On 12 December 2024, the European Securities and Markets Authority (“ESMA”) published a consultation paper (“Consultation”) on draft regulatory technical standards relating to open-ended loan originating AIFs under the revised Alternative Investment Fund Managers Directive (EU/2024/927) (“AIFMD 2”).

Purpose of the Consultation

AIFMD 2 stipulates that loan-originating AIFs should generally be closed-ended, but can be “open-ended” if the AIFM is able to demonstrate to its home member state regulator that the AIF’s liquidity risk management system is compatible with its investment strategy and redemption policy.

The purpose of the Consultation is to determine the requirements that a loan originating AIF must comply with in order to maintain an “open-ended” fund structure and it includes ESMA’s proposals in respect of the same.

Key areas of focus

Key areas addressed in the Consultation include:

  • a sound liquidity management system: proposals aimed at ensuring a robust system that aligns with the fund’s investment strategy and redemption policy;
  • availability of liquid assets and stress testing: maintaining sufficient liquid assets and conducting regular stress tests to manage liquidity risk effectively; and
  • redemption policy: developing an appropriate redemption policy that considers the liquidity profile of the AIF’s loan assets.

These requirements take into account factors such as the nature of the underlying loan exposures, average loan repayment times and overall composition and the granularity of the fund’s portfolio.

Next steps

The Consultation is open for feedback until 12 March 2025 and the final RTS is due to be submitted to the European Commission in Q3 or Q4 2025, ahead of 16 April 2026 (being the date by which Member States will be required to have implemented the AIFMD 2 requirements).

Market participants should continue to monitor these developments and reach out to your usual Proskauer contact if you have any questions or reach us at ukreg@proskauer.com.

Posted in Private Funds
Tags: AIFMD, European Securities and Markets Authority
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Photo of John Verwey John Verwey

John Verwey is a Regulatory partner and a member of the Firm’s Private Capital industry group.

John advises on financial services regulatory matters at a national UK and European level. He specializes in advising investment firms, including venture, private equity, credit, and hedge…

John Verwey is a Regulatory partner and a member of the Firm’s Private Capital industry group.

John advises on financial services regulatory matters at a national UK and European level. He specializes in advising investment firms, including venture, private equity, credit, and hedge fund managers as well as institutional managers and advisers, on all aspects of the UK and EU regulatory regimes.

Another key area of focus is advising clients in the financial services sector on mergers and acquisitions, re-organisations and associated regulatory approvals.

John represents a variety of clients that range from small start-up fund managers to established global fund advisers and managers. In The Legal 500, John is noted as “an all-rounder who gets into the details and manages client expectations on navigating tricky regulatory requirements”.

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Photo of Rachel Lowe Rachel Lowe

Rachel E. Lowe is a special regulatory counsel in the Corporate Department and a member of the Private Investment Funds Group.

Rachel advises on financial services regulation specializing in sustainable finance and ESG regulation. She has particular expertise in drafting and advising on…

Rachel E. Lowe is a special regulatory counsel in the Corporate Department and a member of the Private Investment Funds Group.

Rachel advises on financial services regulation specializing in sustainable finance and ESG regulation. She has particular expertise in drafting and advising on the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation. Rachel has also supported with EU MiFID and AIFMD sustainability updates for clients, including from a governance and organizational perspective, as well as providing drafting and training support. She also advises on the Corporate Sustainability Reporting Directive (CSRD), including analysis of its applicability for large international group structures.

From a UK perspective, Rachel supports clients with the TCFD-related requirements in the Financial Conduct Authority’s ESG Sourcebook and is increasingly engaged on the UK’s Sustainability Disclosure Requirements (SDR).

More broadly, Rachel has worked with litigation colleagues to assist clients with understanding and mitigating greenwashing-related legal and regulatory risk.

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Photo of Sulaiman Malik Sulaiman Malik

Sulaiman Malik is an associate in the Corporate Department and a member of the Private Funds Group.

Sulaiman advises clients on a range of UK and international financial regulation. He advises private equity funds, hedge funds, sovereign wealth funds and other asset managers…

Sulaiman Malik is an associate in the Corporate Department and a member of the Private Funds Group.

Sulaiman advises clients on a range of UK and international financial regulation. He advises private equity funds, hedge funds, sovereign wealth funds and other asset managers, as well as banks, FinTechs, broker-dealers and governments.

Prior to joining Proskauer, Sulaiman trained at Simmons & Simmons in London, where he was seconded to Brevan Howard. He has also spent time at the UK’s Ministry of Justice and as an adviser to the Mayor of Brisbane, in Australia.

Sulaiman is a passionate advocate for diversity and inclusion. He previously worked at Rare, a market-leading diversity consultancy, and provides pro bono legal advice to a range of community and civil rights organizations.

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Photo of Michael Singh Michael Singh

Michael is an associate in the Private Funds Group in the Corporate Department.

Michael advises clients on a variety of regulatory issues both from a UK and European perspective. He also helps clients on fund related transactions. His clients include private equity firms…

Michael is an associate in the Private Funds Group in the Corporate Department.

Michael advises clients on a variety of regulatory issues both from a UK and European perspective. He also helps clients on fund related transactions. His clients include private equity firms, investment managers, FinTech companies and wealth management businesses.

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