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AIFMD 2.0: The European Commission's Proposal

AIFMD 2.0: The European Commission's Proposal

On 25 November 2021, the European Commission published a proposal to amend the Alternative Investment Fund Managers Directive (AIFMD).

The suggested changes cover key topics including reporting; delegation; liquidity risk management; loan origination; marketing and depositary services in the context of alternative investment funds (AIFs). The Proposals also contain similar changes to the UCITS Directive (UCITS VI).

Regulatory Reporting

The Commission proposes to increase AIFMs’ regulatory reporting obligations to the National Competent Authorities (NCAs), moving away from reporting on main instruments and principal exposures only to reporting on instrument level. ESMA have been tasked with developing level 2 technical standards to replace the current Annex IV reporting template.

To align with the Annex IV regulatory reporting requirements UCITS management companies will be also be required (UCITS VI) to regularly report details of the markets and instruments in which it trades on behalf of the UCITS managed to their home EU member state.

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The Proposal aims to strengthen the supervisory oversight to ensure a more level playing field in how the current delegation rules are applied.

The regulator in the member state of the AIFM will need to be provided with more details on the functions that are to be delegated and those that are to be retained if the AIFM is delegating more portfolio management or risk management than it is retaining. The ESMA has been tasked with developing regulatory technical standards for the annual delegation notifications.

It is also proposed that applications submitted to NCAs for authorization as an AIFM should include information on the human and technical resources that the AIFM will employ to carry out is functions and, where applicable, supervise its delegates.

Finally, it is also proposed that every AIFM must have at least two full-time staff resident in the EU.

Liquidity Risk Management

The Proposals provide for a more harmonized approach to liquidity risk management across the EU. AIFMs managing an open-ended alternative investment fund must be able to:

  • Temporarily suspend repurchase or redemption of the AIF’s units; and
  • Apply at least one other appropriate liquidity management tool from a prescribed list (e.g. side pockets, gating, notice periods, etc.).

Scope of AIFM Permitted Activities

The Proposals add two services to the list of services that an AIFM may perform:

  • Benchmark administration under Regulation (EU) 2016/1011; and
  • Credit servicing

The Proposals also envisage the list of AIFM functions in Annex I of AIFMD being expanded to add:

  • Lending; and
  • Servicing of securitization special purpose entities.

Investor Disclosures

It is proposed that the list of mandatory pre-contractual disclosures will be expanded to cover:

  • The description of each AIF’s liquidity risk management to include relevant LMT details; and
  • Additional disclosure of AIF fees borne by the AIFM / its affiliates.

Amendments are also proposed to AIFMs’ ongoing periodic disclosure to investors, including new requirements to disclose:

  • The composition of any originated loan portfolios; and
  • All direct and indirect fees and charges directly or indirectly charged or allocated to the AIF or to any of its investments (quarterly);

Loan Origination

The Commission proposes to introduce a new specific regime for AIFMs managing loan-originating Alternative Investment Funds (LOAIFs). The proposals include:

  • A 20% limit on loans to a single borrower if that borrower is a financial undertaking or a collective investment undertaking;
  • The requirement for the fund to be closed-ended if the notional value of all loans originated is greater than 60% of the fund’s net asset value (NAV), and a restriction on selling more 95% of loan value on the secondary market that a fund has originated;
  • Open-ended loan origination funds are required to have at least one additional liquidity management tool (see previous paragraph)

Marketing of Non-EU AIFs

Under the National Private Placement Regimes (NPPRs) marketing of AIFs domiciled in non-EU jurisdictions to EU-based professional investors on a private placement basis is possible under local EU member state requirements. In the proposal Marketing prohibited when the AIFs is located in a jurisdiction that is either:

  • On the EU’s list of high-risk countries according to the latest EU AML rules and / or
  • On the EU’s list of non-cooperative jurisdictions for tax purposes.


The proposals give regulators the power to allow funds (AIF) and managers (AIFM) to appoint depositaries in other member states pending a review of the possibility of introducing a depositary passport.

Next Steps

The Proposals, which take the form of an amending directive, will now be considered by the European Council and the European Parliament, and it is expected that agreement could be reached by mid to end-2022. After formal adoption and publication in the Official Journal of the EU, each EU member state will be given time (provisionally up to two years) to individually transpose the new rules into national law. Current expectation is that the rule changes may not be fully in effect until late 2024 or early 2025.

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