Pre-Marketing Efforts By US Fund Sponsors In The EU: Testing The Waters Before Going All-In - New York Office Snippet

• Jurisdiction: European Union
• Law Firm: Loyens & Loeff
• Subject Matter: Finance and Banking, Media, Telecoms, IT, Entertainment, Advertising, Marketing & Branding, Fund Finance
• Author: Mr Frank Van Kuijk, Guillaume Benoit and Megane Lindecker
• Published date: 28 March 2023

Although the fundraising climate in 2023 is more challenging than in prior years, US fund sponsors still look to tap into the European professional investor market. However, US fund sponsors are reluctant to incur material costs to prepare for a European capital raise when there is an elevated risk that a fundraising effort in Europe may not be successful. Hence, testing investor appetite is key.

Prior to August 2021, the rules around efforts to test investor interest (generally referred to as "pre-marketing") were not harmonized in the EU, resulting in varying interpretations of what was permissible without a marketing registration. Since August 2021 there is a harmonized definition of pre-marketing in the EU. What the definition generally boils down to is that pre-marketing is the effort of testing EU investor interest for an investment idea or strategy whereby prospective EU investors cannot be presented with "sign on the dotted line" style documents or other key fund documents which are in final or near-to-final form.

In addition to a harmonized definition of pre-marketing, the EU pre-marketing passport saw the light in August 2021. Such a passport can be obtained by an authorized EU AIFM and is only subject to a simple notification with the EU regulator of the country where the AIFM is located. The pre-marketing passport secures EU-wide pre-marketing access to professional investors without the need to first launch the fund, incur administrative fees, engage in burdensome registration procedures or already select the type of vehicle that prospective EU investors would commit to.

Luxembourg 'host AIFMs' typically offer pre-marketing as a separate service under a so-called chaperone agreement, whereby the Luxembourg host AIFM and the US sponsor team up when approaching prospective EU investors. The pre-marketing service can be subcontracted to certain EU-regulated entities, which in practice are often placement agents.

If a US fund sponsor does not want to...