AIFMD Regulation

January 09, 2013

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The European Commission (the “Commission”) adopted on the 19th December 2012 a regulation (the “Regulation”) setting out the more detailed requirements applicable to alternative investment fund managers (“AIFMs”) arising from the Alternative Investment Fund Managers Directive, or AIFMD. The requirements under the AIFMD will take effect in July 2013 and the Regulation is also expected to come into force by that time. When taking effect, the AIFMD and the Regulation will create a single European regime for the alternative investment funds industry.

The Regulation is of most relevance to EU-domiciled investment fund managers who will be required to be authorised pursuant to the AIFMD (“EU AIFMs”). However, certain aspects of the Regulation (most notably those relating to investor and regulator transparency requirements) will also impact investment fund managers domiciled outside the EU, but who wish to market one or more funds to European investors (“non-EU AIFMs”).

We highlight below some of the key requirements in the Regulation.

Disclosures to investors

Under Article 23 of the AIFMD, all EU AIFMs and non-EU AIFMs must disclose key information regarding the fund, including periodic disclosure of the percentage of the fund’s assets that are subject to special arrangements because they are illiquid, any new liquidity management arrangements and regular disclosures of the level of fund leverage.

The Regulation specifies the content of the investor disclosures, requiring EU AIFMs and non-EU AIFMs to disclose (in addition to the more general requirements in the AIFMD) (i) in periodic reports; and (ii) when the offering document for the fund and/or its annual report is provided to actual or prospective investors, information relating to illiquid assets under special arrangements (including the valuation methodology and any applicable management or performance fees) and information on changes to the maximum level of leverage permitted and changes to any guarantees granted or service providers, and requiring immediately notification to investors of any active side pockets, liquidity gates or similar arrangements.1

Disclosures to regulators

Under Article 24 of the AIFMD, an AIFM must regularly report to the relevant EU regulator information regarding the main markets on which it trades, the financial instruments it trades, and the principal exposures and concentrations of all the funds the AIFM manages. While an EU AIFM will report the requisite information to the regulator in its home EU state, a non-EU AIFM must report to the regulators in each EU state where the funds are marketed. The Regulation clarifies the scope of the information to be so reported, and requires that an AIFM must provide to the regulator detailed information relating to each fund established or marketed in the EU, including information about the main categories of assets, illiquid assets subject to special arrangements, results of stress tests, liquidity management arrangements (including any changes thereto), the current market and liquidity risk profile (including expected return and profile of redemption terms), and the risk management systems used to manage counterparty, market, liquidity and other risks.2

AIFMs managing a fund that employs leverage “on a substantial basis” are required to make additional disclosures. Under the Regulation, a fund is deemed to employ leverage on “a substantial basis” when its exposure is over 3 x NAV, calculated using the “commitment method”.3 Further, the Regulation sets out in more detail the content, format and frequency of information to be provided to regulators, but does not introduce additional categories of information requiring disclosure.4

Annual report — remuneration disclosure

Under the AIFMD, EU AIFMs and non-EU AIFMs must provide to investors an audited annual report of the fund.5 The Regulation specifies the content and format of the audited annual report.6 In particular, the Regulation establishes criteria for the presentation of the fund’s balance sheet and of its income and expenditure account.

Notably, the AIFMD requires the annual report to disclose the total amount of remuneration for the financial year paid by the AIFM to its staff as a whole, and to its senior management and trading staff. The Regulation sets out in more detail the content of the remuneration disclosure, specifying that the disclosure must indicate if the total remuneration disclosure relates to all of the AIFM’s staff, or only to those staff members involved in the fund’s activities, or to the proportion of the total remuneration of AIFM’s staff that is attributable to the fund, in each case indicating the number of beneficiaries. In addition, AIFMs must disclose general information relating to staff remuneration criteria to allow investors to assess the incentives created, and any conflicts of interest arising from the same.

