By Fèmy Mouftaou, Head of Fund Strategy, Continental Europe and Business Development, Benelux
Pre-marketing a fund allows managers to test investor interest and validate demand for a fund strategy before committing to the costly and time-consuming process of establishing the fund and obtaining regulatory approvals.
Fund managers preparing to market a new fund in the European Union need to pay attention to the Cross-Border Distribution Framework (CBDF), a pre-marketing regime introduced in 2021 as part of the wider Alternative Investment Fund Managers Directive (AIFMD). The framework details how GPs can soft-launch a fund through a pre-marketing process.
The CBDF defines pre-marketing as the “provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors … in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing.”
In short, pre-marketing means that an AIFM representing a GP can share investment strategies or ideas with potential professional investors but within certain limits.
Fund creation process: a pre-market checklist to help attract investors
With that in mind, it may be helpful to consider this checklist when preparing to pre-market a fund:
1. Begin with regulatory notification
Before anything else, ensure you’re compliant. When you’re ready to go, file a pre-marketing notification with the regulator in the EU country where your AIFM is based. Non-EU managers (like those in the UK or U.S.) typically need to partner with an EU AIFM or third-party AIFM. At this stage you only need to supply details about the AIFM, the fund’s investment focus and strategies, and the go-to-the-market timeframe including the EU countries to be targeted.
2. Be strategic about market selection
Not all EU countries are equal when it comes to fund marketing. Identify the specific countries where you want to pre-market, keeping in mind that each jurisdiction comes with its own compliance and operational costs. A targeted approach is more efficient – IQ-EQ research has found that 13 markets account for over 84% of Luxembourg fund marketing, with Germany, France and the UK leading the way.
3. Train your investor relations team thoroughly
Your investor relations team plays a key role in pre-marketing, but they must operate within strict boundaries. They can share pitch decks and draft limited partnership agreements, but not subscription forms or final agreements. They must also limit outreach to professional investors such as institutions, family offices and high-net-worth individuals.
4. Consider appointing a third-party AIFM
To effectively pre-market, you may need to appoint a third-party AIFM or other authorised EU entity. This could be an authorised EU investment firm, an EU tied agent under the Markets in Financial Instruments Directive (MiFID) or an EU-authorised credit institution. These partners handle the formalities and ensure regulatory compliance.
5. Review all marketing materials for compliance
Pre-marketing communications, whether online or offline, must be vetted for compliance. This includes pitch decks, brochures and even LinkedIn posts. A single misstep can lead to regulatory issues, so thorough review is essential.
6. Understand the 18-month rule for investor follow-up
Finally, remember that investors contacted during pre-marketing can only be approached with a subscription offer after 18 months – unless the fund has been formally notified for marketing under the AIFMD passport. Timing and documentation are key to staying compliant.
Once investor interest is confirmed, apply for a marketing passport under AIFMD so you can begin to onboard investors quickly after pre-marketing ends.
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