• AIFMD 2.0¹ enters into force today –15 April 2024.
• Member States have 24 months to transpose the provisions into national law, meaning that AIFMD 2.0 will take effect from 16 April 2026.
• AIFMD 2.0 provides for some transitional provisions for AIFs that originate loans, and the key date of reference for these transitional provisions is 15 April 2024.
• All AIFMs engaged in loan originating strategies need to understand the implications of AIFMD 2.0 for their existing AIF portfolio and future fundraising plans so that they can start to make the appropriate business preparations.

The directive that makes amendments to the Alternative Investment Fund Managers Directive (AIFMD)¹ (and, to the relevant extent, the UCITS Directive)², referred to as “AIFMD 2.0”³ enters into force today –15 April 2024.

AIFMD 2.0 introduces, amongst other things, a new regime applicable to Alternative Investment Funds (AIFs) that originate loans,⁴ as covered in detail in our OnPoint “AIFMD 2.0: What’s New? Analysis of Key Changes”. As further explained in our OnPoint, the applicable regime differs depending on whether the AIFs merely originate loans or whether the AIFs originate loans on a significant basis – the latter being defined in AIFMD 2.0 as “Loan Originating AIFs”⁵. Most of the AIFMD 2.0 loan origination provisions will apply to all AIFs when originating loans, with some additional provisions applying specifically to Loan Originating AIFs.

EEA Member States have 24 months to implement the provisions of AIFMD 2.0 into the national law, with the provisions on AIFMD 2.0 “going live” on 16 April 2026. However, AIFMD 2.0 provides for some transitional provisions for AIFs that originate loans, and the key date of reference for these transitional provisions is 15 April 2024 (the date AIFMD 2.0 enters into force).

This is significant for asset managers because they will need to review their AIFs and their loan portfolios and determine what regime will apply to AIFs that originate loans that are in existence as of 15 April 2024 (Existing AIFs) and to the loans in their portfolios. This determination is based on the circumstances of such Existing AIFs on and before 15 April 2024 and on planned activities after such date. Asset managers can start taking relevant steps now so that they will be in a position to comply with the relevant provisions on time, if necessary.

AIFMD 2.0 distinguishes the following fact patterns in the context of transitional provisions:

• AIFs that originate loans and that were constituted before 15 April 2024 and that will raise capital going forward;
• AIFs that originate loans and that were constituted before 15 April 2024 and that will not raise any additional capital going forward; and
• AIFs that originated loans before 15 April 2024 (which may apply in combination with bullets 1 or 2 above).

1. Regime applicable to AIFMs of Existing AIFs that originate loans and that were constituted before 15 April 2024 and that will continue raising capital after 15 April 2024

AIFMD 2.0 provides:

“AIFMs managing AIFs that originate loans and that were constituted before 15 April 2024 shall be deemed to comply with Article 15(4a) to (4d) and Article 16(2a) until 16 April 2029.”

This means that AIFMs of such Existing AIFs can benefit from transitional provisions until 16 April 2029 in relation to certain provisions of AIFMD 2.0.

The AIFMs of such AIFs are deemed compliant, until 16 April 2029, with:

• the investment limits and related ramp up and ramp down periods provisions (articles 15(4a), 15(4c) and 15(4d) of AIFMD 2.0), which apply to all AIFs that originate loans;
• in respect of Loan Originating AIFs only, the rules relating to leverage for both closed-ended and open-ended AIFs (article 15(4c) of AIFMD 2.0); and
• the requirement for the AIFM to ensure that all Loan Originating AIFs are closed-ended, unless the AIFM that manages it is able to demonstrate to the competent authorities of its home Member State that the AIF’s liquidity risk management system is compatible with its investment strategy and redemption policy (article 16(2a) of AIFMD 2.0)⁶

The AIFMs will need to ensure that they comply with the abovementioned provisions as soon as the transitional period ends, i.e. as from 16 April 2029.

For example, open-ended AIFs that satisfy the definition of Loan-Originating AIFs and which continue to raise capital after 15 April 2024, will need to have implemented the necessary changes to their policies and procedures by 16 April 2029 to be able to demonstrate to the AIFM’s home Member State regulator that the AIF’s liquidity risk management system is compatible with the investment strategy and redemption policy. If the relevant AIF is also otherwise regulated or directly supervised (i.e., is a regulated fund in its home state jurisdiction), the regulator of the home Member State of the AIF may also need to be involved in these changes and other rules may also apply.

Notwithstanding the above transitional provisions, there are some requirements that AIFMs need to be aware of relating to the investment and leverage limits⁷ during the transitional period.

AIFMD 2.0 provides:

“Until 16 April 2029, where the notional value of the loans originated by an AIF to any single borrower, or the leverage of an AIF, is above the limits referred to in Article 15(4a) and (4b) respectively, AIFMs managing those AIFs shall not increase that value or that leverage. Where the notional value of the loans originated by an AIF to any single borrower, or the leverage of an AIF, is below the limits referred to in Article 15(4a) and (4b) respectively, AIFMs managing those AIFs shall not increase that value or that leverage above those limits”.

