[ESMA34-32-352] Q&A on the Application of the AIFMD

The European Securities and Markets Authority (ESMA) has published an updated version of its Questions and Answers (Q&As) on the application of the Alternative Investment Fund Managers Directive (AIFMD). Specifically, ESMA added one new Section with one new Question to the document relating to Exemptions (the following text is quoted):
>Section XVI: Exemptions
Question 1: Article 3(2) AIFMD states the following: “Without prejudice to the application of Article 46, only paragraphs 3 and 4 of this Article shall apply to the following AIFMs:
(a) AIFMs which either directly or indirectly, through a company with which the AIFM is linked by common management or control, or by a substantive direct or indirect holding, manage portfolios of AIFs whose assets under management, including any assets acquired through use of leverage, in total do not exceed a threshold of EUR 100 million; or
(b) AIFMs which either directly or indirectly, through a company with which the AIFM is linked by common management or control, or by a substantive direct or indirect holding, manage portfolios of AIFs whose assets under management in total do not exceed a threshold of EUR 500 million when the portfolios of AIFs consist of AIFs that are unleveraged and have no redemption rights exercisable during a period of 5 years following the date of initial investment in each AIF”.
How should the notion of “substantive direct or indirect holding” in Article 3(2) of the AIFMD be interpreted. In particular, is there a quantitative threshold above which the criterion of substantive direct or indirect holding could be considered as met, and, if yes, what this threshold would be? // page 60
Answer 1: Answer provided by the European Commission in accordance with Article 16b(5) of the ESMA Regulation
As mentioned in Article 3(2)(a) AIFMD, the notion of “substantive direct or indirect holding” refers to situations where the AIFM manages the portfolios of AIFs through its direct or indirect holding in a company. This covers, for instance, situations whereby the AIFM de facto has the power to impose decisions on the AIF portfolio composition, its asset allocation or its risk management.
Article 3(2)(a) AIFMD does not set a quantitative threshold. The notion of “substantive direct or indirect holding” shall be assessed on a case-by-case basis by AIFMs supervisors.