Mark Bollard, Client Relationship Director
Raising capital for a fund is as much about timing and credibility as it is about performance and strategy. Over the past number of years, we’ve seen how difficult fundraising can be, especially in the private credit space where approximately 60% of the capital to Q3 2024 was raised by the top 10 managers – leaving little for others.
For emerging managers, particularly those spinning out of established firms or launching their first vehicle, the question often arises: Do I need to set up a fund before I have investors committed?
The short answer in Europe is: not necessarily.
Thanks to the pre-marketing regime under the EU’s 2019/1160 Cross-Border Distribution of Funds (CBDF) Directive, managers now have a clearer framework to test investor appetite before incurring the time and expense of fund formation. But navigating this route requires strategic thought and compliance with a specific set of rules.
What is pre-marketing?
Pre-marketing allows alternative investment fund managers (AIFMs) to engage with potential professional investors to gauge interest in a fund that is not yet established. This is particularly valuable for first-time managers who want to validate demand before launching and going through the process, and cost, of setting up a fund.
Critically, this engagement must not amount to an offer or placement of units in a fund. It’s a subtle but important distinction: you’re sharing ideas, concepts and investment theses—not subscription documents.
Who can pre-market?
Only MiFID firms, EU-authorised AIFMs or non-EU AIFMs working through a local EU placement agent or tied third-party AIFM platform can rely on the pre-marketing rules.
For emerging non-EU managers, particularly from the UK or US, working with a host AIFM or local distribution partner is a key way of achieving access to European investors legally and compliantly.
What can be shared?
Under the CBDF Directive, the materials shared during pre-marketing must be clearly identified as draft and not for subscription. These might include:
- Investment strategies and sector focus
- High-level fund terms (e.g. target size, expected structure, fees)
- Track record or team background
Where draft offering documents (prospectus, supplement etc.) are provided, they must not contain information sufficient to allow investors to take an investment decision and should clearly state that: (a) they do not constitute an offer or an invitation to subscribe to units or shares of an AIF; and (b) the information presented therein should not be relied upon because it is incomplete and may be subject to change.
Documents cannot be shared that would:
- Allow investors to commit to acquiring units or shares of a particular fund
- Amount to subscription documents, whether in a draft or final form
- Amount to constitutional documents, a prospectus or offering document of an AIFM in final form.
Strategic advantages of pre-marketing for emerging managers
- Market validation: Pre-marketing allows you to shape your fund around real potential investor feedback. It’s a chance to define your strategy, structure and terms before launch
- Capital efficiency: Avoiding the premature cost of fund formation (legal, structuring, domiciliation) until you have visibility on demand protects your operating budget
- First-mover dialogue: It positions you as proactive and responsive, allowing investors to shape the opportunity alongside you—fostering stronger alignment.
Pitfalls to avoid
- Exceeding the boundaries: If communications are deemed to cross into “marketing” (i.e. offering documents that would allow someone to invest), you trigger regulatory notification and compliance obligations under the Alternative Investment Fund Managers Directive (AIFMD)
- Non-notification: Even though pre-marketing does not require prior notification to the regulator, AIFMs must inform their home regulator of where they intend to pre-market within two weeks of beginning the process. To make the submission, the following information is required:
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- The intended fund name (if known) / fund strategy
- The EU member states in which the pre-marketing is taking or has taken place
- The time periods in which the pre-marketing is taking or has taken place
- A brief description of the pre-marketing, including information on the investment strategies presented
- Where relevant, a list of the AIFs and AIF compartments that are/were the subject of the pre-marketing
- Improper partnering: For non-EU managers, failing to align with a compliant EU-based AIFM or marketing partner can lead to regulatory breaches and reputational risk.
While not necessarily a pitfall, it is important to note that you can’t rely on reverse solicitation in a jurisdiction where you have pre-marketed in the previous 18 months. If you have pre-marketed and are approached by a prospect, you must apply for a full marketing passport in that jurisdiction.
The road ahead
For emerging fund managers, building a book of potential investors is as critical as defining your investment strategy. The ability to pre-market offers a strategic bridge, allowing you to enter conversations early, refine your proposition, and line up capital before committing to a fund launch.
Ultimately, pre-marketing isn’t just a regulatory construct; it’s a modern fundraising tool that, when used well, can de-risk your launch, enhance investor alignment, and build momentum from the ground up.
No matter what private assets fund you’re raising for, leveraging Europe’s pre-marketing regime can give you the edge you need—thoughtfully, compliantly, and cost-effectively.
How IQ-EQ can help
We have extensive experience and a strong track record in helping international asset managers access European investors, with comprehensive AIFM services as well as licensed third-party AIFM platforms in Ireland, Luxembourg, France and the UK. Click here to find out more and get in touch today.
