What the Alternative Investment Fund Managers Directive 2.0 means for EU marketing funds

Alternative Investment Fund Managers Directive (AIFMD) 2.0 makes amendments to AIFMD. 

It entered into force on 15 April 2024 and, barring some exceptions, EEA Member States have 24 months to implement its provisions into national law. This means changes will largely take effect from 16 April 2026.

AIFMD 2.0 includes various reforms for European funds and creates new, specific rules for funds that originate loans. 

Further guidance from the European Commission and European Securities and Markets Authority’s (ESMA) on how the provisions should be interpreted is expected, meaning there are numerous uncertainties at this stage.

Key changes to marketing alternative investment funds (AIFs)

Article 20 of the AIFMD stipulates that an AIF Manager (AIFM) can delegate tasks to third parties. THE AIFMD 2.0 amendment makes it explicit that delegation of the marketing function by an EU AIFM must comply with the obligations of this Article. 

This means an EU AIFM delegating marketing to a third-party distributor will need to notify its home state regulator before the delegation becomes effective. It remains to be determined what form this prior notification will take in each EU jurisdiction.

If the marketing function is performed by one or several distributors acting on their own behalf, and they market the AIF in accordance with the Markets in Financial Instruments Directive (MiFID), or through insurance-based investment products in accordance with the Insurance Distribution Directive, such function shall not be considered to be a delegation. The amendment made to Article 20 is helpful as it clarifies that the framework relating to the delegation under AIFMD will not apply to these relationships.

Implication of changes

While this aspect of AIFMD 2.0 might have a limited impact on EU AIFMs, there are several areas where the market would welcome clarification, namely:

• The meaning of marketing “in accordance with Directive 2014/65/EU”.
• How the carve-out will be applied to situations involving nominees with a MiFID licence.
• Whether the carve-out could apply to third-country firms appointed by AIFMs to carry out distribution which cannot be authorised under MiFID, or any UK firms which are approved to provide MiFID services or are tied agents based on pre-Brexit MiFID equivalent regulations.

Disclosures and reporting 

AIFMD 2.0 also makes amendments to Article 23 which will result in AIFMs having to provide additional information to investors.

AIFMs managing EU AIFs and marketing any AIFs in the EU will now be required to provide additional information to investors before they invest in an AIF, as well as notify them of any material changes to this information. One of the key requirements includes the disclosure of the name of the AIF. This change brings the name of the AIF under the scope of ESMA’s recent Guidelines on the use of ESG-related terms in fund names. 

Broadly, this means that if a fund uses sustainability or ESG-related terms in its name, its ESG profile must correspond to its name in line with these Guidelines. Under AIFMD 2.0, ESMA is also mandated to develop further guidelines to specify when an AIF’s name is considered unclear, unfair, or misleading. This mandate applies to fund names generally, not just those with sustainability-related terminology.

In addition, AIFMs must disclose, where applicable, the possibility of and conditions for using liquidity management tools selected in accordance with the amended Article 16(2b). They are also required to provide a detailed list of fees, charges, and expenses borne by the AIFM in connection with the operation of the AIF, which are to be directly or indirectly allocated to the AIF.

AIFMs will also need to periodically provide investors with further information, including the composition of the originated loan portfolio (where applicable). On an annual basis, they must disclose all fees, charges, and expenses directly or indirectly borne by investors, as well as any parent undertaking, subsidiary, or special purpose vehicle used in relation to the AIF’s investments by or on behalf of the AIFM. These changes aim to enhance transparency and ensure investors have a clearer understanding of the costs and structures associated with their investments.

AIFMD 2.0 does not provide a mandate to ESMA to develop any delegated acts that would provide further detail on these requirements. It remains to be seen whether ESMA or any national competent authority (NCA) will issue guidance or frequently asked questions setting out how granular these additional disclosures must be.

Regulatory Reporting Obligations

AIFMD 2.0 also introduces increased reporting obligations under Article 24. AIFMs must regularly report to the relevant EU NCAs, either their home EU NCA or that of the country into which they market the AIFs in case of a non-EU AIFM, on the markets and instruments in which it trades, where it actively trades, and on the exposures and assets of each AIF it manages. 

