The updated Alternative Investment Fund Managers Directive (AIFMD) is published in the Official Journal of the EU, which the Alternative Investment Management Association (AIMA) and its private credit affiliate the Alternative Credit Council (ACC), said “secures regulatory stability for the EU alternative investment industry”.
The final rules confirm that established practices in areas such as delegation and liquidity management continue to work well. In particular:
- Asset managers will continue to benefit from the ability to delegate portfolio or risk management to third parties, albeit with more requirements on substance and greater transparency to regulators regarding delegation arrangements.
- Firms will be subject to tighter restrictions around liquidity risk management.
- EU investors will continue to benefit from access to global expertise, as well as the broadest range of alternative investment strategies.
The agreement also includes new rules for loan origination funds (LOFs) aimed at addressing financial stability concerns.
- The cross-border passport is introduced so that managers and their funds can lend on a cross-border basis.
- LOFs will face higher levels of regulation when it comes to liquidity risk management, leverage and retention of loans to avoid ‘originate-to-distribute’ models.
- In addition to existing rules on leverage management, new differentiated leverage limits for open and closed-end funds are set in the legislation – at 175% and 300% of NAV respectively.
Jiri Krol, deputy CEO and global head of Government Affairs at AIMA, said in a statement: “We welcome most of the new rules on delegation, liquidity risk management and passporting for loan origination funds as relatively sensible. Some restrictions, such as leverage limits on loan funds, are difficult to justify but we have worked closely with policymakers to ensure they are better defined and calibrated than the original proposals. As usual, it’s a mixed bag and we hope the positive elements will outweigh the negatives. This updated framework will provide our members with greater certainty on the future regulatory framework and allow them to focus on delivering returns to investors and capital to the economy.”