The journey to implementation of the revised EU’s Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD) is in its final stages, and the Directive, AIFMD2, will take effect in each of the EEA member states on 16 April 2026.
The member states of the EEA have not all moved at the same pace in making the changes to their laws which AIFMD2 requires. As AIFMD2 is not a ‘maximum harmonisation’ directive, the member states have the choice to make more changes to their laws in the areas that AIFMD2 addresses. It is not yet clear whether any member state will ‘gold-plate’ their laws in implementing AIFMD2 in a manner that has a material effect on managers who are managing or marketing funds in that member state.
The current signs are such that no material additional changes are expected, so we would expect fewer practical inconsistencies in implementation (and there are also directly enforceable EU regulations under AIFMD2) and in determining the scope of the obligations for managers under AIFMD2.
To help EU and non-EU managers with these determinations, we have set out a baker’s dozen of questions and answers, covering the main topics for managers and fund sponsors to consider and address. This is not the first time that we have tackled AIFMD2, and the Q&As below supplement and clarify our earlier publications, now with the benefit of the passage of time and the work we have done in helping clients. We have listed below our various publications on AIFMD2.
1. When does AIFMD2 come into effect, and are there any transitional provisions?
It comes into effect on 16 April 2026, although new regulatory reporting requirements (with a new Annex IV reporting template) will only apply from 16 April 2027. These will include expanded disclosures under Article 24, including additional reporting on delegation and leverage.
There are some transitional provisions for funds that originate loans, including ‘loan-originating AIFs’ (LOFs), that were set up before 15 April 2024. The application of these provisions is complex and needs to be considered on a case-by-case basis. In broad summary: (i) LOFs that continued to raise capital after 15 April 2024 have transitional relief up to 16 April 2029 (including on the LOF-specific requirements and the 20% financial sector entity concentration limit, subject to a standstill obligation); whereas (ii) LOFs that have not raised further capital benefit from more favourable and, in some cases, indefinite grandfathering.
2. Who will be most affected by AIFMD2?
AIFMD2’s impact on managers and fund sponsors will vary depending on the nature of the manager, as an AIFM, as set out in the table below.
| EU AIFMs/EU AIFs |
Non-EU AIFMs/non-EU AIFs marketing under NPPR |
Third party/host AIFMs |
| Loan origination and ‘loan-originating AIFs’ provisions |
No direct impact of new rules on loan origination or LMT (but there are new investor disclosures for those marketing using NPPR) |
Delegation: increased requirements, including heightened conflict of interest provisions for host AIFMs |
| Liquidity management tools (LMT) for open-ended AIFs |
New tax and high-risk blacklists for access to EEA member states (look out for any future changes) |
Host AIFM has to comply in full with AIFMD2 (see column one) |
| Delegation: broader scope and increased requirements |
– |
– |
| Investor disclosures (Article 23) |
Investor disclosures (Article 23) |
– |
| Regulatory reporting (Article 24) |
Regulatory reporting (Article 24) |
– |
| Authorisation requirements |
– |
– |
|
Risk of regulatory intervention to activate/deactivate suspension of redemptions/subscriptions (in exceptional circumstances, in the interests of investors and having consulted with the AIFM) Monitor member state implementation and any gold-plating/imposing restrictions via NPPRs Monitor further developments, including the EU’s market integration package (AIFMD3?) |
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3. I am a non-EU manager marketing into the EU. Tell me more about changes to the marketing rules, including the further investor disclosures in Article 23.
The marketing by non-EU AIFMs of non-EU AIFs in the EEA will not be allowed if the third country in which they are established: (i) is identified as high-risk under EU legislation; (ii) is not fully compliant with Article 26 of the OECD Model Tax Convention; (iii) is deemed noncooperative in tax matters (as set out in the periodically updated Council of the EU’s list). Managers and fund sponsors will need to be alert to the impact of any published changes made to these lists, as well as how national competent authorities (NCAs) will be interpreting existing tax agreements.