Operating conditions

As noted above, the Regulation is of most relevance to EU AIFMs who will be authorised pursuant to the AIFMD. The Regulation provides detailed “operating conditions” for EU AIFMs including rules relating to:

(i)         Conduct of business

  • Due diligence: The Regulation clarifies the scope of due diligence generally (including when selecting and appointing counterparties and prime brokers) and with respect to illiquid investments.7
  • Order execution: The Regulation requires AIFMs to have in place arrangements that provide prompt and fair order execution, including sequential execution of comparable orders.8

  • Conflicts of interest: The Regulation sets out an indicative list of relevant types of conflicts of interest, and specifies requirements applicable to the conflicts of interests policy of AIFMs to ensure effective monitoring, management and disclosure of conflicts of interests.9

(ii)        Risk management

The AIFMD requires an AIFM to, inter alia, establish a permanent, functionally and hierarchically separate, risk management function to implement the risk management policy and to monitor and measure the risks relevant to each fund it manages.10 The Regulation sets out the risk management requirements that an AIFM must apply to each fund it manages, including the organisational structure, policies, and risk measuring and management procedures and processes, as appropriate to the risk profile of each fund.11

(iii)       Liquidity management

The AIFMD requires an AIFM to have in place an appropriate liquidity monitoring and management system for all funds it manages (except unleveraged private equity and other closed-ended funds).12 Under the Regulation, such system must enable the AIFM to manage the assets of the funds it manages (including any illiquid assets) and establish and maintain adequate liquidity in order to ensure the alignment of the liquidity profile and redemption policy. In addition, an AIFM is required to conduct regular (at a minimum, annual) stress tests to assess the liquidity risk of each fund under its management.13

(iv)       Valuation

An AIFM must have in place procedures to ensure the proper and independent valuation of the assets of each fund it manages.14 The Regulation sets out the main features of such valuation policies and procedures, including specific rules for the use of valuation models and requirements regarding the calculation of net asset value per unit.15 In addition, the Regulation requires that assets must be valued using consistent methods, and such methods, and the relevant policies and procedures, must be periodically reviewed.16

(v)        Delegation of AIFM functions

The AIFMD permits the delegation of some of the AIFM’s functions.17 However, the Regulation imposes conditions and limits on the scope of such delegation.18 In particular, the AIFM must provide its regulator with an explanation of and evidence for the objective reasons for the delegation (i.e. that the delegation optimises business functions and processes, provides cost savings, provides specific expertise or access to global trading capabilities). The AIFM must be able to effectively supervise and manage its delegates. Furthermore, the delegation must not be such that the AIFM is no longer managing the fund.

(vi)       Depositary

The AIFMD requires the AIFM to ensure that each fund that it manages has a depositary that provides safe custody services to the fund, and to oversee and effectively monitor the fund’s cash flows.19 The Regulation sets out in detail the obligations and rights of depositaries, including, inter alia, criteria for monitoring the cash flows of a fund, the scope of financial instruments to be held in custody, general oversight duties, delegation of custody and liability for the loss of a financial instrument held in custody.20 All assets of the fund should be subject to the custody arrangements, including assets provided as collateral. In practice, the custody arrangements of collateral assets will likely require negotiation if the collateral taker is not the depositary or a sub-custodian appointed by the depositary.

Calculation of AuM

The Regulation contains detailed provisions on how an AIFM should calculate its assets under management for the purpose of establishing whether it falls within the scope of the AIFMD.21


Under the AIFMD,22 leverage is defined as any method by which the AIFM increases the exposure of a fund it manages, including through derivative positions. The Regulation provides two methods for calculating leverage. AIFMs are required to calculate leverage according to both methods, but additional and optional calculation methods may be developed in the future, if appropriate.23

Both the “gross” and the “commitment” methods, broadly, require the aggregation of the absolute values of all positions held by the fund valued in accordance with the AIFMD and the conversion of financial derivatives into the equivalent position in the underlying assets in accordance with the Regulation. The “commitment” method, however, allows for hedging and netting arrangements to be reflected in the calculation of total exposure.24

What should I do next?

Investment fund managers need immediately to begin to prepare for the implementation of the AIFMD in July 2013. The extent of such preparations will vary depending on whether the manager is an EU AIFM or a non-EU AIFM.

