Crossing the Atlantic: What U.S. managers need to know about European fund structures

By Mark Bollard, Director, Business Development – International Funds

Europe continues to present a highly attractive opportunity for U.S. fund managers, but many find it more complex than expected. Not because the strategy is weak, but because the regulatory and distribution environment is fundamentally different. The structure you choose changes who you can market to, what governance you need and how credible the product looks to European investors.

Familiar U.S. options can mislead. UCITS isn’t a ’40 Act fund. ELTIF isn’t a European BDC. Cayman isn’t always the path of least resistance. And AIFMD isn’t a product label. Without the right understanding of Europe’s structuring options, things quickly get slower, narrower and more expensive.

This article is for U.S. fund managers who want the commercial truth, not the brochure version. It compares the structures you’re most likely to assess when entering Europe and explains what each one means in practice.

Four truths to protect U.S. managers’ time, access and credibility in Europe

• UCITS and ’40 Act funds may be comparable retail products, but they have very different governance and leverage frameworks
• ELTIFs (post‑ELTIF 2.0) and UCI Part IIs are the closest European routes into retail-accessible private markets, but neither is a European BDC clone; investor protections are tighter
• Irish ILPs and Luxembourg SCSp structures are now the preferred onshore alternatives to Cayman ELPs; they’re gaining ground as many European institutions now want EU substance, not just offshore familiarity
• AIFMD is a regulatory regime, not a fund label. If you miss that, you’ll misread the whole European market

Is UCITS the European equivalent of a ’40 Act fund?

UCITS (which stands for Undertakings for Collective Investment in Transferable Securities) are often described as “Europe’s ’40 Act”. That shorthand is convenient, but it can underplay what the EU expects from a retail product.

The ’40 Act relies on a board-led oversight model. UCITS places legal responsibility on an independent depositary with strict safekeeping liability. As the table below illustrates, the products differ in many major aspects. In Europe, governance isn’t an administrative layer; it’s part of the product.

Key insight for U.S. managers:

The biggest differences between UCITS and ’40 Act funds are in governance, leverage and distribution. A UCITS passport can reduce distribution friction across Europe, which matters if your goal is scale across multiple markets rather than a single-country launch.

UCITS can accommodate leverage, but within a more prescriptive risk framework. That can force U.S. managers to redesign liquidity, derivatives use or eligible assets sooner than they’d expect.

If a strategy works in a ’40 Act format, it may be adaptable for UCITS. But don’t assume the wrapper will travel unchanged. In Europe, distribution scale comes with more product discipline.

This matters especially as Europe’s ETF market continues to grow rapidly, having recently surpassed the $3 trillion mark. Active ETFs, in particular, are growing at a pace. While they still make up a small portion of the overall ETF AUM in Europe, AUM in active ETFs has nearly tripled in size in the last two years to over $100 billion, with assets growing over 19% in the first four months of 2026 alone.

For U.S. managers looking for scalability, ETFs offer an efficient way to access multiple European markets through a single, passported structure.

What is the closest European equivalent to a BDC?

European Long-Term Investment Funds (ELTIFs) and UCI Part IIs are the closest EU equivalents to U.S. BDCs and semi‑permanent private credit vehicles. That doesn’t make them substitutes. The resemblance is helpful, but the differences still matter.

ELTIFs were historically a niche product, but ELTIF 2.0, launched in January 2024, has significantly expanded their flexibility by:

• Removing minimum investment thresholds
• Broadening the range of eligible assets
• Introducing greater optionality around liquidity (subject to notice periods and gating)

This matters because the ELTIF is now a more realistic route for managers who want retail-accessible private markets exposure across Europe. It’s especially relevant when broad distribution matters more than speed to market.

ELTIF still carries a higher governance and investor protection bar than a BDC. In Europe, retail access typically comes with more structure around it.

UCI Part II plays a different, complementary role. It offers many of the same asset class flexibilities, including private credit, real assets and hybrid strategies, without the full ELTIF label and passporting framework.

