Alternative Investment Fund Managers Directive (AIFMD)

Background & Overview

The Alternative Investment Fund Managers Directive (AIFMD) 2011/61/EU, which regulates the management of Alternative Investment Funds (AIFs), was published in the Official Journal of the European Union in July 2011. An AIF is defined in the Directive as any collective investment funds that does not fall under the scope of the UCITS Directive, such as hedge funds, retail investment funds, and real estate. In June 2020, the European Commission submitted a report to the European Parliament and the Council which outlined that although there had been significant growth in the AIF market since 2011, it was determined that the legal structure of the AIFMD required improvement to further enhance investor protection, and to establish differences between retail and professional investors. A review of the AIFMD was launched in 2021, to further integrate and improve the use of the AIFM passport and the overall competitiveness of the industry.

It is a requirement for all AIFMs to attain a license from the relevant National Supervisor and adhere to the AIFMD’s supplementing Regulation 231/2013/EU – The Alternative Investment Fund Manager Regulation (AIFMR). The Directive has been transposed into EU Member States local legislation, and is also supplemented by regulatory guidance from individual National Competent Authorities (NCAs) and the European Securities and Markets Authority (ESMA).

Aims & Objectives

The aim of AIFMD is to provide greater market integration of AIFs, and tackle potential risks to the broader financial markets whilst maintaining investor protection. Core objectives of the AIFMD include limiting systemic risk and ensuring appropriate risk management of asset managers, providing a common understanding for authorisation and supervision of asset managers, as well as creating a market for AIFs. It is important to note that this Directive is not intended to regulate AIFs, but the Managers of AIFs.


The Directive applies to all managers of non-UCITS investment funds, regardless of whether the AIF or AIFM is in Europe or not, unless they fall within the exceptions outlined in Article 3. An AIFM is defined as an entity or legal persons that provides services such as portfolio and risk management to one or more AIFs. Where an AIF or AIFM is not located within the EU and hence does not benefit from the passport, they must comply with the relevant authorities under the National Private Placement Regime (NPPR).

Impact of Securities Lending

AIFMs must report on the jurisdictions of the three main fund sources (excluding shares of the AIF bought by investors) as well as on the aggregate amount of borrowing and cash financing. They should also include all liquidity that is made available to the AIF, including the cash received for securities lending transactions. Collateral, which is transferred to a lender to protect them in the event of default is used in order to reduce counterparty risk that arises from efficient portfolio management techniques, including securities lending. ISLA have been working with Tri-party Agents (TPAs) to respond to the recent public consultation on the review of AIFMD, and issues that arise from various industry models when addressing the flow of information and reconciliation of books of records between TPAs and Depositories.

In addition, Article 13 of the Securities Financing Transactions (SFTR) requires AIFMs to provide information to investors on the use made of SFTs, in the annual report of each AIF under management.

Implementation Timeline & Key Dates

  • July 2011

    AIFMD was published in the Official Journal and entered into force

  • July 2013

    Deadline for National Transposition into individual Member States National Law

  • July 2014

    Deadline for existing AIFMs to apply for authorization

  • November 2018

    AIFMD Delegated Regulation 2018/1618/EU on the safekeeping duties of depositories entered into force.

  • June 2020

    European Commission submitted a report to the European Parliament and the Council on the scope of application of the AIFMD

  • January 2021

    Public Consultation on the review of the AIFMD closes

  • Q3 2021

    Legislative Proposal to amend the existing AIFMD is expected

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