As the EU Member States conclude technical discussions around the AIFMD & UCITS review, EFAMA would like to congratulate the European Commission and the co-legislators for keeping the key elements of both Directives intact during their review. These frameworks lie at the core of a well-functioning and resilient funds market and this agreement is a welcome step forward for the funds industry, investors and the Capital Markets Union project.
The fact that the delegation framework under the AIFMD & UCITS remains largely unchanged is positive news. This will benefit investors, especially in terms of broader access to investment opportunities and diversification. New delegation reporting to national authorities (upon authorisation and periodically) does introduce some unwelcome duplication. However, we trust that this increased transparency will give national supervisors the desired overview of market practices.
Both frameworks oblige EU countries to provide asset managers with a wide list of liquidity management tools within their national legislation. Asset managers must choose at least two, and are able to decide when to activate/deactivate them, which is of fundamental importance to their “agency” business model. National authorities can intervene in suspension of redemptions and subscriptions, but only in very limited and specific circumstances, and after consulting the fund manager.
The new AIFMD rules also allow the appointment of a depositary in a country different to that of the fund, under particular circumstances and following a case-by-case assessment by the relevant authority. While a full depositary passport across the EU was another option, we believe this would have weakened investor protection.
Outside of these positive elements, there are some areas that we question.
- New provisions for loan-originating funds are product-specific and therefore ill-suited under a “manager” directive like the AIFMD. Moreover, we question the inclusion of things like retention requirements. They can impede risk management of the fund, while ‘originate to distribute’ strategies are already prohibited by the provisions anyway.
- The AIFMD regulates management companies (not financial products) and is largely relevant for a professional investor base, therefore references to “undue costs” are not appropriate here. It is also unnecessary considering that ESMA is already working on a report on this topic covering both AIFs and UCITS.
Tanguy van de Werve, EFAMA Director General, commented: “From the start, EFAMA advocated for a targeted review of the AIFMD in order not to undermine a successful framework. We are pleased to see that this has broadly been achieved, allowing the AIFMD and UCITS Directive to remain a robust regulatory framework with improved rules. This will help UCITS and AIFs to remain internationally competitive and attractive investment options.”
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