This means that during the transitional period (i.e., until 16 April 2029) AIFMs of Existing AIFs:

• are not permitted to further increase (but do not need to decrease) their leverage if their leverage exceeds the limits stated in AIFMD 2.0;
• are not permitted to further increase (but do not need to decrease) their concentration with respect to any one relevant borrower if they already exceed the relevant concentration limits stated in AIFMD 2.0;
• are not permitted to increase their leverage above the limits stated in AIFMD 2.0; and
• are not permitted to increase their concentration with respect to any one relevant borrower above the limits stated in AIFMD 2.0.

Note that the transitional provisions only cover the abovementioned requirements relating to AIFs that originate loans. Other provisions of AIFMD 2.0 relating to AIFs that originate loans and their AIFMs (for example the rules relating to risk retention or restriction on “originate to distribute” strategies, etc.), will apply as from 16 April 2026, unless and to the extent that another exemption also applies (see below under 3.).

Notwithstanding the above, AIFMs may opt voluntarily not to rely on the transitional provisions but comply with the abovementioned provisions of AIFMD 2.0 at any time prior to 16 April 2029. If an AIFM makes such a decision, the AIFM would need to notify its home Member State regulator of the same.

2. Regime applicable to AIFMs of Existing AIFs that originate loans and that were constituted before 15 April 2024 and which do not raise additional capital after 15 April 2024

AIFMD 2.0 provides:

“AIFMs managing AIFs that originate loans, that were constituted before 15 April 2024 and that do not raise additional capital after 15 April 2024 shall be deemed to comply with Article 15(4a) to (4d) and Article 16(2a) in respect of those AIFs.”

This means that AIFMs of such Existing AIFs may continue to manage such AIFs without needing to comply with the following provisions of AIFMD 2.0 without any time limit:

• the investment limits and related ramp up and ramp down periods provisions (articles 15(4a), 15(4c) and 15(4d) of AIFMD 2.0) which apply to all AIFs that originate loans;
• in respect of Loan Originating AIFs only, the rules relating to leverage for both closed-ended and open-ended AIFs (article 15(4c) of AIFMD 2.0); and
• the requirement for the AIFM to ensure that all Loan Originating AIFs are closed-ended, unless the AIFM that manages it is able to demonstrate to the competent authorities of its home Member State that the AIF’s liquidity risk management system is compatible with its investment strategy and redemption policy (article 16(2a) of AIFMD 2.0).

For example, open-ended AIFs that satisfy the definition of Loan-Originating AIFs but that decide not to continue to raise capital after 15 April 2024, do not, in principle, need to comply with the new requirements applicable to open-ended Loan-Originating AIFs (i.e. demonstrate to the AIFMs’ home Member State regulator that the AIF’s liquidity risk management system is compatible with the investment strategy and redemption policy)⁸. However, additional rules may apply if the relevant AIF is also otherwise regulated or directly supervised (i.e. is a regulated fund in its home jurisdiction).

Note that Existing AIFs falling into this category are only deemed to comply with the abovementioned requirements. Other provisions of AIFMD 2.0 relating to AIFs that originate loans and their AIFMs (for example the rules relating to risk retention or restriction on “originate to distribute” strategies, etc), will apply as from 16 April 2026, unless and to the extent that another exemption also applies (see below under 3.).

However, AIFMs may opt to comply voluntarily with the abovementioned provisions of AIFMD 2.0 at any point. If an AIFM makes such a decision, the AIFM would need to notify its home Member State regulator of the same.

3. Existing AIFs that originate loans before 15 April 2024

AIFMD 2.0 provides:

“Where AIFs originate loans before 15 April 2024, AIFMs may continue to manage such AIFs without complying with Article 15(3), point (d), and Article 15(4e), (4f), (4g), (4h) and (4i) in respect of those loans”.

This means that AIFMs of Existing AIFs that originated loans before 15 April 2024, may continue to manage those Existing AIFs without complying with certain provisions of AIFMD 2.0 relating to loan origination, without any time limit, in respect of those loans only. In particular, the AIFMs will not be required to:

• implement specific policies, procedures and processes relating to granting of loans (article 15(3), point d) of AIFMD 2.0);
• comply with certain restrictions on entities that the AIF may grant loans to (article 15(4e) of AIFMD 2.0);
• comply with the rule that the proceeds of loans minus allowable expenses shall be attributed to the relevant AIF in full and that all costs and expenses linked to the administration of loans shall be disclosed (article 15(4f) of AIFMD 2.0);
• comply with the restrictions relating to granting loans to consumers (article 15(4g) of AIFMD 2.0);
• comply with the restrictions on ‘originate-to-distribute’ strategies (article 15(4h) of AIFMD 2.0); and
• retain 5% of the notional value of each loan originated and subsequently transferred to third parties (the so-called ‘risk retention’ requirements) (article 15(4i) of AIFMD 2.0).

