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On 1 November, 2007, the London Stock Exchange (LSE) launched the Specialist Fund Market (SFM) -dedicated and tailored to the needs of investment funds, and targeted at an audience of institutional, professional and knowledgeable sophisticated investors. The SFM is designed for specialist ‘alternative’ funds, and offers managers of closed-ended investment vehicles a new opportunity to raise permanent capital in the investment markets centred in London.

The growth of more complex investment vehicles, together with the much publicised listing of certain high-profile private equity funds on Amsterdam’s NYSE Euronext exchange (including funds managed by KKR Private Equity Investors LLP and Apollo Management Corporation), and along with the rise of sophisticated fund structures being listed on London’s Alternative Investment Market (AIM) -originally designed for smaller trading and entrepreneurial companies -led the LSE to identify a gap between the main market and London’s AIM.

Working in conjunction with market participants in both London and New York, the SFM was developed by the LSE as a European Union-regulated (EU-regulated) market under the Markets in Financial Instruments Directive (MiFID) that is compliant with the EU’s financial services action plan. The SFM is intended to operate with a regulatory framework that can balance the need for flexibility with sound market practice and investor protection, and to provide funds with the ‘London badge’ of enhanced credibility, along with access to the deep pool of investment capital in London and, through the EU passporting system of mutual recognition, access to crucial investment capital in the finance centres of Europe.

Other key attractions of the SFM to investment funds include:

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