Asset Management
Asset Management
by Irene Rey and Julia Rodkiewicz
AIFMD and ELTIF reviews Since the European Commission (EC) in November 2021 published its proposals to review the Alternative Investment Fund Managers Directive (AIFMD) and the European Long-term Investment Funds (ELTIF) Regulation, the ICMA Asset Management and Investors Council (AMIC) Risk Management Working Group has proposed targeted amendments to support the EU law makers in preparing their positions.
AIFMD Regarding the AIFMD review (which also amends the UCITS Directive), AMIC was generally satisfied with the proposals and identified four key priority areas on which it proposed targeted amendments. Some of the key points included: • Liquidity Management Tools (LMTs): In response to the EC proposed detailed provisions (as outlined in a previous Quarterly Report article), which risk generating procyclical behaviours and lead to systemic risks, AMIC proposed that the deployment of LMTs should remain at the discretion of fund managers, that the notification for use of LMTs should be limited to exceptional circumstances, and that fund managers have access to the full toolkit when having to choose a mandatory tool. • Delegation: AMIC noted that, as long as the parent group remains in the EU, intra-group delegation notifications should be exempt as these models have already been approved by National Competent Authorities (NCAs) and the 2017 ESMA legal opinions ensure appropriate levels of delegation oversight. • Loan Originating Funds: AMIC noted that there are legitimate scenarios where AIFMs would need to sell a loan they have originated – they need to have the flexibility to sell their assets to adhere with their investment mandates when conditions change in order to manage risks and achieve their desired returns. Thus AMIC proposed (i) a prohibition on originating loans with sole intent to sell on secondary market or (ii) a minimum holding period. PAGE 46 | IS S U E 65 | SECOND QUARTER 2022 | ICMAGROUP.ORG
• Reporting: UCITS data is already provided by EU fund managers to national central banks in full detail. Instead of adding extra reporting requirements, AMIC suggested that the most direct way to upgrade the UCITS supervisory data would be to grant ESMA and other securities regulators access to the data the ECB and national central banks already receive from fund managers. Next steps: The European Parliament’s Economic and Monetary Affairs Committee (ECON) draft report on AIFMD is expected in mid-May, followed by further discussions in the Parliament over the coming months. Negotiations in the Council of Ministers are expected to continue over the course of 2022. It is hoped that significant progress will be made by June.
ELTIFs On ELTIFs, AMIC members found the review positive and considered that the proposed amendments should help uptake of this fund structure. AMIC specifically welcomed the reduction in barriers that have prevented retail investors from accessing ELTIFs with the removal of the €10,000 minimum entry ticket and the 10% investment limit as well as the streamlining of the ELTIF suitability test with MiFID II. These proposed changes will make these funds more accessible, allow for the development of the ELTIF retail passport and align distribution with other investment products. In order to further increase the chances of the labels’ success and attractiveness, AMIC proposed the following: • remove the 20% cap for aggregate exposures to securitisations; • remove the 40% limitation on being able to invest in other funds as this limits retail ELTIFs from adopting full fund of fund structures; • reduce thresholds from 60% to 50% for capital which has to be invested in eligible assets.
