Status of the regime and the UK position
The loan origination regime is EU law: Directive (EU) 2024/927 inserted it into AIFMD Articles 15 and 16, applied by Member States from 16 April 2026.
EU law
The UK has not adopted it. Searches of the FCA Handbook and of CP26/28 on 21 September 2026 return no UK loan origination regime and no occurrence of "loan-originating". It reaches a UK firm only through an EU-established fund or entity.
A UK full-scope AIFM's lending book engages FUND 3.7.5R: risk management systems, a documented and regularly updated due diligence process, and no sole or mechanistic reliance on credit ratings; FUND 3.7 does not reach a small authorised UK AIFM.
Originating a loan and being a loan-originating AIF
Origination decides which rules reach a loan; classification decides which reach a fund.
A loan-originating AIF is one whose investment strategy is mainly to originate loans, or whose originated loans have a notional value of at least 50 per cent of its net asset value (Article 4(1)(at)). Either limb suffices; the ratio limb counts originated loans only and the strategy limb carries no threshold.
A shareholder loan (Article 4(1)(as)) has two cumulative limbs: the AIF holds directly or indirectly at least 5 per cent of the borrower's capital or voting rights, and the loan cannot be sold to third parties independently of the capital instruments the AIF holds in that undertaking.
Concentration, leverage and the two shareholder-loan carve-outs
Capital of the AIF, not net asset value, is the denominator for the concentration limit and both carve-outs. Article 4(1)(aq) defines it as aggregate capital contributions and uncalled capital committed to the fund, on amounts investible after all fees, charges and expenses borne directly or indirectly by investors.
Under Article 15(4a) the notional value of loans originated to any single borrower must not exceed 20 per cent of the capital of the AIF in aggregate, and only where that borrower is a financial undertaking as defined in Article 13(25) of Directive 2009/138/EC, an AIF or a UCITS. It is without prejudice to the EuVECA, EuSEF and ELTIF thresholds.
Article 15(4b) caps the leverage of a loan-originating AIF at 175 per cent where it is open-ended and 300 per cent where closed-ended, measured as exposure on the commitment method over net asset value. Borrowing fully covered by contractual capital commitments from investors is not exposure for that ratio. Where an infringement is beyond the AIFM's control, it must rectify the position within an appropriate period, taking due account of investors' interests.
Two carve-outs, two scopes
Article 15(3) disapplies the duty to implement policies, procedures and processes for granting loans, and the credit-risk assessment, administration and monitoring subparagraph beneath it, for the origination of shareholder loans whose notional value does not exceed 150 per cent of the capital of the AIF in aggregate, without prejudice to Article 12(1)(b). Article 15(4b) separately disapplies the leverage caps for a loan-originating AIF whose lending activities consist solely of originating shareholder loans within the same 150 per cent figure, without prejudice to competent authorities' powers under Article 25(3). Neither carve-out reaches Article 15(4e).
Borrowers an AIF may not lend to
Article 15(4e) prohibits an AIF from granting loans to the AIFM or its staff; to the AIF's depositary or entities to which the depositary has delegated functions in respect of the AIF under Article 21; to an entity to which the AIFM has delegated functions under Article 20, or its staff; and to an entity within the same group as the AIFM, as defined in Article 2(11) of Directive 2013/34/EU, except where that entity is a financial undertaking that exclusively finances borrowers outside the first three categories. It contains no shareholder-loan allowance and no cross-reference to one.
Closed-ended default and retention
Article 16(2a) makes closed-ended the default. A loan-originating AIF may be open-ended only where the AIFM demonstrates to its home competent authorities that the fund's liquidity risk management system is compatible with its investment strategy and redemption policy, without prejudice to the EuVECA, EuSEF and ELTIF Regulations. The technical standards specifying that demonstration (Article 16(2f)) were still in draft when last checked on 22 August 2026.
Under Article 15(4i) the AIF retains 5 per cent of the notional value of each loan it originated and later transferred to third parties: until maturity for loans maturing within eight years and for loans to consumers whatever their maturity, and for at least eight years for other loans. Four derogations sit in that paragraph, and the AIFM must demonstrate on request that it meets the conditions for the one relied on.
Funds constituted before 15 April 2024
Article 61(6) keys relief to two dates, the fund's constitution and the loan's origination. Funds constituted before 15 April 2024 are deemed to comply with Article 15(4a) to (4d) and Article 16(2a) until 16 April 2029; where such a fund raises no additional capital after that date, the deeming carries no end date.
The relief operates as a standstill: where single-borrower notional value or leverage is above the Article 15(4a) or 15(4b) limits the AIFM must not increase it, and where it is below them it must not increase it above them. Separately, loans originated before 15 April 2024 may continue to be managed without complying with Article 15(3)(d) and Article 15(4e) to (4i). An AIFM may instead opt a pre-15 April 2024 fund into Article 15(4a) to (4d) and Article 16(2a) by notifying its home competent authorities.
Alongside this module
Where this subject is covered elsewhere in the course.