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Published: April 9, 2024
The Alternative Investment Fund Managers Directive II (AIFMD II) is poised to significantly impact the way alternative investment funds (AIFs) operate in the European Union. This new directive aims to create a more robust and transparent regulatory framework, prioritising investor protection and risk management.
January 2024
Official Publication of the final AIFMD II directive in the EU Official Journal.
Late 2025/Early 2026
The target for national legislation to be finalised. EU Member States have 18 months to transpose AIFMD II into national legislation. This process can be shorter, but not longer.
Q1/Q2 of 2026
Most AIFMD II changes will come into effect (assuming national legislation finalised by target date)
Q1/Q2 of 2027
Regulatory reporting requirements under AIFMD II will apply.
Latest possible date for national legislation to come into effect is late 2027/early 2028, assuming full 18 months for national legislation of member states.
January 2024
Official Publication of the final AIFMD II directive in the EU Official Journal.
Late 2025/Early 2026
The target for national legislation to be finalised. EU Member States have 18 months to transpose AIFMD II into national legislation. This process can be shorter, but not longer.
Q1/Q2 of 2026
Most AIFMD II changes will come into effect (assuming national legislation finalised by target date)
Q1/Q2 of 2027
Regulatory reporting requirements under AIFMD II will apply.
Latest possible date for national legislation to come into effect is late 2027/early 2028, assuming full 18 months for national legislation of member states.
A key point to highlight is that the overall AIFMD II framework builds upon the existing AIFMD regulations, aiming to enhance transparency, risk management and investor protection within the EU’s AIF sector.
AIFMD II introduces a new framework for AIFs that primarily engage in loan origination.
Stricter Leverage Limits: AIFs will face tighter restrictions on leverage. For open-ended AIFs, leverage cannot exceed 175% of net asset value, while closed-ended AIFs are capped at 300%.
Concentration Risk Management: Stricter rules to manage concentration risks associated with loan origination activities, i.e. limitations on exposure to specific borrowers or industries.
Conflict of Interest Mitigation: The new directive requires robust policies to address potential conflicts of interest that may arise during loan origination processes.
AIFMs must provide National Competent Authorities (NCAs) with more comprehensive information on:
Investment Instruments: A breakdown of the types of instruments the AIF is trading and the markets where these activities occur.
Exposure and Asset Details: Detailed data on the AIF’s exposures and assets, including a clear picture of its current risk profile.
Fees and Charges: Clearer disclosure and periodic reporting of all fees, charges, and expenses levied on AIFs
AIFMD II emphasises investor protection through:
Transparent Fee Structures: Investors will receive clearer breakdowns of fees associated with their investments.
Misleading Fund Names: ESMA (European Securities and Markets Authority) will develop guidelines to create clearer fund names, promoting greater transparency for investors.
Marketing ban within EU for non-EU AIFMs and AIFs from high risk and non-cooperative jurisdictions.
Compliance Hurdles: Significant adjustments to internal processes. This includes updating compliance procedures, risk management frameworks and reporting systems.
Loan origination AIFs will face the most substantial compliance burdens.
Data Aggregation Challenges: Gathering and compiling the additional data required for enhanced reporting will pose a challenge for AIFMs. Streamlining data collection processes and potentially investing in new technological solutions will be crucial to ensure accurate reporting.
Investment Strategy Adjustments: Some AIFs, particularly those heavily reliant on loan origination strategies, will need to adapt their investment approaches to comply with the new leverage and concentration limits.
While AIFMD II presents significant challenges for AIFMs, it also represents an opportunity to strengthen investor confidence in the European alternative investment market. By prioritising transparency, risk management, and investor protection, AIFMD II has the potential to pave the way for a more robust and sustainable AIF industry within the EU.
With AIFMD II details emerging, we offer expert guidance to navigate your AIFMD II journey.
Our highly skilled consultants at First Derivative can help you with regulation interpretation, implementation and support you with overcoming your regulatory obstacles. We provide impressive expertise in many areas such as PM, PMO, BA and QA and would endeavour to lighten your load and help you on the road to success.
First Derivative is ready and waiting for your call.
Adam Thomas
Senior Leadership Team
First Derivative
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Sagar Shah
Principal Consultant
First Derivative
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Katerina Saba
Principal Consultant
First Derivative
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