Asset Management & Investment Funds: EU & International Developments – November 2025

Draft RTS on open-ended loan origination AIFs

The European Securities and Markets Authority (ESMA) published draft Regulatory Technical Standards (RTS) on open-ended loan-originating alternative investment funds (LOAIFs). This follows a consultation.

These draft RTS set out operational requirements for LOAIFs wishing to function as open-ended funds. Key provisions include:

• a robust liquidity risk management system compatible with the LOAIF’s investment strategy and redemption policy
• maintenance of sufficient liquid assets
• regular stress testing
• ongoing monitoring
• a redemption policy that is consistent with the LOAIF’s liquidity profile
• appropriate liquidity management tools

The RTS also reflect the provision in Article 16(2)(f) of AIFMD that the requirements take account of the underlying loan exposures, average repayment time of the loans, and the overall granularity and composition of the LOAIF’s portfolios.

The RTS set out the factors that AIFMs must consider when formulating redemption policies and evaluating the liquidity of their funds. These include ensuring that:

• redemption arrangements are appropriate to the underlying assets and liabilities
• risk management practices are sufficiently rigorous to protect investors and maintain market stability

As highlighted in our October bulletin, the European Commission announced that these RTS, (along with other ‘non-essential’ Level 2 legislative acts in the financial services sector), will not be adopted before 1 October 2027 at the earliest. This decision forms part of a broader deprioritisation of certain regulatory initiatives within the EU’s financial services agenda.

The FATF removed South Africa, Burkina Faso, Mozambique and Nigeria from its grey list

The Financial Action Task Force (FATF) removed from the grey list (jurisdictions under increased monitoring): Burkina Faso, Mozambique, Nigeria, and South Africa.

No new jurisdictions were added to the grey or black lists, but FATF updated its public statement on Iran, calls for countermeasures in the Democratic People’s Republic of Korea and calls for enhanced DD (not countermeasures) for Myanmar. High-Risk Jurisdictions subject to a Call for Action - 24 October 2025.

This removal of Burkina Faso, Mozambique, Nigeria and South Africa from the FATF’s grey list may prompt the EU to align its list of high-risk third countries (EU HRTCs) with the FATF's.

The EU's identification of EU HRTCs must be based on a jurisdiction's compliance with 4AMLD criteria and is independent from that of the FATF. However, the European Commission aims to closely align its list with lists agreed internationally so as to ensure the integrity of the global financial system. Until an EU updated list of HRTCs comes into effect, EU "obliged entities" - including funds, banks, auditors, legal professionals - are required to apply enhanced customer due diligence measures when dealing with persons and entities based in EU HRTCs. The current EU list of HRTCs is here.

ESMA report on total costs of investing in UCITS and AIFs - distribution represents 48% of UCITS total costs and 27% of AIFs’

ESMA published its report on total costs of investing in UCITS and AIFs. This is the first comprehensive assessment of the total costs charged to investors in EEA investment funds. This ad-hoc report complements ESMA’s annual monitoring of the performance and costs of EU investment products.

The report provides an analysis on distribution costs, which account for 48% of total costs for UCITS. These high costs are primarily driven by the traditional and dominant role of credit institutions and investment firms in the distribution chain across many Member States. In contrast, digital platforms - such as neo-brokers offering execution-only services - are less expensive. The report also confirms that inducements play a central role for ongoing costs. When there are inducement agreements between the distributor and the manufacturer of a UCITS (non-independent advice), these payments account for up to 45% of the ongoing costs. 

This analysis provides a useful contribution to the ongoing SIU debate, especially in relation to retail participation. Findings include:

• Traditional intermediation: credit institutions and investment firms dominate EEA distribution.  
• Total costs: actual retail UCITS costs range between 0.5% of the invested amount for passive bond UCITS and 2% for active equity UCITS; AIFs costs range between 1.4% and 2.8%.
• PRIIPs KIDs fees: PRIIPs KIDs maximum one-off fees do not reflect actual fees.
• Distribution costs: distribution represents 48% of UCITS total costs and 27% of AIFs’; distribution costs differ by provider, distributor, asset and fund type.
• Inducements: inducement agreements are widespread; they amount on average to 45% of product ongoing costs for UCITS and to 34% of product ongoing costs for AIFs.
• Cost drivers: the main drivers are the type of investor, the amount invested, the distribution channel and the service offered.
• Geographical differences: ESMA observe a high heterogeneity of costs across Member States.