Bingham lawyers have been following the development of the AIFMD and advising clients on its impact since the initial proposal for a directive was made in 2009. Bingham’s Investment Management lawyers in Europe, Asia and the US understand the directive, its potential impact on managers and the particular requirements for managers with a presence in multiple jurisdictions. Bingham can help investment managers prepare for implementation of the AIFMD and to take their business forward in the new environment.








  • 特別な管理下に置かれている非流動資産に関する事項(評価方法、及び適用される運用報酬・成功報酬を含みます。)

  • 許容されるレバレッジの最大水準の変更に関する事項

  • 保証内容の変更に関する事項

  • サービス・プロバイダーの変更に関する事項




  • 主要な資産の種類
  • 特別な管理下に置かれている非流動資産
  • ストレス・テストの結果
  • 流動性管理態勢(その変更を含みます。)
  • 現在の市場リスク・プロファイル及び流動性リスク・プロファイル(期待利回り及び償還条件の概要を含みます。)
  • カウンターパーティ・リスク、市場リスク、流動性リスクその他のリスクを管理するために使用されるリスク管理システム







① 事業活動

  • デュー・ディリジェンス: AIFM指令規則は、デュー・ディリジェンスを行うべき範囲を全般的に(カウンターパーティ及びプライム・ブローカーを選別・選任する際に行うデュー・ディリジェンスを含みます。)、また、非流動資産への投資について行うべきデュー・ディリジェンスの範囲を明確化しています7

  • 注文執行: AIFM指令規則は、オルタナティブ投資ファンド運用者に対し、注文執行を迅速かつ公正に行うための態勢(同等注文の順次執行に関する事項を含みます。)を整備することを求めています8

  • 利益相反: AIFM指令規則は、利益相反の類型の指標リストを定めるとともに、オルタナティブ投資ファンド運用者が利益相反を効率的に監視、管理、開示することができるようその利益相反管理方針に盛り込むべき事項を明記しています9

② リスク管理


③ 流動性管理


④ 評価


⑤ オルタナティブ投資ファンド運用者の権限委託













If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:


1 Articles 108 and 109 of the Regulation.
2 Article 24 of AIFMD; Article 110 of the Regulation.
3 Article 111 of the Regulation.
4 Article 110 of the Regulation.
5 Article 22 of AIFMD.
6 Article 107 of the Regulation.
7 Articles 18–20 of the Regulation.
8 Article 25 of the Regulation.
9 Article 30–36 of the Regulation.
10 Article 15 of AIFMD.
11 Articles 38–42 of the Regulation.
12 Article 16 of AIFMD.
13 Articles 46–49 of the Regulation.
14 Article 19 of AIFMD.
15 Articles 68 and 72 of the Regulation.
16 Articles 69–70 of the Regulation.
17 Article 20 of AIFMD.
18 Articles 75–82 of the Regulation.
19 Article 21 of AIFMD.
20 Articles 83–102 of the Regulation.
21 Article 2 of the Regulation.
22 Article 4 of AIFMD.
23 Article 6 of the Regulation.
24 Articles 7 and 8 of the Regulation.

1 AIFM指令規則第108条、第109条
2 AIFM指令第24条、AIFM指令規則第110条
3 AIFM指令規則第111条
4 AIFM指令規則第110条
5 AIFM指令第22条
6 AIFM指令規則第107条
7 AIFM指令規則第18条~第20条
8 AIFM指令規則第25条
9 AIFM指令規則第30条~第36条
10 AIFM指令第15条
11 AIFM指令規則第38条~第42条
12 AIFM指令第16条
13 AIFM指令規則第46条~第49条
14 AFIM指令第19条
15 AIFM指令規則第68条、第72条
16 AIFM指令規則第69条、第70条
17 AIFM指令第20条
18 AIFM指令規則第75条~第82条
19 AIFM指令第21条
20 AIFM指令規則第83条~第102条
21 AIFM指令規則第2条
22 AIFM指令第4条
23 AIFM指令規則第6条
24 AIFM指令規則第7条、第8条

This article was originally published by Bingham McCutchen LLP.