Directive 2011/61 - Alternative Investment Fund Managers - Main contents

SUMMARY OF:

Directive 2011/61/EU on alternative investment fund managers

WHAT IS THE AIM OF THE DIRECTIVE?

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  It lays down the rules for authorising, supervising and overseeing managers of a range of alternative investment funds (AIFs), including hedge funds and private equity in the European Union (EU).
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  The directive has been amended several times and the European Commission has adopted a number of delegated and implementing acts which supplement the directive or offer technical guidance on its application.

KEY POINTS

Exclusions from scope

The directive does not apply to the following:

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  holding companies (as defined in the directive);
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  management of pension funds;
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  employee participation or savings schemes;
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  supranational institutions;
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  national central banks; and
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  insurance contracts.

Passporting

Alternative investment fund managers (AIFMs) can ‘passport’ their services in different EU Member States on the basis of a single authorisation. This means that once an AIFM is authorised in one Member State and complies with the rules of the directive, it is entitled to manage or market funds to professional investors throughout the EU.

Authorisations

To operate in the EU, fund managers must obtain authorisation from the competent authority of their home Member State. To obtain authorisation, AIFMs have to hold a minimum level of capital in the form of liquid or short-term assets.

Depositary

AIFMs are required to ensure that the funds they manage appoint an independent depositary. This could be, for example, a bank or investment firm that is responsible for overseeing the fund’s activities and ensuring that its assets are appropriately protected.

Risk management and prudential oversight

AIFMs must be able to assure the competent authority of the robustness of their internal arrangements with respect to risk management.

This includes a requirement to disclose, on a regular basis, the main markets and instruments in which they trade, their principal exposures and their risk concentrations.

Treatment of investors

To encourage diligence amongst their investors, AIFMs are required to provide a clear description of their investment policy, including of the types of assets and the use of leverage. An annual report for each financial year has to be made available to investors on request.

Leveraged funds

The directive sets out specific requirements with regard to leverage, i.e. the use of debt to finance investment. Competent authorities may set leverage limits in order to ensure the stability of the financial system.

Private equity funds

Where an AIF acquires control of a non-listed company or an issuer, the AIFM is subject to anti-asset stripping rules. For a period of 2 years, the AIFM must act against any distribution, capital reduction, share redemption or acquisition of own shares by the company.

Funds and managers located in non-EU countries

Subject to conditions set out in the directive, the ‘passport’ may be extended to non-EU AIFMs and to the marketing of non-EU funds, managed by either EU or non-EU AIFMs.

Role of the European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) plays an active role in building a common supervisory culture in particular by issuing guidelines on sound remuneration policies and developing technical standards to determine types of AIFMs.

Smaller funds

Member States may choose not to apply the directive to smaller AIFMs, i.e. funds with managed assets below €100 million if they use leverage, and with assets below €500 million if they do not. Smaller funds are however subject to minimum registration and reporting requirements.

Amendments to Directive (EU) 2011/61

Directive (EU) 2016/2341 concerning institutions for occupational pension funds (IORPs) (see summary), introduces the following two additional rules.

Member States must not:

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  restrict IORPs from appointing, for the management of the investment portfolio, investment managers established in another Member State and duly authorised for this activity;
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  restrict IORPs accepted as a depositary for the purposes of Directive 2011/61/EU.

Regulation (EU) 2017/2402, which sets up a general framework for securitisation (see summary), introduces a rule requiring that where AIFMs are exposed to a securitisation that no longer meets the requirements it lays down, they must, in the best interest of the investors in the relevant AIFs, act and take corrective action, if appropriate.

Directive (EU) 2019/1160 includes several changes.

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  It introduces the concept of – and the conditions for – pre-marketing* by an AIF manager established in the EU; any rules introduced by Member States must under no circumstances disadvantage EU AIFMs vis-à-vis non-EU AIFMs.
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  It addresses the conditions which apply where an EU AIF discontinues the marketing of units or shares in Member States other than in the home Member State of the AIFM and its notification requirements. All transparency requirements that investors must fulfil under Directive 2011/61/EU would continue to apply to investors who would retain their investment after de-notification of the marketing activities in the selected Member State.

Amendments introduced by Directive (EU) 2019/2034 ensure that the own funds of the AIFM must amount to at least one quarter of the fixed overheads of the preceding year. Investment firms must use figures resulting from the applicable accounting framework.

Delegated and implementing acts

The Commission has adopted several delegated and implementing acts.

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  Delegated Regulation (EU) No231/2013 supplements Directive 2011/61/EU with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision. This delegated regulation has, in turn, been amended by Delegated Regulation (EU) 2018/1618 on safe-keeping duties of depositaries and by Delegated Regulation (EU)2021/1255 on sustainability risks and sustainability factors to be taken into account by AIFMs.
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  Delegated Regulation (EU) No694/2014 supplements Directive 2011/61/EU with regard to regulatory technical standards determining types of alternative investment fund managers.
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  Delegated Regulation (EU)2015/514 sets out the information to be provided by competent authorities to the ESMA.
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  Implementing Regulation (EU) No447/2013 sets out the procedure for AIFMs which choose to opt in and request authorisation under Directive 2011/61/EU.
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  Implementing Regulation (EU) No448/2013 sets out a procedure for determining the Member State of reference of a non-EU AIFM.

Amendment of other legislation

Directive 2011/61/EU also amended Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010.

FROM WHEN DOES THE DIRECTIVE APPLY?

It has applied since 21 July 2011 and had to become law in the Member States by 22 July 2013.

BACKGROUND

For further information, see:

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  Investment funds (European Commission)
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  Alternative investment fund managers (AIFM) – Directive 2011/61/EU (European Commission).

KEY TERMS

Pre-marketing. A direct or indirect provision of information on investment strategies or investment ideas by the AIFM or on their behalf to professional investors domiciled or registered in the EU in order to test their interest in an AIF which is not yet established.

MAIN DOCUMENT

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, pp. 1–73).

Successive amendments to Directive 2011/61/EU have been incorporated in the original text. This consolidated version is of documentary value only.

RELATED DOCUMENTS

Commission Delegated Regulation (EU) 2015/514 of 18 December 2014 on the information to be provided by competent authorities to the European Securities and Markets Authority pursuant to Article 67(3) of Directive 2011/61/EU of the European Parliament and of the Council (OJ L 82, 27.3.2015, pp. 5–11).

Commission Delegated Regulation (EU) No 694/2014 of 17 December 2013 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards determining types of alternative investment fund managers (OJ L 183, 24.6.2014, pp. 18–20).

Commission Implementing Regulation (EU) No 447/2013 of 15 May 2013 establishing the procedure for AIFMs which choose to opt in under Directive 2011/61/EU of the European Parliament and of the Council (OJ L 132, 16.5.2013, pp. 1–2).

Commission Implementing Regulation (EU) No 448/2013 of 15 May 2013 establishing a procedure for determining the Member State of reference of a non-EU AIFM pursuant to Directive 2011/61/EU of the European Parliament and of the Council (OJ L 132, 16.5.2013, pp. 3–5).

Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (OJ L 83, 22.3.2013, pp. 1–95).

See consolidated version.

Report from the Commission to the European Parliament and the Council on the exercise of delegation of powers to the Commission to adopt delegated acts pursuant to Article 56 of Directive 2011/61/EU of 8 June 2011 (COM(2015) 383 final, 3.8.2015).

last update 29.10.2021

This summary has been adopted from EUR-Lex.