AIFMD II for PE: the delegation, reporting and loan-origination changes arriving in 2026

AIFMD II is Directive (EU) 2024/927. It was published in the Official Journal on 26 March 2024 and entered into force on 15 April 2024. Member states must transpose most of its provisions, including the leverage limits and the loan-origination rules, by 16 April 2026. The enhanced supervisory reporting, the expanded Annex IV, follows a year later, applying from 16 April 2027 once the technical standards are finalised.

It amends the 2011 AIFMD rather than replacing it, leaving that framework in place and tightening four areas: delegation and substance, liquidity management, supervisory reporting, and a new harmonised regime for funds that originate loans. For a UK PE manager the point isn’t the headline. It’s which of those four touches a firm that no longer sits inside the EU.

There are four doors. A firm should work out, deliberately, which of them it walks through, if any. Walk through none and AIFMD II is background reading. Walk through one or more and you need a plan before April 2026.

The four channels through which AIFMD II reaches a UK firm:

1. You manage or advise an EU AIF, or you have an EU AIFM in your group. If any vehicle in your structure is an EU AIF, or you run an EU management company alongside your UK firm, that entity is squarely within AIFMD II and complies in full. Plenty of UK PE houses stood up a Luxembourg or Irish AIFM for EU fundraising after Brexit, precisely to keep marketing into Europe. That entity is in scope.
2. You market into the EU under national private placement regimes. UK managers marketing EU-domiciled or third-country AIFs to EU investors do so under Article 42 national private placement. AIFMD II tightens the Article 42 conditions, most notably by prohibiting marketing where the AIF or the AIFM is established in a jurisdiction on the EU’s list of high-risk countries for money laundering, or on the EU list of non-cooperative jurisdictions for tax purposes, and by adding investor-disclosure requirements. A UK firm placing into the EU needs to confirm its structure clears these conditions in each member state where it markets.
3. You act as a delegate for an EU AIFM. This is the most common channel and the least understood. Where an EU AIFM delegates portfolio or risk management to a UK firm, a standard post-Brexit arrangement, the EU AIFM is the entity bound by AIFMD II’s enhanced delegation and substance requirements. The obligation is theirs, but it reaches you through them. The EU AIFM must evidence its oversight of you, report detailed information about you to its regulator, and prove it has kept genuine substance rather than becoming a letterbox. To do that it will pull your delegation agreements, service levels, oversight reporting and staffing into its own compliance, and it will ask you to support all of it.
4. You originate loans into the EU or run an EU loan-originating fund. If your platform runs a credit or hybrid strategy that originates loans through an EU AIF, the new loan-origination regime applies directly to that fund. For a pure buyout manager this door is usually shut. For the growing number of PE houses that have added direct lending, it’s open.

The discipline is to map your own structure against these four before assuming the answer. A fair number of UK PE firms believe they sit outside AIFMD II and find, on inspection, that a Luxembourg AIFM, an EU placement, or a delegate role puts them inside it.

For the firms AIFMD II does reach, three areas carry the substance: delegation, reporting and loan origination.

Delegation and substance

Before the Directive, the fear was that the EU would restrict or ban delegation of portfolio management to third countries. That would have been an existential problem for the UK-delegate model that much of European fund management depends on. It didn’t happen. What AIFMD II did instead was raise the transparency and substance bar. AIFMs must give more detail about their delegation arrangements at authorisation and on an ongoing basis, must report detailed information on delegates to their regulators, and must keep genuine substance, with at least two senior people conducting the business of the AIFM, full-time, EU-resident, of good repute and sufficiently experienced. Where an AIFM delegates more portfolio or risk management to a third country than it retains, its regulator must notify ESMA, which can review the arrangement.

The UK’s own delegation rules already set a high bar, and AIFMD II is in effect raising the EU toward it. The onshored regime at FUND 3.10 [R/UK] requires the manager to notify before delegating, to justify the whole delegation structure on objective grounds, and to keep the ability to monitor, instruct and withdraw with immediate effect (FUND 3.10.2). It expressly provides that the AIFM “must not become a letter-box entity” (FUND 3.10.8), with FUND 3.10.9 deeming a letter-box where, among other things, the AIFM delegates investment-management functions to an extent exceeding by a substantial margin what it performs itself. Delegation doesn’t touch the AIFM’s liability (FUND 3.10.10). A UK firm acting as a delegate should expect its EU clients to test their own compliance against materially the same concepts.

For a UK PE manager acting as a delegate, the practical effect is indirect but real. Your EU AIFM clients will face sharper scrutiny of whether they genuinely manage the funds you run for them or merely badge them. They’ll respond by asking you for better evidence: clearer delegation agreements, documented oversight, defined escalation, and reporting that lets them satisfy their own regulator. Treat those delegate relationships as a light contractual formality and your EU clients will come asking for an evidence trail you haven’t been keeping.

Reporting

AIFMD II widens supervisory reporting considerably. The current Annex IV report, which for a UK manager sits at FUND 3.4 [R/UK] and in SUP 16.18, is limited in places by a “to the extent” qualifier that lets managers report only some categories of data. That qualifier is going, and the report is being widened to capture the full range of markets and instruments traded, along with detailed information on delegation arrangements and staffing. The detail already required gives a sense of the granularity. A substantially leveraged fund must report its overall leverage, the split between cash and securities borrowing and derivative-embedded leverage, and the five largest sources of borrowed cash or securities (FUND 3.4.5), with “substantial leverage” defined as exposure under the commitment method exceeding three times net asset value (FUND 3.4.6). The reporting-frequency tiers by assets under management sit in SUP 16.18 rather than in FUND. The enhanced reporting applies from 16 April 2027, once the technical standards are settled, which sounds distant and isn’t, because the data has to be capturable before it can be reported.