This means reporting is no longer limited only to ‘principal’ markets and instruments nor limited to ‘principal’ exposures and ‘most important’ concentrations of each AIF. Reporting is also expected to be much more comprehensive.

Amendments also require significantly more detail on reporting delegation arrangements concerning portfolio management or risk management, to the extent applicable.

AIFs managed by third-party EU AIFMs

Third-country sponsors without an EU presence will continue to be able to appoint third-party EU AIFMs (or “white label” AIFMs) to manage their EU AIFs. Such AIFs will be able to benefit from the EU-wide AIFMD marketing passport. 

Under such arrangements, the EU AIFM will remain responsible for obtaining the marketing passport. However, third-party EU AIFMs rarely have their own investor relations teams and prefer for the actual marketing to be undertaken by a distributor. The abovementioned marketing delegation rules will apply between such third-party EU AIFMs and the chosen network of distributors.

In such situations, the Cross-Border Distribution of Funds Directive will also continue to apply and remains relevant, particularly in relation to any pre-marketing undertaken by the third-country sponsor before the third-party EU AIFM has been formally appointed. Where pre-marketing is taking place, notification may be required – which should be submitted within two weeks of pre-marketing having taken place, identifying an EU AIFM as responsible for such pre-marketing.

Marketing of AIFs managed by non-EU AIFMs in the EU 

Article 42 of AIFMD outlines the conditions for marketing AIFs in the EU when managed by a non-EU AIFM. Under the directive, the ability of a non-EU AIFM to market an AIF within the EU remains possible but is subject to compliance with certain requirements, some of which have been amended under AIFMD 2.0. These amendments include the obligation to adhere to the revised provisions of Articles 23 and 24, as well as changes concerning the acceptable jurisdictions for establishing non-EU AIFMs or non-EU AIFs.

One significant amendment specifies that non-EU AIFMs or non-EU AIFs must not be located in a high-risk third country as defined under the EU’s Anti-Money Laundering Directive. This replaces the earlier requirement that such entities should not be established in countries listed as Non-Cooperative Countries by the Financial Action Task Force (FATF). 

Additionally, the third country in which the non-EU AIFM or non-EU AIF is based must have entered into an agreement with the Member State of reference and with every other Member State where the AIF is intended to be marketed. This agreement must fully comply with the standards set forth in the OECD Model Tax Convention and ensure the effective exchange of information on tax matters.

Furthermore, the third country in which the non-EU AIFM or non-EU AIF is established must not appear on the EU's revised list of non-cooperative jurisdictions for tax purposes. 

These updates are designed to improve regulatory alignment and strengthen international cooperation while maintaining the integrity of the EU market for non-EU AIFMs and AIFs.

Non-EU AIFMs and EU management and marketing “passport”

AIFMD 2.0 has not removed the yet to be implemented provisions in Articles 37, 39 and 40 setting out the circumstances in which a non-EU AIFM can obtain authorisation to manage EU AIFs and/or market AIFs in the EU under a third-country marketing passport.

Instead, AIFMD 2.0 has merely updated the provisions of Articles 37 and Article 40 to reference the same changes as those made to Article 42 (see above) in relation to the permitted location of the non-EU AIFM and non-EU AIFs.

As the UK is a non-EU jurisdiction, any UK sponsor, UK AIFM or UK AIF will need to follow the rules applicable to non-EU sponsors, non-EU AIFMs and non-EU AIFs when marketing in the EU. The UK is not currently proposing to introduce changes similar to AIFMD 2.0 for its internal market.

Timing and next steps

There are no express exemptions or transitional provisions with regards to new obligations under Article 42, and by extension Article 23 and 24, of AIFMD 2.0, or the provisions relating to marketing.

EEA Member States have until 16 April 2026 to implement AIFMD 2.0 into national law. However, the Annex IV reporting RTS may be published as late as 16 April 2027 and as such may practically push the Annex IV reporting changes to that date.