Additional investor disclosures in Article 23 most relevant to non-EU AIFMs include:
- details of portfolio composition of an AIF’s originated loans and administrative costs and expenses
- conflicts that may arise from all delegations
- all direct and indirect fees, charges, and expenses borne by investors in relation to the AIF and, on an annual basis, all direct and indirect fees, charges, and expenses borne by investors and any parent company, subsidiary, or SPV used in relation to the AIF’s investments by or on behalf of the AIFM
4. How does AIFMD2 change the delegation rules?
AIFMD2 expands the scope of delegation requirements and increases regulatory reporting obligations. Delegation rules now apply to a wider range of functions beyond portfolio and risk management, to include: administration functions; marketing and distribution activities; loan origination activities; servicing securitisation SPVs; and certain Article 6(4) investment services.
5. What counts as loan origination under AIFMD2? When is a fund a LOF? Is there an AIFMD lending passport?
Loan origination means the AIF either: (i) makes a loan directly as the original lender or (ii) makes the loan indirectly through a third party or SPV (on the AIF/AIFM’s behalf) where the AIF/AIFM is involved in structuring the loan/pre-agreeing its characteristics before it takes on the risk under the loan.
A LOF is where the AIF either: (i) has an investment strategy that is mainly to originate loans; or (ii) has originated loans whose notional value represents at least 50% of the AIF’s NAV.
Although the AIFMD2 loan origination provisions are described as a harmonising measure, it is clear from the text of AIFMD2 that they do not create a loan origination or other lending ‘passport’ for AIFs; the AIFMD passporting rights apply to AIFMs and not to the AIFs, which are the usual lenders. Moreover, member states are free to introduce requirements that are more restrictive, which include prohibiting AIFs from granting loans to and servicing credit for individual consumers. Therefore, national frameworks for product lending may continue to apply. That said, we do not expect the current position in relation to lending to change, noting that a member state will still be free to impose loan origination requirements on non-EU AIFMs and AIFs marketed in that member state.
6. What are the key requirements for loan origination, and what additional rules apply to LOFs?
The consequences of carrying out loan origination are:
- An AIFM must have policies and procedures in place and review these annually
- A 20% concentration limit (to a single borrower if that borrower is a financial undertaking, MiFID investment firm, AIF, or UCITS fund — a financial sector entity). Helpfully, there is a 24-month ramp-up period for this limit to apply
- The proceeds of loans (minus any administrative fees) must be attributed to the AIF in full
- Risk retention: 5% of the value of each loan must be retained until (a) maturity, for (i) consumer loans and (ii) other loans with a maturity of less than eight years; or (b) eight years for all other loans. Various carve-outs apply, including where: the AIFM is selling assets to redeem units as part of the AIF’s liquidation; the loan sale is necessary for the AIFM to implement the AIF’s investment strategy in the investors’ best interests or due to a deterioration in the risk of the loan detected by the AIFM’s risk management and due diligence (provided the buyer has been informed); or in order to comply with EU sanctions or product requirements
- A prohibition on lending to certain connected persons (its AIFM or its staff, any AIFM delegates, the depositary and its delegates, or group entities of the AIFM — except for third-party finance, i.e. where the affiliate exclusively finances other borrowers)
- A potential prohibition on consumer lending
- A prohibition on lending to distribute strategy
- Additional investor and regulatory disclosures
The consequences of being a LOF are all of those listed above, as well as:
- There is a requirement to be closed-ended (unless the AIFM can demonstrate to its NCA that it can be open-ended, i.e. that its liquidity management strategy is compatible with its investment strategy and redemption policy). Although draft regulatory technical standards (RTS) on the requirements with which a LOF must comply in order to maintain an open-ended structure were published, they have since been categorised as ‘nonessential’ by the European Commission — they will not be introduced until at least 1 October 2027, if at all.
- There are specified leverage limits: 175% for open-ended and 300% for closed-ended funds.
Where loan origination relates to ‘shareholder loans’ (a definition introduced by AIFMD2) there are exemptions from certain requirements. A ‘shareholder loan’ is a loan that an AIF grants to an undertaking in which the AIF holds directly or indirectly at least 5% of the capital or voting rights and where the loan cannot be sold independently to third parties, and that do not exceed 150% of the AIF’s capital. The exemptions are: (i) having policies and procedures on loan origination and (ii) adhering to leverage limits for LOFs.
7. What about an AIF that does not have a lending strategy but has internal financing arrangements (for instance, providing debt financing to the AIF subsidiaries/holdcos for efficient tax structuring)? Would that still be caught under the loan origination rules?
