Alternative Investment Fund Managers Directive (AIFMD)

Publication|

9 July 2021

On this site, we explore the main topics covered by AIFMD and provide additional insight into how the provisions have been implemented in Luxembourg and the UK. We have also included information on upcoming changes being made by an amending Directive (“AIFMD II”). Please click on the tiles below for more details.

If you would like any further information on AIFMD, please contact any of the Linklaters’ contacts or your usual Linklaters contact. See our Investment Funds page for more information on our services.

Overview and Updates

The Directive on Alternative Investment Fund Managers (known as “AIFMD”) was published in the Official Journal of the European Union on 1 July 2011.

Scope – Definition of AIF

Under AIFMD, an alternative investment fund or “AIF” is: any collective investment undertaking, including investment compartments thereof.

Scope – Definition of AIFM

Under AIFMD, Member States are required to ensure that each AIF managed within the scope of AIFMD has a single AIFM responsible for ensuring compliance with AIFMD.

Marketing and Pre-Marketing – Introduction

There are two methods for marketing to professional investors under AIFMD: (i) the marketing passport; and (ii) Member States’ National Private Placement Regimes (NPPR).

Marketing – Passport

As per AIFMD, managing an EU AIF and marketing an EU AIF to professional investors is permitted if the EU AIFM is authorised under AIFMD and the relevant regulator has given its approval.

Marketing – Private Placement

When implementing AIFMD into national law, each EU Member State was entitled to decide whether or not to implement the National Private Placement Regimes (NPPR) contained in AIFMD.

Disclosure and Reporting to Investors

The Directive imposes requirements for information to be given to investors and regulators, both in the marketing process and on an ongoing basis.

Reporting to Regulators

AIFMD imposes requirements for information to be reported to regulators on an ongoing basis.

Remuneration

AIFMD lays down principles for firms to ensure that their remuneration policies and practices “are consistent with and promote sound and effective risk management and do not encourage risk-taking".

Loan Origination under AIFMD II

The changes made to AIFMD by AIFMD II include a new set of rules which apply to AIFs that originate loans.

Leverage

AIFMD states that the employment of leverage by an AIFM may contribute to the “build-up of systemic risk” or “disorderly markets”.

Liquidity Management and other Operating Conditions

AIFMs are subject to detailed rules regarding operating conditions and with respect to their internal organisation.

Depositaries

An AIFM that is fully authorised under AIFMD is required to appoint a single independent depositary in respect of each AIF it manages.

Portfolio Company Disclosure

Articles 27 to 29 of AIFMD require notifications and disclosures by an AIFM managing an AIF which acquires control of a portfolio company which has its registered office in the EU.

Asset stripping

Article 30 of AIFMD imposes restrictions on distributions, capital reductions, share redemptions or purchases of own shares by EU-incorporated portfolio companies.

Authorisation Requirements

An EU AIFM that cannot rely on an exemption from AIFMD will need to obtain authorisation from its home regulator in order to manage AIFs in accordance with Article 6 of AIFMD.

Delegation

AIFMs which are fully authorised under AIFMD are subject to detailed rules regarding delegation of their functions.

Material Change Notifications

Full-scope EU AIFMs are required to notify the competent authorities of their home Member State of material changes to the conditions for their initial authorisation.

Capital Requirements

Under AIFMD, an AIFM which is fully authorised under AIFMD and is an internally managed AIF is required to have initial capital of at least €300,000.

Valuation

AIFMD sets out who can value the assets, how and when they should be valued and the AIFM’s liability towards the investors for valuations.

AIFMD in the UK after Brexit

On 31 December 2020, the Transition Period with respect to the United Kingdom’s departure from the European Union ended, with the UK ceasing to be treated as a Member State of the European Union.

EU, Luxembourg and UK Sources

Glossary of Terms

AIFM Directive - Glossary of Terms

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Alternative Investment Fund Managers Directive (AIFMD) Homepage

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Our market-leading Investment Funds, Financial Regulation, Private Equity and Employment & Incentives lawyers have been at the forefront of advising on the Alternative Investment Fund Managers Directive (“AIFMD”) since its publication in 2011.

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