Directive (EU) 2024/927 — commonly known as AIFMD II — amends both the Alternative Investment Fund Managers Directive (2011/61/EU) and the UCITS Directive (2009/65/EC). Member States must transpose it into national law by 16 April 2026.

For fund managers, compliance officers, and legal teams, the deadline is not a distant concern. It is weeks away. Here are the key changes that will reshape the fund management landscape.

1. Loan Origination Funds: A New Regulatory Framework

AIFMD II introduces, for the first time, a dedicated EU-level framework for AIFs that originate loans. This fills a regulatory gap that has existed since AIFMD I, where loan origination was governed entirely by national rules — leading to significant divergence across Member States.

Risk Retention

Article 15(4a) of the amended AIFMD requires that AIFMs ensure loan-originating AIFs retain, on an ongoing basis, 5% of the notional value of each loan they originate and subsequently sell on the secondary market. This mirrors the risk retention requirements in the Securitisation Regulation (Regulation (EU) 2017/2402) and is designed to prevent "originate-to-distribute" models where the fund bears no residual risk.

Diversification Requirements

AIFMs managing loan-originating AIFs must implement effective diversification policies. No single loan to a borrower can exceed a specified concentration limit relative to the AIF's capital. While the exact thresholds will depend on Level 2 measures and ESMA guidance, the principle is clear: concentrated lending books will face regulatory scrutiny.

Lending Policies

AIFMs must establish, maintain, and implement effective policies, procedures, and processes for the granting of loans. This includes credit risk assessment, loan administration, and monitoring. The requirements effectively impose banking-style credit governance on fund managers — a significant operational uplift for firms that previously operated with lighter-touch procedures.

Prohibition on Lending to Related Parties

AIFMD II prohibits loan-originating AIFs from lending to the AIFM itself, to the AIFM's staff, to the AIFM's delegates, or to entities within the AIFM's group. This closes a conflict-of-interest risk that concerned several NCAs.

2. Liquidity Management Tools: Mandatory, Not Optional

Article 16 of the amended AIFMD introduces mandatory liquidity management tool (LMT) requirements for open-ended AIFs. This is arguably the most operationally significant change in AIFMD II.

What Is Required

AIFMs managing open-ended AIFs must select at least two appropriate LMTs from a list specified in the Directive. These include:

Redemption gates — limiting the percentage of units that can be redeemed in any redemption period
Notice periods — requiring investors to provide advance notice before redeeming
Swing pricing — adjusting the NAV to pass transaction costs to redeeming or subscribing investors
Anti-dilution levies — charging a fee to redeeming investors to cover the cost of liquidating assets
Redemption in kind — satisfying redemptions with assets rather than cash
Side pockets — segregating illiquid assets into a separate vehicle

In addition, AIFMs must always have the ability to suspend redemptions in the interest of investors in exceptional circumstances.

Why This Matters

The LMT requirements are a direct response to the liquidity crises observed during the COVID-19 market disruption in March 2020, when several open-ended funds faced redemption pressures that strained their ability to liquidate assets in an orderly manner. ESMA and the ESRB had been pushing for mandatory LMTs for years.

For fund managers, this means reviewing all existing open-ended AIF documentation — offering memoranda, constitutional documents, management regulations — to ensure that at least two LMTs are legally embedded. This is not merely a policy change; it requires amendments to fund documentation and investor notification.

3. Delegation Framework: Enhanced Substance Requirements

AIFMD II does not end delegation — the Luxembourg and Irish fund management models survive — but it significantly strengthens the substance requirements.

Reporting to NCAs

AIFMs must provide their home NCA with detailed information on delegation arrangements, including:

The name and jurisdiction of each delegate
The functions delegated
The resources retained by the AIFM to oversee the delegate
A description of the AIFM's oversight mechanisms

This information must be provided on a regular basis, not merely at authorisation. NCAs will use this data to assess whether AIFMs have become "letter-box entities" — firms that delegate so extensively that they retain no meaningful substance.

