Alternative Investment Fund Managers Directive (AIFMD) – regulation memo

The Alternative Investment Fund Managers Directive (AIFMD) introduced a framework to regulate and supervise Alternative Investment Fund Managers (AIFMs) and the distribution of Alternative Investment Funds (AIFs) within the EU.

The key objectives of the directive are to reinforce investor protection; limit systemic risk; ensure proper risk management by asset managers; provide common rules for authorisation, organisation and supervision of asset managers; and create a single market for these funds in the EU.


The AIFM passport allows marketing only to professional investors, restricting the cross-border activities of AIFMs as semi-professional and retail investors can only be approached under various National Private Placement Regimes (NPPRs). As AIF distribution is subject to MiFID II rules, which differentiate between retail and professional investors any change to the definitions of the types of investors in MIFID II will affect the marketing of AIFs. Since 22 July 2013, the passport has been available to EU AIFMs who manage or market EU AIFs to EU professional investors. The delegated act that could extend AIFMD passport to funds and managers established in third countries have not been adopted yet. Given that the end of national regimes depends on the extension of the passport to third countries, the end of NPPRs has also not taken place.


The AIFMD applies to all managers of non-UCITS investment funds that manage or market those funds in Europe, whether the AIFM and/or the AIF are located in Europe or not.

Industry implications

For asset managers that benefit from the passport, AIFMD requirements have translated into increased costs due to new rules and constraints in terms of organisation, risk management and remuneration. More specifically AIFMD requires:

  • Three separate functions: the portfolio function, the risk management function and the valuation function
  • Specific rules in terms of liquidity management, risk management and reporting to the competent authority
  • The appointment of a single depositary for each AIF

However, according to the report from the EC assessing the application and scope of AIFMD published in June 2020 since the adoption of the AIFMD in 2011, total net assets of AIFs more than doubled in size from € 2.3 trillion to € 5.9 trillion. The cross-border distribution of AIFs almost doubled between June 2017 and October 2019, rising from 3% to 5.8% of AIFs.

AIFMD has also translated into a harmonised depositary regime requiring an appointed depositary to safekeep AFI’ assets and oversee AIF’s compliance with national legislation and the AIF rules.

BNP Paribas Securities Services’ view

We welcome the clarification of depositary duties introduced by the Delegated Regulation on safekeeping duties of depositaries entered into application from 1 April 2020, and the increase of investor protection it brings. However, Those new obligations may be challenging for smaller depositaries and this delegated regulation clarifies that the depositary itself must maintain a record in the financial instruments account it must open for each AIF in its book, even for assets whose custody has been delegated. Those amendments have also allowed, at the depositary’s delegates’ level, the use of omnibus accounts including assets of AIFs, UCITS and other clients. In counterparty, due diligence and verifications by the depositary all along the custody chain are strengthened.

Another change has been introduced in the regulatory framework of AIFMs. The Cross-Border fund Distribution legislative package, which entered into force on 31 July 2019,  will be implemented from August 2021. It will allow pre-marketing of AIFs and will introduce increased transparency and a single online access point to information on national rules relating to marketing requirements and applicable surpervisory fees.

The next expected changes are:

  •  In the context of the sustainable finance action plan, with the EC consultation on draft delegated acts of AIFMD published in June 2020 and the entry into application of the sustainability-related disclosure regulation from 10 March 2021, asset managers of AIFM will have to integrate sustainability risks in their risk management process. If they are in the scope of application of the Non-Financial Reporting Directive, they will have to disclose policies on their consideration of adverse impacts on environmental and social matters resulting from their investment decisions, as well as indicators. More transparency is also required on those topics on the website of asset managers and at the AIF level.
  •  According to the report published in June 2020 by the Commission on the application and scope of AIFMD the expected consultation on the review of AIFMD is likely to rise discussion on some changes in the supervisory reporting requirements and on the safekeeping duties of depositaries, particularly when a fund has appointed a tri-party collateral manager. It is also expected that this review will clarify that investor CSDs are to be considered as delegates of depositaries.

Key dates

22 July 2014 – All AIFMs must comply with relevant AIFMD provisions (effective authorisation by national competent authorities)

8 October 2014 – ESMA’s guidelines on reporting obligations under AIFMD apply

30 October 2018 – amendments of AIFMD delegated acts on safekeeping duties of depositories

1 April 2020 – Entry into application of the Delegate Regulation on safekeeping duties of depositary 

June 2020 – EC consultation on amendments to AIMFD delegated acts in the context of the Sustainability Action Plan 

Sept 2020 – EC consultation on the review of AIFMD

March 2021 – Entry into application of the sustainability-related disclosure regulation

August 2021 – Entry into application of the Cross-border Fund distribution package