This means in practice, that if an AIF originated loans before 15 April 2024 and will continue to originate loans after this date, two or potentially three separate sets of rules will apply:

1. rules applicable to loans generated before 15 April 2024.
2. rules applicable to loans originated on or after 15 April 2024 but that will mature or be disposed of before 16 April 2026; and
3. rules applicable to loans originated on or after 15 April 2024 and that are still in the AIF’s portfolio on 16 April 2026.

This will need to be reflected in the policies, processes and procedures at the level of the AIFM and carefully monitored.

Note, the abovementioned exemption can be combined with an exemption described under sections 1 and 2.

Key Takeaways

As a result of the abovementioned transitional provisions, asset managers should note that:

• only AIFs constituted before 15 April 2024 can benefit from transitional exemptions from certain rules relating to AIFs that originate loans and their AIFMs as provided by AIFMD 2.0 (e.g., investment limits, leverage limits, requirement for Loan-Originating AIFs to be closed-ended)⁹;
• any and all AIFs that originate loans and that are constituted on or after 15 April 2024 will have to comply with the provisions of AIFMD 2.0 from 16 April 2026;
• only loans originated by AIFs before 15 April 2024 will be eligible to continue to be managed by the AIFMs without having to comply with certain rules (e.g., the risk retention requirement would not apply, no restrictions on “originate-to-distribute” strategies, etc); and
• loans originated by AIFs on or after 15 April 2024 will generally need to be managed by the AIFMs in accordance with the new rules relating to AIFs that originate loans, from 16 April 2026.

Actions to Take

We would advise asset managers and AIFMs to perform a fact-gathering exercise as of 15 April 2024 to ascertain (at least) the following:

• whether they manage any AIFs that originate loans or any Loan Originating AIFs within the meaning of AIFMD 2.0 and if they do, what are the maturities of the loans in their portfolios (or anticipated maturities);
• whether those AIFs will raise additional capital after 15 April 2024;
• whether those AIFs are open-ended or closed-ended within the meaning of AIFMD; and
• whether those AIFs have originated loans before 15 April 2024 and/or whether they will originate loans afterwards and what is the maturity of those loans.

All AIFMs engaged in loan originating strategies need to understand the implications of AIFMD 2.0 for their existing AIF portfolio and future fundraising plans so that they can start to make the appropriate business preparations in good time prior to 16 April 2026. Depending on the impact, managers may also wish to take a different approach to their product design or make changes to the terms of their existing AIFs. They will also need to adapt their compliance policies and processes. Undertaking the above fact-gathering exercise will help ensure that the availability of transitional relief is properly assessed in this process.

Dechert LLP has been following AIFMD 2.0 since 2021.

1. Directive 2011/61/EU.
2. Directive 2009/65/EC.
3. AIFMD 2.0 (Directive (EU) 2024/927) is available here.
4. AIFMD 2.0 defines “loan origination” or “originating a loan” as “the granting of a loan (i) directly by an AIF as the original lender or (ii) indirectly through a third party or special purpose vehicle, which originates a loan for or on behalf of the AIF, or for or on behalf of AIFM in respect of the AIF, where the AIFM or AIF is involved in structuring the loan, or defining or pre-agreeing its characteristics, prior to gaining exposure to the loan”.
5. To be a “Loan Originating AIF” the AIF must meet at least one of two alternative conditions: (i) a qualitative test when the investment strategy of the AIF is “mainly to originate loans”; or (ii) a qualitative test where the AIF’s originated loans “have a notional value that represents at least 50 % of its net asset value.”
6. There are derogations from the requirement for a Loan Originating AIF to be operated as a closed-ended fund. Under AIFMD 2.0 it is possible for Loan Originating AIFs to operate as open-ended provided that certain requirements are fulfilled, including a liquidity management system that minimises liquidity mismatches, ensures the fair treatment of investors and is under the supervision of the competent authorities of the home Member State of the AIFM. ESMA has been mandated to develop draft regulatory technical standards and submit them to the European Commission by 16 April 2025 to determine the requirements with which Loan Originating AIFs are to comply in order to maintain an open-ended structure. Those requirements shall include (i) a sound liquidity management system, (ii) the availability of liquid assets and stress testing, as well as (iii) an appropriate redemption policy having regard to the liquidity profile of Loan Originating AIFs. Those requirements shall also take due account of (i) the underlying loan exposures, (ii) the average repayment time of the loans and (iii) the overall granularity and composition of the portfolios of Loan Originating AIFs.
7. Note, the leverage limits stipulated in AIFMD 2.0 apply to Loan Originating AIFs only.
8. See footnote 6 above.
9. As noted above in sections 1. and 2., a Loan Originating AIF may be open-ended provided that the AIFM that manages it is able to demonstrate to the competent authorities of the AIFMs’ home Member State that the AIF’s liquidity risk management system is compatible with the investment strategy and redemption policy. See also footnote 6 above.