EU reaches provisional agreement on AIFMD II and UCITS “plain-vanilla EU investment funds”
On 20 July 2023, negotiators from the European Council and the European Parliament reached a provisional agreement on new regulations aimed at improving European capital markets and strengthening investor protection in the EU. The agreement focuses on revising the Alternative Investment Fund Managers Directive (AIFMD), broadly referred to as AIFMD II, which governs managers of various investment funds including hedge funds, private equity funds, and real estate funds in the EU. Additionally, it modernises the framework for “plain-vanilla” EU-harmonised retail investment funds known as undertakings for collective investment in transferable securities (UCITS).
Under the provisional agreement, negotiators have decided to enhance the availability of liquidity management tools, imposing new requirements on managers to activate these instruments. This will better equip fund managers to handle significant outflows during periods of financial turbulence, ensuring greater stability. The agreement also establishes an EU framework for funds providing loans to companies, introducing additional requirements to mitigate risks to financial stability and safeguard investor interests.
Enhanced rules for investment managers delegating to third parties are expected to be implemented, subject to reinforced supervision to maintain market integrity. The agreement further emphasises data sharing and cooperation between authorities, it introduces measures to identify undue costs that could affect funds and investors, and takes steps to prevent misleading names, providing better protection to investors.
The agreement remains provisional and pending formal adoption and confirmation from the European Council and the European Parliament.
The European Council’s press release can be found here.
