ALFI statement on the conclusion of trialogue negotiations concerning the AIFMD review

ALFI published as statement on the conclusion of trialogue negotiations concerning the AIFMD review, a process initiated over three years ago following various reports and consultations by the European Commission. While the primary focus was on managers of alternative investment funds, revisions to several provisions of the UCITS Directive have also ensued.
The revised directives will impose increased information requirements upon the authorization of an AIFM or UCITS management company. This aims to offer regulatory authorities a comprehensive understanding of (sub-)delegates and the managers‘ periodic due diligence on them. The acknowledgement of the merits of delegation is welcomed by ALFI. Notably, the initial emphasis on third countries, coupled with an obligation to disclose delegation details, has been omitted. However, distinctions between partial and full delegation must still be maintained, with additional reporting obligations introduced.
In the context of normal portfolio management and addressing liquidity stress, LMTs are crucial. Policymakers have mandated that AIFMs and UCITS management companies managing open-ended funds must select at least two LMTs from a predefined list. ALFI notes the unusual focus on a limited number of tools but appreciates the constrained (de-)activation powers by NCAs or ESMA. Detailed policies and procedures for LMT implementation are required.
Targeting debt funds with generous grandfathering rules, the European Commission introduced stringent provisions. Notably, a leverage cap of 175% for open-ended AIFs and 300% for closed-ended AIFs was established. ALFI suggests a qualitative limit based on the AIFM’s assessment would be more suitable. The retention requirement of 5% was maintained and extended to at least 8 years, a decision ALFI finds stringent. ALFI proposes limiting a pure originate-to-distribute strategy.
Member States may exceptionally allow institutions from another Member State to be appointed as depositary, subject to specific conditions. ALFI appreciates the absence of a depositary passport, emphasizing the importance of a stable depositary presence in the fund’s home country. A review of the derogation will occur in 5 years, assessing its functionality and potential benefits and risks.
ALFI welcomes the extended list of ancillary services and the ability to perform non-core services without authorization for discretionary portfolio management. The absence of set rules on undue costs in the AIFMD and UCITS Directive is noted positively. Adoption and publication in the Official Journal are anticipated in Q1 2024, with the rules expected to apply from Q1 2026. Implementation details await determination through level 2 or 3 measures, delaying practitioner readiness for the changes.