By Graham Roche, Director, Private Credit and Debt Solutions
The regulatory landscape for private credit in Europe is evolving fast. With the introduction of AIFMD 2, fund managers must navigate new rules designed to bring greater consistency, transparency and market stability across the EU.
For loan origination funds – both newly established and those coming to market – understanding and preparing for this shift is essential.
Here, we provide an easy-to-digest breakdown of AIFMD 2’s significance and what its new rules mean in practice for managers involved in loan origination in Europe.
When does AIFMD 2 take effect?
Whilst all EU member states must transpose the Directive into national law by 16 April 2026, AIFMD 2 entered into force on 15 April 2024, marking the start of a new, harmonised regime for loan-originating alternative investment funds (AIFs).
Any AIF engaging in loan origination after the latter date is required to comply with the updated framework.
What are the key impacts of AIFMD 2?
AIFMD 2 establishes harmonised rules for all EU-domiciled AIFs that originate loans. This brings consistency to a sector previously subject to divergent national requirements that had made cross-border lending difficult and inconsistent.
For private credit managers, this shift represents both an opportunity and a compliance imperative.
With its introduction of a harmonised, EU-wide framework for loan-originating AIFs, AIFMD 2 brings new obligations that affect policies, operations, governance and portfolio management. Such changes require careful planning from firms, as well as updated oversight to ensure ongoing compliance.
EU-domiciled, loan-originating AIFs: what is in scope?
AIFMD 2 introduces definitions of both ‘loan origination’ and ‘loan origination AIF’ (LO AIF).
‘Loan origination’ or ‘originating a loan’ means the granting of a loan:
- Directly by an AIF as the original lender, or
- Indirectly through a third party or special purpose vehicle which originates a loan for or on behalf of the AIF, or for or on behalf of an AIFM in respect of the AIF, where the AIFM or AIF is involved in structuring the loan, or defining or pre-agreeing its characteristics, prior to gaining exposure to the loan.
A ‘LO AIF’ is an AIF:
- Whose investment strategy is mainly to originate loans, or
- Whose originated loans have a notional value that represents at least 50% of its net asset value (NAV)
What rules do loan-originating fund managers need to be aware of?
Certain AIFMD 2 provisions apply to all AIFs that can, or intend to, originate loans, whereas other provisions only apply to AIFs that meet the LO AIF definition.
Provisions applicable to all AIFs that can or intend to originate loans:
Policies and procedures
Enhanced disclosure requirements
Prohibition on ‘originate to distribute’ strategies
Risk retention
Ineligible borrowers
Provisions only applicable to LO AIFs:
Liquidity
Leverage limits
Exceptions
Where an AIF’s only loans are ‘shareholder loans’, the aggregate value of which does not exceed 150% of the capital of the relevant AIF, there is no requirement on the AIFM to maintain policies, procedures or processes for AIFs granting such loans.
Furthermore, the AIFMD 2 leverage limits for LO AIFs do not apply to such AIFs. Shareholder loans are loans originated by an AIF to portfolio companies in which the AIF has at least 5% of the capital or voting rights, and which can’t be sold to third parties independently of the equity instruments held by the AIF in the portfolio company.
What are the anticipated benefits of AIFMD 2?
- AIFMD 2 calls upon EU member states to remove existing cross-border lending barriers. When/if implemented by member states, this will be transformative for European direct lenders
- Harmonised loan origination rules will apply in all EU member states, providing GPs with greater choice of fund domicile, thus unlocking much-needed industry capacity to service Europe-domiciled LO AIFs
- AIFMD 2 specifically facilitates open-ended and evergreen LO AIFs in EU member states (subject to approval and appropriate liquidity management tools)
How IQ‑EQ can help
Navigating AIFMD 2 requires deep regulatory understanding, operational readiness and the ability to implement complex controls across the full fund lifecycle. At IQ-EQ, we can support you with:
Specialist AIFMD 2 expertise
Our teams across Ireland, Luxembourg, France and the wider EU have extensive experience in loan origination structures and evolving regulatory expectations, ensuring your fund is structured and operated in full alignment with AIFMD 2.
Comprehensive compliance and reporting support
We help you build and maintain the governance, policies and risk frameworks required by the Directive – including credit risk oversight, leverage monitoring, concentration controls, and enhanced cost transparency.
Integrated systems and data capabilities
Leveraging our end-to-end tech platforms, including Investran, Paxus, Allvue and IQ-EQ Cosmos, we provide accurate, real-time data across loan administration, portfolio monitoring and investor reporting – all crucial for meeting AIFMD 2’s tighter disclosure requirements.
Operational resilience across the full fund lifecycle
From fund launch and structuring support to ongoing administration, risk monitoring and investor services, we deliver a seamless operating model tailored to loan-originating AIFs, be they new or transitioning into AIFMD 2 compliance.
Need help preparing for AIFMD 2? Our AIFM, depositary and compliance specialists can support your transition. Talk to our experts today.
