AIFMD II – Council of the EU and European Parliament reach a deal

On 20 July 2023, the Council of the EU (the Council) announced that a deal has been provisionally reached with the European Parliament (EP) on changes to the AIFMD and the UCITS Directive.

Originally, it had been thought that agreement would be a relatively straightforward matter – when the trilogue negotiations started in March, many thought it was possible a deal would be struck by the end of April.

Things have, though, proved to be trickier than that, and there have been significant differences between the parties from the outset, with delegation and loan originating funds (LOFs) proving especially contentious.

Although it remains to be seen exactly what the terms of the agreed text say (and, as ever, the devil will be in the detail), the Council is reporting that they will include:

• new requirements allowing for the activation of liquidity management tools, so, in future, managers will be “well equipped to deal with significant outflows in times of financial turbulence”
• a framework for LOFs
• enhanced rules for delegation by investment managers to third parties, enabling managers to “tap the best resources from market specialists, subject to reinforced supervision and preserving market integrity”
• enhanced data sharing and cooperation between NCAs
• new measures to identify "undue costs” being charged to funds and investors
• new measures to prevent misleading fund names.

Once the text is made public, we will review it and will report in greater detail on the key impacts for managers.

What happens next?

The agreement reached is provisional upon the endorsement by both the Council and the EP (in a plenary session).

It will then be translated into all the official languages of the EU

Finally, it will be published in the Official Journal.

Each of these steps takes time.

The intention (which we assume won’t have been changed in the new deal) was for there to be a 24 month period following publication before the new rules take effect, meaning they will probably apply from Q3/4 2025 or early 2026.