AIFMD — Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (AIFMD) (Directive 2011/61/EU) creates a harmonised regulatory framework for managers of alternative investment funds (AIFMs) in the European Union. Alternative investment funds (AIFs) include hedge funds, private equity funds, real estate funds, and other funds not covered by the UCITS Directive.

The directive was introduced in response to the 2008 financial crisis, which revealed significant risks from unregulated fund managers. It pursues three main objectives: establishing a single internal market for AIF managers, strengthening financial stability through improved supervision, and improving investor protection through comprehensive transparency requirements.

A key element is the European marketing passport, which allows authorised AIFMs to market their funds cross-border to professional investors throughout the EU. The AIFMD also contains strict requirements on remuneration policies, risk management, and the custody of fund assets. In March 2024, AIFMD II (Directive 2024/927) was published, introducing significant reforms to be transposed by April 2026.

On 30 April 2009, the European Commission presented the AIFMD proposal as a direct consequence of the financial crisis. The draft was highly controversial, particularly regarding the regulation of third-country managers and leverage limits. After two years of intensive negotiations, the directive was adopted on 8 June 2011 and published in the Official Journal of the EU on 1 July 2011. It entered into force on 21 July 2011, with a transposition deadline for Member States of 22 July 2013.

The Level II measures were specified through Commission Delegated Regulation (EU) No 231/2013. In 2021, the Commission initiated a review of the AIFMD. AIFMD II (Directive (EU) 2024/927) was adopted by Parliament and the Council on 13 March 2024, published in the Official Journal on 26 March 2024, and entered into force on 15 April 2024. Member States must transpose the reforms by 16 April 2026; certain reporting obligations apply from 16 April 2027.

The AIFMD applies to managers of alternative investment funds in the EU and indirectly also regulates the funds they manage:

• Authorised AIFMs: Managers with assets under management exceeding EUR 100 million (or EUR 500 million for unleveraged funds without redemption rights in the first 5 years) are subject to full AIFMD regulation.
• Registered AIFMs: Smaller managers below the thresholds are subject to a simplified registration regime with limited reporting obligations.
• Alternative investment funds (AIFs): All funds not covered by the UCITS Directive, including hedge funds, private equity, real estate funds, infrastructure funds, and funds of funds.
• Loan-originating AIFs (from AIFMD II, transposition by 16 April 2026): First harmonised rules — generally closed-ended structure, leverage caps of 175% (open-ended) and 300% (closed-ended), 5% risk retention on transferred loans, and a ban on pure originate-to-distribute strategies.
• Third-country AIFMs: Managers from third countries marketing AIFs in the EU are subject to national private placement regimes; the planned third-country passport has not yet been activated.
• Depositaries: An independent depositary must be appointed for each AIF to assume custody of the fund's assets.

• Authorisation requirement: AIFMs with assets above the thresholds require authorisation from the competent national authority, which assesses minimum capital requirements, organisational requirements, and fitness of senior management.
• Depositary: An independent depositary must be appointed for each managed AIF, responsible for custody of assets, cash flow monitoring, and oversight of compliance with fund rules.
• Risk management: AIFMs must maintain a risk management system that is functionally and hierarchically separate from portfolio management, monitoring market, credit, liquidity, and operational risks.
• Transparency and reporting: Annual reports, disclosure of investment strategy, leverage, and risk profiles to investors and supervisory authorities.
• Remuneration policy: Remuneration rules for identified staff designed to prevent excessive risk-taking, with requirements on variable remuneration and deferral.
• European marketing passport: Authorised EU AIFMs can market their EU AIFs cross-border to professional investors without requiring separate authorisation in each Member State.
• Leverage reporting: Regular reporting of leverage levels to supervisory authorities; authorities may impose leverage limits where risks to financial stability arise.
• Loan-originating AIFs (from AIFMD II, transposition by 16 April 2026): First harmonised rules — generally closed-ended structure, leverage caps of 175% (open-ended) and 300% (closed-ended), 5% risk retention on transferred loans, and a ban on pure originate-to-distribute strategies.
• Liquidity management tools (from AIFMD II): Managers of open-ended AIFs must select at least two tools from a harmonised EU list (including suspension of redemptions, redemption gates, extension of notice periods, swing pricing, anti-dilution levies, redemption fees) and embed them in fund documentation.

AIFMD II introduces an obligation for managers of open-ended AIFs to select at least two liquidity management tools from a harmonised EU list (e.g. suspension of redemptions, redemption gates, extension of notice periods, swing pricing, anti-dilution levies, redemption fees) and embed them in fund documentation. The same list is introduced into the UCITS Directive in parallel. The entry does not mention this new key requirement.

AIFMD II's (Directive (EU) 2024/927) flagship reform is the first harmonised EU framework for loan-originating AIFs. The entry references AIFMD II's existence in the summary and history but does not reflect its substantive changes in either scope or key requirements. Key new obligations: loan-originating AIFs must in principle be closed-ended, leverage caps of 175% NAV (open-ended) and 300% NAV (closed-ended), 5% risk retention of the notional value of transferred loans, and a ban on pure originate-to-distribute strategies.