Origins and aims of AIFMD

Managers of Alternative Investment Funds (AIFMs) are responsible for the management of €3 trillion of assets across the European Union. They manage further significant pools of assets via global fund ranges marketed to European sophisticated investors.

AIFMD captures a very broad spectrum of investment funds and asset classes as any investment fund marketed to non-retail investors in Europe is likely to be in scope. AIFMs therefore account for significant amounts of trading in markets for financial instruments, and can exercise an important influence on markets and companies in which they invest.

The aim of the Alternative Investment Funds Directive (AIFMD), agreed on 8 June 2011, was to establish common requirements governing the authorisation, operations and supervision of AIFMs in order to provide a coherent approach to the related risks and their impact on investors and markets in the European Union.

The Directive came into force on 21 July 2011 with level 2 implementing measures published on 19 December 2012. Non-EU AIFMs have a phased compliance obligation for registration which must be met, in full, no later than July 2018 (there are additional interim restrictions/ requirements for them to satisfy, subject to existing member state requirements).

AIFMD requirements

The AIFMD creates standardised and transparent governance and an operational framework for AIFMs and the fund ranges they manage. The key benefit of AIFMD is the ability to raise assets and potentially streamline non-retail fund ranges across all of Europe on a harmonised basis for the first time.

AIFM obligations are broad based, covering requirements pertaining to Regulatory Authorisation, Capital Adequacy, Manager Remuneration, Conduct of Business Procedures, Conflicts of Interest Policies, Comprehensive Transparent Reporting to Investors and Regulators and new Marketing Provisions.

Finally, AIFMD introduces the key requirement to appoint a single independent Depositary for each in-scope EU domiciled fund. The Depositary performs a key investor protection role in four key areas:

  • High standards of safekeeping of assets in custody
  • Verification and record keeping of other fund assets
  • Cash flow monitoring across fund cash activity
  • Various independent oversight services for key fund operations (for example valuation, investment compliance, on time settlement)

Who is affected by the AIFMD?

AIFMD regulates the manager and this creates the obligation to appoint a depositary which is, in turn, then obligated to operate within the Regulation. AIFMD achieves fund regulation by virtue of the compliance obligations placed on the managers of such funds. The Regulation covers all non-UCITSi funds including any non-EU funds marketed to EU investors. While hedge funds, private equity and venture capital funds are very likely to be in-scope, many other more conventional fund types are captured. For example, certain UK real estate funds, charity funds and investment trusts are caught, as are certain Netherlands pension funds and German Spezialfonds.

Key dates

22 July 2014: All AIFMs must comply with all relevant AIFMD requirements from 22 July 2014, irrespective of whether their application has been determined.

22 July 2015: ESMA due to issue an opinion as to whether to ‘turn on’ the EU passport for 3rd country AIFMs / AIFs.

22 October 2015: Dependant on ESMA's recommendation of July 2015, the EC may ‘turn on’ the EU passport for 3rd country AIFMs / AIFs.

22 July 2017: EC due to begin its review of the AIFM Directive.

22 October 2018: ESMA to issue an opinion as to whether to ‘turn off’ domestic private placement regimes.

22 January 2019: Dependant on ESMA's recommendation of October 2018, the EC may ‘turn off’ private placement.

More information on the AIFMD can be found in the European Commission’s FAQs and additionally, in ESMA’s FAQs.

i'Undertakings for the Collective Investment of Transferable Securities (UCITS). A UCITS fund is a public limited company that coordinates the distribution and management of unit trusts amongst countries within the European Union. The original UCITS Directive created the internal market for investment funds in Europe. The current EU legislation for investment funds (the UCITS Directive) has been the basis for an integrated market facilitating the cross-border offer of collective investment funds. UCITS have proved successful and are widely used by European retail investors. UCITS are also regularly sold to investors outside the EU where they are valued due to their high level of investor protection.

Last updated: 4 June 2014

Authorisation and compliance

AIFMD: Authorisation and Compliance


AIFMs must apply for authorisation with their home competent authority. The information required, varies by member state and generally includes detailed information such as:

  • Details of the fund manager and funds managed
  • Details of fund manager operating model
  • Confirmation as to existence of key controls
  • Details of any outsourced activities and third party relationships
  • Confirmation as to Depositary arrangements
  • Financial resources / capital requirements

Transparent Reporting

Once the AIFM is authorised, they must publish significant annual, semi-annual or quarterly reports to regulators (depending on their size), including:

  • Information on all AIFs managed
  • Principal exposures and market concentrations of AIFs
  • Significant investor concentrations
  • Risk profile of AIFs
  • Liquidity profile of AIFs
  • Leverage profile of any leveraged AIFs

NB. There are specific approved methods of data calculation. Additionally, certain information must also be disclosed to investors on an upfront and annual basis.

Compliance requirements


  • Must comply before 22 July 2014 for all funds actively marketed to EU investors.
  • Full compliance is required for all EU AIFs and pan-EU regulatory passport available.
  • Near full compliance is required for non-EU AIFs but no pan-EU regulatory passport available. In this case, the independent Depositary services may be procured from multiple service providers.


  • Must comply with periodic Reporting requirements from 22 July 2014 and such reporting must be made to each EU member state where the relevant manager is marketing.
  • In order to benefit from the pan-EU passport, non-EU AIFMs may, subject to certain additional regulatory conditions, opt in to full AIFMD compliance in 2015.
  • All non-EU AIFMs intending to market any non UCITS fund to EU investors are expected to be fully compliant with AIFMD by 2018.
  • Must comply with individual member state marketing requirements until the AIFM is authorised.

NB. EU AIFMs must be fully compliant with AIFMD by 22 July 2014 in order to market in-scope funds to EU citizens.

Last updated: 18 June 2014