This can make it a better fit for managers who want faster execution or more targeted distribution through selected European wealth channels.

In practice, many sponsors treat UCI Part II as the faster entry route and ELTIF as the scale play.

The table below illustrates the key distinctions between the three products:

 * A UCI can be passported under AIFMD if it markets to professional investors only and not retail.

Key insight for U.S. managers:

Neither ELTIF nor UCI Part II is a European BDC in disguise. The choice between them depends less on strategy and more on the target investor base, distribution ambition and desired speed to market.

When should U.S. managers choose an ILP or SCSp instead of Cayman?

Irish ILPs and Luxembourg SCSp structures are increasingly used as onshore alternatives to Cayman ELPs, especially where European institutional capital is the target.

Historically, many European investors have accepted Cayman structures through private placement. That’s changing. A growing number of pensions, insurers and sovereign investors now prefer EU onshore vehicles because of regulatory, ESG and optics considerations.

The SCSp has long been the structure of choice for illiquid strategies. The Irish ILP is now a credible alternative for managers who want partnership-style economics inside an EU-regulated framework, including the ability to delegate portfolio management to a U.S. manager.

Key insight for U.S. managers:

For managers targeting European institutions, onshore partnerships can offer a credible route to capital where investors want EU substance, AIFMD alignment and familiar partnership economics. Choosing the right domicile between Luxembourg or Ireland requires careful consideration around tax, distribution, culture and service provider networks.

AIFMD is not a fund structure. Why that matters

This is the distinction many U.S. managers can miss at first. AIFMD isn’t a wrapper. Short for the Alternative Investment Fund Managers Directive, it’s the regulatory framework around the manager, the oversight model and the marketing route. If you treat it as a label, your Europe strategy can start on the wrong footing.

AIFMD 2, which came into effect in April 2026, represents a meaningful shift – particularly for private credit – by creating a more harmonized EU‑wide framework for loan origination funds. It also includes refined rules for leverage caps and delegation oversight. For managers with the right structures and partners in place, this can actually provide greater clarity and consistency across markets.

Key insight for U.S. managers:

In practice, three points matter most under AIFMD:

• The regulated entity is the AIFM, not the fund itself (although some funds will also be supervised depending on their investors and asset class, e.g. loan origination funds)
• Portfolio management can be delegated to a U.S. manager
• Marketing across Europe depends on passporting or local private placement rules (NPPR)

Two more comparisons relevant to U.S. managers

EU parallel funds vs U.S. feeders

U.S. managers often use parallel EU funds rather than feeders due to AIFMD restrictions on passporting. Parallel structures can preserve strategy alignment while giving European investors a structure that fits local regulation and governance expectations.

U.S. interval funds vs EU semi-liquid AIFs

The EU does not have a direct equivalent to a U.S. interval fund. ELTIFs, QIAIFs (Ireland) and LTAFs (UK) all fulfill a similar role for periodic liquidity private assets, but each comes with its own rules on liquidity, investor base and distribution.

Choosing the right route into Europe

Europe remains a compelling opportunity for U.S. asset managers across both liquid and illiquid strategies. Investor appetite for high‑quality, cross‑border products continues to grow, and regulatory developments in 2026 favor well‑prepared entrants.

Europe is not necessarily harder, but requires choosing the right wrapper for your investor base. The structure you choose shapes distribution, investor access, and how quickly you can move. It’s important to see regulation in Europe not as a barrier, but a framework that rewards preparation and that unlocks capital rather than constraining it.

Let us do the legwork for you

At IQ-EQ, not only do we offer end-to-end fund administration but also the AIFM infrastructure, governance and operational support you need to raise capital and operate in Europe, without all the regulatory compliance hassle.

Acting as your third-party AIFM or ManCo, we’ll coordinate with European regulators on your behalf while providing the right regulatory oversight, governance frameworks and board reporting to meet AIFMD requirements. We can also help you test the waters by utilizing the CBDF pre-marketing regime ahead of fund set-up.

Discover our full service suite and get in touch with our expert team today.

Quick answers to questions U.S. managers often ask