AIFs and AIFMs | KPMG Global
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AIFs and AIFMs

AIFs and AIFMs

The rules for alternative investment funds (AIFs) and alternative investment fund managers (AIFMs) are defined within the directive.

The rules for AIFs and AIFMs are defined in the directive.

The definitions of alternative investment funds (AIFs) and alternative investment fund managers (AIFMs) are contained within the directive. 

What is an AIF? 

The directive defines an AIF as a collective investment undertaking, which is not an Undertaking for Collective Investments in Transferable Securities (UCITS) and which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors.  An AIF may be either open-ended or closed-ended and may take any legal form.

Specific exemptions from the definition of AIF are holding companies, joint ventures, securitization special purpose vehicles, pension funds, employee participation or savings schemes and family offices.

The European Securities & Markets Authority (ESMA) has issued guidelines on key concepts of the Alternative Investment Fund Managers Directive (AIFMD), including on the definition of an AIF.

What is an AIFM?

Management of AIFs is defined as comprising at least the core activities of portfolio management and risk management.  If permitted by its legal structure, an AIF can be internally managed, which means that the same entity is both the AIF and the AIFM.  Otherwise, each AIF must appoint one (external) AIFM.

The AIFM may also perform additional functions in the course of managing AIFs, including:

  • administration (legal and accounting services; handling customer enquiries ; valuation, pricing, tax returns; regulatory compliance monitoring; maintenance of the AIF’s unit/shareholder register; distribution of income; unit/shares issues and redemptions, contract settlements and record keeping)
  • marketing
  • and services specifically related to the AIF’s assets (e.g., maintenance of real estate).

Member States may allow external AIFMs to provide additional investment services permitted under the Markets in Financial Instruments Directive (MiFID II), including discretionary portfolio management, investment advice, safe-keeping and administration of fund units, and the receipt and transmission of orders in relation to financial instruments. An AIFM authorized to provide such services has the right to provide these services on a cross border basis.

Thresholds for AIFMD compliance

Firms whose AIF assets under management (AUM) are below certain thresholds are subject to a lighter registration regime and a reporting requirement. However, if they wish to market or manage funds on a cross border basis, they must opt up to full compliance with the directive. The thresholds are less than €100 million including any assets acquired through leverage, or less than €500 million in unleveraged AIFs. The method for calculating AUM is prescribed in the rules.