On 26 February 2024, the Council of the European Union (“Council”) adopted the AIFMD/UCITS review text, which followed its approval by the European Parliament in its plenary session on 7 February 2024. This represents the final step of the adoption procedure of this element of the European Commission’s capital markets union (“CMU”) package, originally commenced in 2021. Political agreement on the text was reached between the European Parliament, the Council and the European Commission in July 2023.

The draft directive will be published in the EU’s Official Journal in the coming weeks and enter into force 20 days later. EU Member States will have 24 months after the entry into force to transpose the rules into national legislation, with the exception of measures transposing Article 1(12) and Article 2(7) concerning reporting obligations to competent authorities, which will not apply for 36 months after the date of entry into force.

The directive amends the 2011 Alternative Investment Fund Managers Directive (“AIFMD”), which governs managers of hedge funds, private equity funds, private debt funds, real estate funds and other alternative investment funds (“AIFs“) in the EU, and is sometimes referred to as AIFMD II. It also modernises the framework for undertakings for collective investment in transferable securities (“UCITS”).

Key aspects of the directive include:

• new requirements to do with the use of liquidity management tools;
• new requirements and restrictions, including on leverage, for funds engaged in loan origination;
• additional reporting on delegation arrangements entered into by alternative investment fund managers (“AIFMs“);
• an expanded list of permitted activities for AIFMs;
• improved data sharing and cooperation between competent authorities.

In addition, the directive contains certain amendments to the 2009 UCITS Directive, with the aim of aligning delegation, reporting, and liquidity management regulations across both the AIFMD and UCITS frameworks.

For more detailed information on the impending changes to AIFMD and the UCITS Directive, please contact your usual contact or any member of our Asset Management and Investment Funds Group.