European Securities and Markets Authority consults on the draft technical standards on open-ended loan-originating alternative investment funds

The European Securities and Markets Authority has published a consultation paper on draft regulatory technical standards on open-ended loan originating Alternative Investment Funds under the revised Alternative Investment Fund Managers Directive. Under the revised AIFMD, an Alternative Investment Fund Manager is required to ensure any loan-originating AIFs it manages is closed-ended. However, there is a carve-out for open-ended loan-originating AIFs where the AIFM is able to demonstrate that the AIF's liquidity risk management system is compatible with its investment strategy and redemption policy.

The draft RTS set out the requirements for loan-originating AIFs to maintain an open-ended structure as per this carve-out. The requirements include: (i) a sound liquidity management system; (ii) the availability of liquid assets and stress testing; and (iii) an appropriate redemption policy having regard to the liquidity profile of loan-originating AIFs.

Responses may be submitted until March 12, 2025. ESMA intends to finalize the draft RTS by Q3/Q4 2025.

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