ESMA Peer Review

ESMA is empowered to conduct peer reviews of how NCAs supervise delegation arrangements. This introduces an element of cross-border supervisory convergence that was absent under AIFMD I. NCAs that are perceived as too lenient on delegation — a criticism historically levelled at certain jurisdictions — will face peer pressure to tighten their approach.

Practical Impact

For Luxembourg AIFMs that delegate portfolio management to London, New York, or Hong Kong, the key question is: do you have sufficient human and technical resources in Luxembourg to genuinely oversee the delegate? If the answer is "the board meets quarterly and reviews a report," that may no longer be sufficient. AIFMD II expects active, ongoing oversight with appropriate staffing.

4. Depositary: A Partial Passport

One of the most debated aspects of AIFMD I was the absence of a depositary passport — the requirement that an AIF's depositary must be established in the AIF's home Member State. This effectively required every fund domicile to have a local depositary market, even if that market lacked scale or competition.

AIFMD II introduces a limited depositary passport for specific instrument types. Where a depositary in the AIF's home Member State is not available for certain financial instruments, the AIFM may, under conditions, appoint a depositary in another Member State.

The conditions are restrictive — this is not a general passporting of depositary services — but it opens the door for smaller fund domiciles to access depositary services from larger markets.

5. MiFID II Top-Up: Ancillary Services Clarified

AIFMD II clarifies the regime for AIFMs providing MiFID II ancillary services (individual portfolio management, investment advice, safekeeping and administration). The amendments align the conduct-of-business and organisational requirements for these services more closely with MiFID II standards.

For AIFMs that manage separate accounts or provide investment advice alongside fund management, this means reviewing their MiFID II top-up compliance framework to ensure alignment with the revised requirements.

Implications for Tokenized Fund Structures

AIFMD II does not specifically address tokenization, but its provisions have direct implications for digital-native fund structures.

RAIFs using DLT: Luxembourg Reserved Alternative Investment Funds that use distributed ledger technology for unit issuance and transfer must comply with the same LMT requirements as any open-ended AIF. Smart contract-based redemption mechanisms need to accommodate gates, notice periods, or swing pricing — which requires careful technical design.

Blockchain-based transfer agents: If an AIFM uses a DLT-based transfer agent, the delegation framework applies. The transfer agent function is a critical operational function, and AIFMD II's enhanced reporting requirements extend to this arrangement.

Digital-native depositaries: The partial depositary passport may facilitate the emergence of specialised digital asset depositaries that serve funds across multiple jurisdictions — a development that could accelerate tokenized fund adoption.

Netherlands-Specific Considerations

For Dutch-based AIFMs, AIFMD II transposition requires amendments to the Wet op het financieel toezicht (Wft) and the Besluit Gedragstoezicht financiële ondernemingen (Bgfo). The AFM has indicated its supervisory priorities will focus on:

LMT implementation for open-ended AIFs managed by Dutch AIFMs
Substance assessments for delegation arrangements, particularly where portfolio management is delegated outside the EU
Loan origination fund governance, given the growth of Dutch-managed private credit vehicles

Dutch AIFMs should engage early with the AFM on their AIFMD II implementation plans, particularly where existing practices may fall short of the new requirements.

What Fund Managers Should Do Now

With the transposition deadline weeks away, fund managers should prioritise:

Review delegation arrangements — Ensure oversight resources match AIFMD II expectations. Prepare the detailed reporting data that NCAs will require.
Implement LMT framework — Select and document at least two LMTs for each open-ended AIF. Amend fund documentation. Notify investors where required.
Update depositary agreements — Review whether the partial depositary passport creates opportunities or obligations for your fund structures.
Assess loan origination compliance — If managing loan-originating AIFs, implement risk retention, diversification, and lending policy requirements.
Review MiFID II top-up — Ensure ancillary services comply with the revised conduct-of-business requirements.

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