In practice, downstream structuring, where an AIF provides debt finance to its SPV/holdcos in this scenario, will, on a literal reading of AIFMD2, qualify as loan origination. Indeed, where originated loans’ notional value represents at least 50% of the AIF’s NAV, the AIF will be a LOF.
There has been no regulatory guidance on the effect of these provisions, but a purposive interpretation suggests that, where there is internal financing with no underlying risks or third-party commercial lending activities — the activities that the restrictions seek to address — the LOF/loan origination requirements should not apply.
8. I am a LOF subject to the specified leverage limit. How do I calculate my leverage?
The specified leverage limits (175% for open-ended funds and 300% for closed-ended funds) are calculated according to the commitment method and expressed as the ratio between the fund’s exposure relative to the fund’s NAV. Borrowing fully covered by contractual commitments can be excluded (not just temporary borrowing) from the hard caps. Otherwise the calculation should be made using the AIFMD Delegated Regulation, as is the case for the leverage calculation in general. This means that asset-level leverage where there is no recourse to the fund should also be excluded from calculating these limits.
9. What are the new liquidity management requirements?
AIFMs of open-ended AIFs have to preselect at least two liquidity management tools (LMTs) and include them in the AIF's constitutional documents. The list of LMTs to be preselected is set out in the table below. A Delegated Regulation and ESMA Guidelines give further effect to these liquidity management provisions and will need to be considered and applied for each tool selected. An AIFM has to implement detailed policies and procedures on when each LMT may be activated/deactivated and how they are used. It can select more than two LMTs as well as additional liquidity measures of its own. NCA notification obligations apply on the selection of LMTs, policies, and procedures and when activating/deactivating its LMTs. The CSSF is setting up an eDesk procedure for this.
ESMA’s Guidelines encourage AIFMs to consider, where appropriate, the merit of selecting (for use under normal and stressed market conditions): at least one anti-dilution tool (such as redemption fee, swing pricing, dual pricing, or anti-dilution levy) and at least one quantitative-based tool (such as redemption gate, extension of notice period, or redemptions in kind).
Two other LMTs are available (without the need to preselect and which do not count toward the two) to AIFMs only in exceptional circumstances and where justified having regard to the interests of AIF investors:
- Suspension of redemptions and subscriptions (temporarily disallowing investors from redeeming or purchasing the fund’s interests) (a quantitative LMT)
- Side pockets (separating certain assets, whose economic or legal features have changed significantly or become uncertain due to exceptional circumstances, from the other assets of the fund) (an anti-dilution LMT)
| LMT to be selected |
What it is |
Selection highlights from the Level 2 measures |
| Redemption gate (quantitative LMT) |
Temporary and partial restriction of the right of investors to redeem their interests so that investors can only redeem a certain portion of their units or shares |
Most applicable for funds with a strongly concentrated investor base and those with illiquid/hard-to-sell assets (or that may become so during stressed market conditions) |
| Extension of notice periods (quantitative LMT) |
Extending the period of notice that investors must give to fund managers, beyond a minimum period which is appropriate to the fund, when redeeming their interests |
To be considered for all funds, but especially for funds whose liquidity can deteriorate quickly in times of stress and for AIFs invested in assets that are less liquid (namely, real estate and private equity funds that should already have appropriate redemption frequency in place) |
| Redemptions in kind (quantitative LMT) |
Transferring assets held by the fund, instead of cash, to meet redemption requests of investors |
AIFM can only offer redemptions in kind in response to redemption requests from professional investors; if the AIF has also been marketed to non-professional investors, on a pro rata basis |
| Redemption fee (anti-dilution LMT) |
Fee, within a predetermined range that takes account of the cost of liquidity, that is paid to the fund by investors when redeeming interests and that ensures investors who remain in the fund are not unfairly disadvantaged |
Most applicable to funds that invest in assets with fixed/transparent and/or foreseeable transaction costs (e.g., real estate agency or notary fees) and/or low-variation transaction costs (e.g., fixed taxes and levies on real estate) or that are invested in assets that are less liquid and for which other tools such as swing pricing might be challenging to implement due to infrequent and limited pricing sources |
| Swing pricing (anti-dilution LMT) |
Predetermined mechanism by which the NAV of the interests is adjusted by the application of a factor (swing factor) that reflects the cost of liquidity |
An AIFM cannot select swing and dual pricing as its only two LMTs |
| Dual pricing (anti-dilution LMT) |
Pre-determined mechanism by which the subscription and redemption prices of the interests are set by adjusting the NAV per interest by a factor that reflects the cost of liquidity |
|
| Anti-dilution levy (anti-dilution LMT) |
Fee that is paid to the fund by investors when purchasing or redeeming interests that compensates the fund for the cost of liquidity incurred because of the size of that transaction and that ensures that other unitholders or shareholders are not unfairly disadvantaged |
Most applicable for funds with a high investor concentration or a small number of investors; with significant levels of subscription and/or redemption activity that could negatively affect the fund’s existing investors (e.g., smaller funds suffer higher liquidity costs when affected by large redemptions); funds that invest in assets that are less liquid; or where information on trading costs is generally available (e.g., funds that invest in assets with market-contingent liquidity costs) |
