AIFMD 2.0

AIFMD 2.0 entered into force on 15 April 2024. It must be transposed into national law by EU member states by 16 April 2026. It introduces a range of obligations for management companies with the aim of promoting investor protection and providing a level playing field between AIFMs and UCITS management companies.

In general, AIFMD 2.0 requires a comprehensive review of existing policies, procedures and fund documentation to ensure compliance with enhanced obligations.

Key Areas of Focus

• Delegation Arrangements – reporting requirements for delegation have been expanded with a focus on transparency and oversight, with additional detail being required on delegates and conflict of interest management. To assist in ensuring AIFMD 2.0 compliance, Firms should maintain detailed accounts of all delegation arrangements, maintain a delegate register, conduct a review and gap analysis of all delegate arrangements, develop a national competent authority notification process before any delegation arrangements become effective and update all relevant policies and contracts.
• Liquidity Management – AIFMD 2.0 significantly expands the provisions of AIFMD relating to liquidity management. AIFMs of open-ended funds and UCITS management companies must implement at least two liquidity management tools (“LMTs“) from the harmonised list provided under AIFMD 2.0. They must clearly specify details in respect of the selection, activation, calibration and deactivation process for each selected LMT. A facility for suspensions and side pockets should always be available and as such details on both should always be specified. To assist in ensuring AIFMD 2.0 compliance, Firms should conduct a review on existing liquidity management and stress testing frameworks and conduct a gap analysis, review all AIFs/UCITS under management and conduct a suitability assessment, aligning selected LMTs with specific investment strategies, liquidity profiles, investor bases and redemption policies.
• Investor Disclosures – in addition to the existing pre-contractual disclosures under Article 23 of AIFMD for AIFs, AIFMD 2.0 requires pre-contractual disclosure documents to include new disclosures including (i) the use and conditions of selected LMTs, (ii) a comprehensive list of fees, charges and expenses that are borne by the management company in respect of any particular fund, and (iii) disclosure of the name of the AIF before investment.

AIFMD 2.0 is a significant evolution in obligations for AIFMs and UCITS management companies. The robust frameworks for delegation, liquidity management and disclosure should be reviewed closely, and the above focus areas should be considered to assist in ensuring AIFMD 2.0 compliance. In addition to these specific practical updates, management companies should ensure that they are proactive in reviewing and aligning their wider governance procedures, staff training and service provider arrangements to ensure successful AIFMD 2.0 integration.