European Alternative Fund Managers Directive has stood the test of time

by | Feb 1, 2021


The European Fund and Asset Management Association (EFAMA) has published today its response to the European Commission’s public consultation on the review of the Alternative Investment Fund Managers Directive (AIFMD).

EFAMA members believe that the AIFMD is an effective and balanced regime for the regulation of AIF Managers. The framework has improved the monitoring of risk to the financial system and the cross-border raising of capital for investments in alternative assets. Following the introduction of the Directive which came into effect in 2011, AIFMs are now operating with greater transparency for investors and supervisors, helping build confidence in financial markets.

Investment funds will play a pivotal role in the post-pandemic economic recovery and in the further development of the Capital Markets Union. The AIFMD is one of the pillars of EU regulation for investment funds and it has stood the test of time! It has delivered on its objectives, setting a high standard of harmonisation in the alternative investment fund management sector, while ensuring a high level of investor protection.” explained Tanguy van de Werve, EFAMA Director General.

Against this backdrop, EFAMA advocates for limited amendments to the framework. The association calls on the European Commission to follow a set of three overarching principles when reviewing AIFMD, to ensure the framework is adequately revised without undermining the robust foundations on which it currently stands:

  • Don’t try to fix something that is not broken: The ongoing review of AIFMD should only be targeting clearly demonstrated material shortcomings that cannot otherwise be addressed through supervisory convergence or Level 2 harmonisation.
  • Keep the AIFMD a “manager” regulation: The AIFMD was designed as a “manager” regulation, and not as a “product” regulation. This is because the alternative investment fund management sector is too diverse to include in a regulation product-specific rules for each category of AIFs. National Competent Authorities need to have the required flexibility to appropriately supervise such a diverse universe.
  • Focus on supervisory & enforcement convergence: Effective supervision and enforcement across Member States is as important as ensuring consistency across national rules. EFAMA encourages the European Commission to ensure that ESMA makes full use of all the powers at its disposal (including enforcement powers at Level 4) to promote greater supervisory and enforcement convergence.

Commenting on the recommended changes, Federico Cupelli, Senior Regulatory Policy Adviser at EFAMA, said: “The AIFMD facilitated the market integration of EU AIFs and we strongly believe that only a few targeted amendments are necessary to improve the effectiveness of AIFMD as a whole. With respect to the introduction of a depositary passport, our views are resolutely against such an option. We believe that the requirement for the depositary to share the same domicile as the fund is an important safeguard in the interest of investor protection. The AIFMD also sets a very clear delegation framework establishing a series of clear parameters against which a third-party could be considered a “letter-box” entity. Such parameters are in our view exhaustive enough, striking an optimal balance between the twin objectives of investor protection and the preservation of a management company’s need to structure its business as most appropriate when serving its investors.”

The Covid19-induced market stress has demonstrated the resilience of the investment management industry and has further reinforced EFAMA’s longstanding view that the full set of Liquidity Management Tools should be made available in all EU jurisdictions. We would caution, however, against including restrictive definitions or rules on the deployment of such tools under stressed market conditions. It must always be at the discretion of the manager of the fund. In addition, to improve the monitoring and supervision of AIFM activities in the EU, there are a number of opportunities for supervisory authorities to address their own data-sharing practices, by allowing more efficient sharing and cross-referencing of data already provided by AIFMs through current reporting. “, added Chiara Sandon, Senior Regulatory Policy Adviser at EFAMA.


The full response to the consultation can be found here.


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