AIFMD 2: Changes relating to delegation, authorisation, reporting and conflicts of interest-related requirements

The long-awaited Directive 2024/927/EU amending AIFMD (2011/61/EU) (AIFMD) and the UCITS Directive (2009/65/EC) as regards delegation arrangements, liquidity risk management, supervisory reporting, the provision of depositary and custody services and loan origination by alternative investment funds (AIFMD 2) entered into force on 15 April 2024.

In this article, we summarise some key changes that AIFMD 2 introduces in respect of delegation, authorisation, regulatory reporting and conflicts of interest-related requirements applicable to alternative investment fund managers (AIFMs).

UCITS management companies should note that AIFMD 2 also introduces amendments to the UCITS Directive which correspond to those described below.

Delegation

The recitals to AIFMD 2 recognise the vital role of third-party delegation in facilitating the efficient management of investment portfolios and acquisition of expertise in a particular geographic market or asset class. AIFMD already prevents AIFMs from delegating functions to the extent that they become a “letter-box entity”. Delegation has been a key focus of the AIFMD review and the recitals further note the importance of supervisors having updated information on the main elements of delegation arrangements and the need to make certain changes to improve the functioning of AIFMD, including the standards applicable to AIFMs delegating functions to third parties.

Accordingly, AIFMD 2 does not impose additional substantive obligations on AIFMs in relation to delegation but as detailed further below, it does introduce enhanced reporting requirements for AIFMs in relation to delegation arrangements.

Clarifications are also provided around the scope of delegation-related requirements.

Authorisation

Substance

In what will be welcome news for Irish AIFMs, AIFMD 2 does not introduce substance requirements which go beyond the existing expectations of the Central Bank of Ireland.

Under AIFMD 2 an AIFM will be required to ensure that the conduct of the business of the AIFM is decided by at least two natural persons (meeting the existing conditions of having sufficiently good repute and experience regarding the investment strategies of the AIFs under management) who are either employed full-time by that AIFM or are executive members or members of the governing body of the AIFM, committed full-time to conducting the business of the AIFM and who are domiciled in the EU.  Additionally, the recitals to AIFMD 2 promote the appointment by AIFMs managing AIFs marketed to retail investors of at least one independent or non-executive director. Neither of these requirements will be novel to Irish AIFMs.

Information on delegation arrangements

AIFMD 2 broadens the existing requirement to provide NCAs with information on third party delegation arrangements at the AIFM authorisation stage and as part of regular reporting requirements (see further below). At authorisation stage, the information required to be provided will include:

• the legal name and relevant identifier, jurisdiction of establishment and, where relevant, supervisory authority of the delegate;
• a detailed description of the human and technical resources employed by the AIFM for:
  • performing day-to-day portfolio management and risk management tasks; and
  • monitoring the delegated activity;
• in respect of each AIF under management, a brief description of the delegated portfolio and risk management functions, including whether the delegation amounts to a partial or full delegation; and
• a description of the periodic due diligence measures used to monitor the delegated activity. 

Regulatory Reporting

In relation to delegation arrangements concerning portfolio or risk management functions, AIFMD 2 requires regular reporting to NCAs of the following information:

1. information on delegates, specifying their name and domicile or registered office or branch, whether they have any close links with the AIFM, whether they are authorised or regulated entities for the purposes of asset management, their supervisory authority, where relevant, and including the identifiers of the delegates that are necessary to connect the information provided to other supervisory or publicly available data sources;
2. the number of full-time equivalent human resources employed by the AIFM to monitor the delegation arrangements;
3. a list and description of the activities concerning portfolio management functions and risk management functions which are delegated;
4. where the portfolio management function is delegated, the amount and percentage of the AIF’s assets which are subject to delegation arrangements concerning the portfolio management function;
5. the number of full-time equivalent human resources employed by the AIFM to monitor the delegation arrangements;
6. the number and dates of the periodic due diligence reviews carried out by the AIFM to monitor the delegated activity, a list of issues identified and, where relevant, of the measures adopted to address those issues and the date by which those measures are to be implemented;
7. where sub-delegation arrangements are in place, the information required under points 1, 3 and 4 above in respect of the sub-delegates and the activities related to the portfolio management and risk management functions that are sub-delegated; and
8. the commencement and expiry dates of the delegation and sub-delegation arrangements.

Other new regular reporting information to be provided includes details of the EU Member States in which the units or shares of the AIF are marketed by the AIFM/a distributor acting on behalf of the AIFM, the total amount of leverage employed by the AIFs under management of the AIFM and information on all (as opposed, per existing requirements, to the “principal”) markets and instruments on/in which it trades on behalf of the AIFs it manages and the exposures and assets of those AIFs. 

The enhancements to the reporting requirements will also be relevant for non-EU AIFMs marketing AIFs under national private placement regimes.

Conflicts of Interest – Third-Party AIFMs

AIFMD 2 provides that where an AIFM manages or intends to manage an AIF at the initiative of a third party, it must submit detailed explanations and evidence of its compliance with conflicts of interest requirements set out in AIFMD to the NCA of its home Member State. In particular, the AIFM is required to specify the reasonable steps it has taken to prevent conflicts of interest from arising out of its relationship with the third party or, where those conflicts of interest cannot be prevented, how it identifies, manages, monitors and, where applicable, discloses those conflicts of interest in order to prevent them from adversely affecting the interests of the AIF and its investors.

Next steps

EU Member States have until 16 April 2026 to transpose AIFMD 2 into national law, although the provisions relating to regular reporting to NCAs are not required to be applied by Member States until 16 April 2027 (by which date ESMA is required to develop regulatory technical standards and implementing technical standards specifying the details of the information to be reported, the level of standardisation, the reporting frequency and timing and amendments to the Annex IV reporting template).

ESMA is required to report by 16 April 2029 on market practices regarding delegation and compliance with the enhanced reporting requirements based on data reported to NCAs. The report will also analyse compliance with the enhanced substance requirements.

For more information, please any member of the Asset Management & Investment Funds team or your usual ALG contact.

Date published: 2 October 2025