For a UK firm that manages or markets EU AIFs, The reporting deadline is, underneath, a data-readiness problem. The expanded Annex IV will demand granular delegation detail, full instrument coverage and staffing data, all of it information that has to be collected systematically through 2026 to be reportable in 2027. Wait until the reporting goes live and you’re reconstructing a year of data under deadline pressure. Map the new fields now and start capturing them, and the future filing becomes a routine extract.

Loan origination

AIFMD II introduces the first EU-wide harmonised regime for funds that originate loans, and the requirements are strict. A loan-originating AIF is defined as one whose strategy is mainly to originate loans, or whose originated loans make up at least 50% of its net asset value. Where a fund falls in scope, several hard requirements apply. The AIFM can’t run an originate-to-distribute model, originating loans solely to sell them on, and must retain at least 5% of the notional value of each loan it originates and then transfers, held for a defined period. Leverage is capped, on a commitment basis, at 175% of net asset value for open-ended loan-originating funds and 300% for closed-ended ones. Exposure to a single borrower is limited, broadly to 20% of the fund’s capital where the borrower is a financial undertaking or another fund. Lending to connected parties (the AIFM, its staff, its depositary and its delegates) is prohibited. And loan-originating funds are presumed closed-ended unless the manager can show that the fund’s liquidity management is compatible with an open-ended structure.

For a pure buyout manager this regime usually doesn’t apply, because originating loans isn’t the strategy. For the increasing number of PE platforms that have built direct-lending or hybrid credit capabilities, it applies in full, and it interacts with the private-credit regulatory scrutiny that is a subject in its own right. The action for a PE board is to test each vehicle in the platform against the loan-originating definition, because the answer determines whether an entire additional rulebook applies. Grandfathering exists for loans and funds predating the regime, but new activity from transposition is caught.

For UK PE managers, the larger 2026 change is the UK’s own AIFM reform, not AIFMD II. It’s the UK’s own, deliberately divergent reform of its AIFM regime. For the first time since AIFMD was introduced, the UK and the EU are on substantially different paths.

In April 2025 HM Treasury published a consultation and the FCA published a call for input, “Future Regulation of Alternative Fund Managers”, both of which closed on 9 June 2025. The direction is to replace the inherited EU framework with a UK-designed regime. HM Treasury is expected to publish a draft statutory instrument, and the FCA is expected to consult on its detailed rules in the first half of 2026. The headline proposal moves away from the current assets-under-management thresholds toward a three-tier structure based on net asset value: large firms above £5 billion NAV, regulated under something close to today’s full-scope rules but with the prescriptive detail stripped out; mid-sized firms between £100 million and £5 billion NAV, covering the same areas as today but with far less prescription; and small firms up to £100 million NAV, held to core baseline standards. The stated aim is to remove the “cliff edge” by which a small valuation movement could tip a firm into full-scope obligations overnight, and to make the regime more proportionate.

Two things matter for a PE board here. First, most UK PE managers will fall into the mid-sized or small tiers, which promises relief from prescriptive box-ticking but not from the substance. The reform strips prescriptive detail but leaves the underlying outcomes in place. Second, Valuation governance, conflicts management and evidence that controls operate — the focus of the FCA’s recent reviews — feed directly into this reform. Read the reform as a licence to dismantle valuation and conflicts controls and you’ll have misread it. The likely outcome is fewer prescriptive rules and a sharper expectation that the firm can show good outcomes in practice.

The work for a UK PE manager splits into two streams, and a firm should run both.

For AIFMD II, confirm exposure and prepare the entities that are in scope. Map your structure against the four doors. For any EU AIFM in the group, build the AIFMD II compliance plan now. For EU placement, confirm your structure clears the tightened Article 42 conditions in each member state. For delegate relationships, get your delegation agreements, oversight reporting and substance evidence into a state your EU AIFM clients can rely on, and start capturing the data the expanded reporting will demand. For any loan-origination activity, work out whether the definition is met and, if it is, scope the retention, leverage and concentration requirements before new lending.

For the UK reform, engage rather than wait. Read the FCA’s consultation when it comes in the first half of 2026, work out which tier your firm falls into, and resist the urge to unwind controls in anticipation of a lighter regime. Divergence creates obligations as well as relief. A control you drop because the UK regime no longer prescribes it may still be needed for your EU touchpoints, and may still be the thing the FCA expects you to evidence under its outcomes-focused supervision. Keep valuation and conflicts governance intact, adapt reporting to both regimes, and use the UK reform to cut genuine box-ticking, not standards.

Run your firm against these points:

• Which entities and activities fall within AIFMD II, and through which door
• For each EU AIFM, a documented AIFMD II readiness plan with a named owner
• Evidence that your EU placement structure clears the tightened Article 42 conditions in every member state
• Delegation agreements and the oversight evidence your EU AIFM clients will rely on
• Whether any vehicle meets the loan-originating definition, with retention, leverage and concentration analysis where it does
• How you’re capturing the data the expanded reporting will require from 2027
• Which UK reform tier your firm falls into

Firms that haven’t mapped their structure will answer with uncertainty, which is itself a red flag on the regulatory perimeter.

This insight is provided for general informational purposes only and doesn’t constitute legal, investment, or regulatory advice.