AIFMD Reporting in 2024: Key Updates and How They Impact Fund Managers
AIFMD, an “alternative investment fund,” or AIF, governs managers of funds other than Undertakings for Collective Investments in Transferable Securities (UCITS). AIFMD, in contrast to the UCITS directive, does not authorize or regulate the funds themselves; instead, it offers professional investors a passport that allows any AIF to be promoted to them across borders within the European Union (EU). Let us explore the key amendments to AIFMD reporting in 2024 and its impact.
Understanding AIFMD
While the regulation of alternative funds underwent significant changes a decade ago with the introduction of the AIFMD, the AIFMD II text is less radical. It does not amount to rewiring the AIFMD framework, except for significant changes in requirements relating to loan-originating AIFs. AIFMD II is expected to be adopted by the European Parliament in April 2024. Within 24 months of the directive’s enactment, member nations must enshrine it in national law.
Key Updates for AIFMD
By mandating more thorough reporting, more stringent guidelines for fees and expenses, and enhanced due diligence protocols, AIFMD II seeks to provide more transparency. As a result, investors can hold AIFMs responsible for their behaviour and make better-informed judgments. Let’s look at major updates: ️
New Loan Origination Regime: Europe’s AIFMs will more easily facilitate B2B lending with EU-managed money. Concentration caps, a 5% retention requirement, lending restrictions, and improved policies and procedures for evaluating credit risk.
Loan Origination Funds: AIFs that meet the criteria to be referred to as “loan-originating AIFs” will also be subject to leverage restrictions and a general requirement to be closed-ended unless the AIFM can show that its liquidity risk management system is adequate to align with the investment strategy and redemption policy of the AIF.
Liquidity Management Tool: AIFMs managing open-ended funds will be subject to new rules on liquidity management, including a new Annex V to the AIFMD that lays out a precise list of methods for controlling liquidity risk. AIFMs must implement at least two liquidity management instruments from the list provided in Annex V.
Prohibition of Marketing to High-risk Non-EU Nations: If an AIFM or AIF is founded in a nation that is on the EU’s list of high-risk third countries or the EU’s list of non-cooperative countries for AML or tax purposes, respectively, then the non-EU AIF will not be allowed to market in the EU.
More transparency AIFMs, including non-EU AIFMs marketed under a national private placement system (“NPPR”), are now required to report on a wider range of assets and transactions under the regulatory reporting program, known as “Annex IV Reporting.”
Organizational Requirements/Substance: EU AIFMs’ operations must be carried out by a minimum of two natural persons with EU residency who are either (i) full-time employees of the EU AIFM or (ii) executive members of the governing body of the EU AIFM, and who are dedicated to running the EU AIFM’s operations full-time.
Depositaries: AIFMs now have additional options for depositary service providers thanks to AIFMD II, which eliminates the need for depositaries to be established in the same Member State as an EU AIF. But this is contingent on the AIFM proving that specific requirements have been satisfied.
How Can DataTracks Help?
It is now upon us to comprehend the new AIFMD II reporting obligations accompanying these modifications. But by outsourcing your Annex IV reporting needs to a reliable partner, you can avoid all of these headaches and expedite the process.
With the least amount of work, you may create error-free regulatory reports with the support of DataTracks’ powerful AIFMD software solution, which stays current with all the changing circumstances. Call +31 20 225 3702 or Email enquiry@datatracks.eu for any assistance w.r.t AIFMD reporting.