New Q&A in the ESA's consolidated Q&A on the SFDR - PAI disclosures

The European Supervisory authorities (ESAs) added a new Q&A (IV. 32) in the ESA's consolidated Q&A on the SFDR. The new Q&A concerns principal adverse impacts (PAI) disclosures.

In summary, under the description of actions taken, planned or targets set “to avoid and reduce” PAI (at entity level) under Article 4, the FMP should, in its Article 6(2) disclosure, include (or refer to), for each of the identified PAI, information on:

• how the FMP assesses the need to take action (e.g. any relevant thresholds or criteria that trigger actions to mitigate the PAI)
• the actions taken the previous year
• actions planned or targets set for the coming year

European Commission work programme 2026

The European Commission published its work programme for 2026.

While the 2026 work programme continues the Commission’s 'Implementation and Simplification' initiative, there are no new legislative proposals in the regulated financial services sector specifically. However, the work programme states that the proposals to strengthen shareholder rights will form part of the Commission’s proposals to complete the Savings and Investment Union.

The following legislative proposals that are specifically relevant to the regulated financial services sector have been carried over from the Commission’s 2025 work programme:

• proposal for a directive on retail investor protection rules
• proposal for a regulation amending the PRIIPs Regulation as regards the modernisation of the KID

ESAs’ joint committee work programme for 2026

The joint committee of the European Supervisory Authorities (ESAs) published the ESAs’ Work Programme for 2026 outlining key areas of collaboration.

The ESAs will execute the work programme in the context of the EU’s simplification agenda. The ESAs will explore ways to foster simplification in areas within its remit, and the joint deliverables and initiatives below may evolve accordingly.

Areas of collaboration include:

• consumer protection and financial innovation (including enhancing financial education and consumer protection as part of the European Commission's Savings and Investments Union initiative and work on drafting regulatory technical standards on the PRIIPs key information document based on the proposed amendments to the PRIIPs Regulation in the European Commission’s Retail Investment Strategy, when finalised by the co-legislators)
• sustainable finance (including work relating to the European Commission’s review of the SFDR)
• risk assessments (including issuing annual joint report on risks and vulnerabilities)
• EMIR

MiFID II/Listing Act: draft RTS to establish a code of conduct for issuer-sponsored research

ESMA published its final report on draft RTS for establishing a code of conduct for issuer-sponsored research setting out standards of independence and objectivity and procedures and measures for the effective identification, prevention and disclosure of conflicts of interest. This follows an ESMA consultation. The RTS have been submitted to the European Commission for adoption.

AML/CFT/FS

EBA response to the European Commission’s call for advice on the new EU AML/CFT framework

The European Banking Authority (EBA) responded to the European Commission’s call for advice on the key components of the new anti-money laundering/countering the financing of terrorism (AML/CFT) framework. This advice aims to support the swift and effective start of the new EU Anti-Money Laundry Authority (AMLA). The EBA held consultations. This call for advice related to:

• draft RTS on the methodology national supervisors will use to assess the inherent and residual risk profiles of obliged entities
• draft RTS on the risk assessment AMLA will use to determine which institutions it will directly supervise
• draft RTS on the information obliged entities will have to obtain as part of the customer due diligence process under the new EU AML/CFT regime
• draft RTS on the way supervisors will classify breaches of the new regime by severity, and the criteria they will apply when setting the level of pecuniary sanctions or taking administrative measures, or when imposing periodic penalty payments
• preparatory work on two additional mandates relating to information exchange within a group and on the base amounts for pecuniary fines

The RTS will need to be adopted by AMLA and endorsed by the European Commission.

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 18 November 2025