AIFMD 2.0 readiness: What changes operationally for managers and third-party providers?

While many firms began impact assessments and gap analyses soon after the Directive was finalised, AIFMD II is now a live regulatory framework. Although it does not fundamentally rewrite AIFMD, it introduces targeted – and in some cases far‑reaching – changes that are materially affecting operating models across private equity, private credit, real assets and other alternative strategies.

Here, Greg McKenzie, Country Head for Belasko in Luxembourg, highlights the areas where firms are experiencing the most significant operational change and shares practical readiness considerations to support implementation.

AIFMD II in context: evolution rather than revolution

For Luxembourg managers in particular, many of whom already operate within a highly regulated environment, the challenge has been less about conceptual compliance and more about documenting, evidencing and embedding practices in a way that meets heightened supervisory scrutiny – particularly in a cross‑border context where national implementation and supervisory expectations continue to diverge.

Delegation remains central to the Luxembourg fund model, but AIFMD II reinforces expectations around active oversight and demonstrable control. While delegation itself is not restricted, AIFMs are required to justify arrangements and ensure they do not result in so‑called “letterbox entities”.

Operationally, this has elevated the importance of:

• Formalised delegation due diligence at onboarding and on an ongoing basis
• Clear allocation of responsibilities between the AIFM and delegates
• Regular, structured oversight reviews supported by documented evidence

For many firms, this has meant enhancing existing frameworks rather than creating new ones. However, the quality, consistency and regularity of oversight reporting to boards and senior management has increased, with operational partners often supporting more standardised reporting packs.

In practice, delegation is no longer assessed on structure alone, but on a manager’s ability to evidence ongoing challenge, escalation and effective oversight within day‑to‑day operations.

Key operational implications include:

• Clear disclosure of applicable LMTs and conditions for use
• Defined internal escalation, decision‑making and documentation processes
• Enhanced reporting on liquidity profiles and stress‑testing outcomes

For open‑ended structures, the regime is now prescriptive: liquidity management tools must be selected in advance, governance clearly defined, and activation processes capable of being executed and evidenced under stressed market conditions.

Even for closed‑ended or illiquid strategies, firms should not assume they are out of scope. Supervisors are increasingly focused on how liquidity risks are understood, governed and evidenced across all alternative fund types.

One of the most material changes under AIFMD II is the introduction of a harmonised framework for loan‑originating funds, reflecting the continued growth of private credit.

Requirements now cover:

• Risk diversification and concentration limits
• Credit granting, monitoring and valuation policies
• Restrictions on certain lending practices, including lending within an AIFM’s own group

For private debt managers, these requirements extend beyond disclosure and directly affect portfolio construction, risk management and operational workflows.

Supervisory focus is increasingly on whether origination criteria, monitoring processes and valuation frameworks operate as a single, joined‑up control framework rather than a collection of standalone policies.

This often requires closer coordination across investment, risk and operations teams, supported by coherent, board‑reportable control frameworks.

Enhanced reporting and regulatory data expectations

Although AIFMD II does not introduce an immediate wholesale expansion of Annex IV reporting, supervisory expectations around data quality, consistency and responsiveness have increased, with a further step‑change anticipated as ESMA technical standards bed in from 2027.

Operational readiness in this area depends less on new templates and more on ensuring that internal and third‑party data sources are aligned, well controlled and capable of responding efficiently to supervisory requests.

Practical AIFMD II readiness considerations

Early experience of operating under AIFMD II has highlighted several practical focus areas for firms embedding the new requirements:

• Strengthen delegation oversight frameworks: emphasising evidencing effectiveness and follow‑up actions
• Pressure‑test liquidity governance arrangements: including escalation paths and decision‑making roles
• Revisit fund documentation with an operational lens: aligning disclosures with how processes operate in practice
• Embed loan origination controls across the lifecycle: from origination through monitoring and valuation
• Enhance board reporting and engagement: focusing on decision‑relevant information and clear escalation thresholds
• Align data, systems and operational partner reporting: ensuring consistency and ownership across the operating ecosystem

Also, on the radar

• Distribution and marketing arrangements: increased clarity around when third parties act “on behalf of” the AIFM and the governance evidence expected.
• Depositary and custody models: limited but evolving optionality under AIFMD II, with indirect implications for operating and oversight frameworks.

The role of third‑party providers in AIFMD II implementation

Although compliance obligations sit with the AIFM, implementation cannot be achieved in isolation. Administrators, depositaries and other providers play a critical role in supporting compliant data, reporting and control environments.

Experience to date suggests that early engagement, clear expectations and aligned timelines across the operating ecosystem are key to successful implementation and supervisory readiness.

Embedding AIFMD II as business as usual

AIFMD II marks a clear transition from regulatory anticipation to supervisory reality. While transposition was a significant milestone, effective compliance depends on embedding new requirements into day‑to‑day operations rather than treating implementation as a one‑off exercise.