10. Is an evergreen/semi-liquid fund ‘open-ended’ for the purposes of these new provisions?
An AIF is ‘open-ended’ if its investors have the right to repurchase or redeem their units or shares out of the assets of the AIF, at any investor’s request, before the AIF’s liquidation phase or wind-down, as set out in the AIF’s rules. Any AIF that does not meet this definition is treated as closed-ended. The ‘open-ended’ categorisation will therefore include all funds that offer redemption opportunities, however infrequently and even if subject to a variety of LMTs.
An evergreen fund, which has regular votes on liquidation, thus giving investors the right to exit on that liquidation or to be rolled into the next incarnation, but no right otherwise to redeem, is likely to be closed-ended.
11. What is the timing for updating my constitutional documents with the new LMT? And what level of detail is required in my fund documents?
For preexisting open-ended AIFs (i.e., those constituted before 16 April 2026), there is a one-year grace period to apply the RTS and guidelines on LMTs, meaning compliance with these Level 2 measures will be required from 16 April 2027. That said, Level 1 compliance — in particular, selecting at least two LMTs and including them in the fund’s constitutional documents — is still required by 16 April 2026, although in practice, we expect certain NCAs (notably, the CSSF) to exercise a degree of regulatory forbearance and not to expect managers in their member state to meet this deadline.
As a practical matter, we would expect fund constitutional documents (i.e., the LPA) to be updated to identify the selected LMTs, and these may cross-refer to an internal standalone LMT policy setting out more detailed operational mechanics. Detailed disclosures regarding the chosen LMTs, their activation conditions, and potential implications for investors should be included in the fund's offering documents/PPM.
12. Are there any governance changes for funds marketed to retail investors?
Where AIFs are marketed to retail investors, the governing body will have to include at least one independent nonexecutive director with appropriate expertise to assess whether the AIFM acts in investors’ best interests.
13. Are there any further changes on the horizon? What else do I need to track?
Once the series of measures made under the European Commission’s Market Integration Package and its Savings and Investment Union Strategy and Retail Investment Strategy are finalised, there will be further knock-on impacts on the EU AIFMD, including on cross-border distribution; marketing communications; supervisory architecture and ESMA’s role and authorisation; the depositary regime and delegation; and group structures. Other initiatives could also lead to further changes to the AIFM regime, particularly for small and midsize managers — for instance, the European Commission’s consultation looking at ways to boost Europe’s venture and growth capital markets, recognising that there is scope to make the current regime more proportionate and effective.
The UK regime for AIFMs, originally created to give effect to AIFMD, is also undergoing reform and is likely to result in greater divergence from EU AIFMD.
Please do not hesitate to speak to one of the authors of this guide or your usual Goodwin contact if you have any questions or want to discuss how AIFMD2 may impact your fund structures and investments.
You may also be interested in our related briefings:
End of the Beginning: AIFMD II’s Final Text
Liquidity Management Under AIFMD2: Near-Final RTS for Open-Ended Funds
Loan Origination Under AIFMD2: A Guide
Loan Fund Structures Under AIFMD2: ESMA’s Final Report
Reforming the UK Regime for Private Fund Managers: FCA and HMT Papers Point the Way
This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.
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