13 December 2021

Sub-Threshold AIF Managers Under AIFMD II: Quo Vadimus?



The long awaited ‘AIFMD II' proposal was published by the European Commission in November 2021. It contains the proposal to amend amongst others the AIFMD Directive 2011/61/EU.
Belgium Finance and Banking
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The long awaited 'AIFMD II' proposal was published by the European Commission in November 2021 (the "Proposal")1. It contains the proposal to amend amongst others the AIFMD Directive 2011/61/EU (the "AIFMD").2 Although summaries of the Proposal have been published elsewhere, we noted that the Proposal does not include additional harmonization regarding sub-threshold managers of alternative investment funds ("AIFMs").

This note intends to give further background on the rules surrounding of these sub-threshold AIFMs, the ongoing discussions, and whether or not they are now in 'safer waters' given that the Proposal leaves them untouched. To do so, we a.o. provide a summary of the responses to the EC public consultation.


  • Sub-threshold AIFMs are 'small-scale' managers of which the AuM does not exceed certain thresholds. In principle, they are regulated only by national laws, and they cannot passport their national registrations.
  • Responses to questions on sub-threshold AIFMs in the EC consultation were diverse, with some recurring themes pointing towards high cost of compliance with AIFM and 'protectionist' national regimes.
  • Industry generally expected AIFMD II to further harmonize the regime applicable to sub-threshold AIFMs.
  • The lack of such harmonization in the present Proposal does not rule out further steps at a later stage, through amendment of the Proposal or Level 2 Regulation.


In principle, the AIFMD exempts small AIFMs from most of the AIMFD rules. 3 Sub-threshold AIFMs therefore cannot passport their services into other Member States.

As the regulation of sub-threshold AIFMs is left to national authorities (but cannot be more strict than the AIFMD), this exemption leads to divergent national approaches with respect to sub-threshold AIFMs. Furthermore, in practice, we also notice that certain national authorities tend to simply apply (a 'toned-down' version of) the AIFMD-framework to sub-threshold AIFMs, but without granting passporting rights.

Indeed, ESMA noted that 'some [National Competent Authorities] would prefer to have an explicit EU legal basis for Member States to introduce additional national requirements with a view to supervising sub-threshold AIFMs sufficiently. In light of this preference by some [National Competent Authorities], ESMA recommends that the Commission should consider further clarifying the power of Member States to apply additional requirements under their national law to sub-threshold AIFMs.' 4

Consequently, several questions on the sub-threshold regime were included in the public consultation on the review of EU rules on AIFMs.5


The responses to these questions on sub-threshold AIFMs were mixed.


  • warned that the current regime takes away capital from small/beginning AIFMs to the major players;
  • argued that the calculation of the thresholds is inadequate or that the thresholds are too low;
  • pointed out that the lack of passport is the flip side of a light regulatory regime, and referred to the (varying) national private placement regimes (NPPRs). These NPPRs do allow to a certain extent to gather capital in other Member States;
  • indicated that in its experience small AIFMs simply rely on reverse solicitation for cross border fund raising, which of course is not desirable as a sound legal basis;6
  • raised a proposal to introduce a 'voluntary passporting' regime, with or without specific (proportionate) regulatory requirements for sub-threshold AIFMs - similar to EuVECA requirements;7
  • indicated that largely unregulated managers allegedly pose a risk to investors, specifying that in their view the sub-threshold regime in its current form should be abolished entirely, one respondent referring to 'an increase in the number of sub-threshold AIFs [which] have been seen creating a sub-market for AIFMs that are not subject to same regulatory framework';
  • flagged, as a recurring theme, that one particular area of concern is that some Member States permit marketing by sub-threshold AIFMs established in their own territory, but do not permit similar access to their territory for sub-threshold AIFMs from other Member States on equal terms, preventing a level playing field;
  • generally, that decreasing cost of compliance with full AIFMD might also be a way to attract smaller firms to opt-in.

Obviously, the divergence of the above points of view is most likely driven by the diverse backgrounds of the relevant respondents (i.e. industry players, representatives, but also national regulators themselves) and should therefore be seen in its context.

However, the responses do illustrate the discussions that are ongoing, and the challenges small-scale AIFMs pose to regulators.


In light of (i) the very specific questions from ESMA in this regard, (ii) the importance of small-scale AIFMs in the European fund land scape and (iii) the many different views on this matter vividly illustrated by the above review of the public consultation responses, sector observers and participants generally expected additional harmonization of the sub-threshold regime. So many professionals were surprised that the Proposal launched by the EC currently left the regime as-is.

However, this Proposal is still in an early stage and the fate of sub-threshold AIFMs might be picked up in later iterations. The Proposal is still subject to review by the EU Parliament and the Council and is not expected to land in its final form before Q4 2022 at the earliest. Furthermore, at this stage the Proposals is limited to Level 1. It is to be seen Level 2 regulations will also leave the current sub-threshold regime entirely 'untouched'.

The takeaway is clearly that the regime for sub-threshold AIFMs is to be monitored closely going forward.

In this context, we note that the EC may have recently indirectly pointed out the way legislation of sub-threshold AIFMs might be taking. In its recent Q&A8 with respect to SFDR9, the EC indicates that both entity- and product-related requirements of the SFDR are applicable to all sub-threshold AIFMs. It further states that provisions in the SFDR which refer to AIFMD-provisions not applicable to sub-threshold AIFMs should be applied 'by analogy'. Although obviously the 'Green Deal' has other objectives than AIFMD, in our view, such application of rules 'by analogy' should alert industry observers and participants – possibly even more than the mere application of SFDR to sub-threshold managers in itself.


1. Available here Other than the review of AIFMD, the package also includes review of the ELTIF Regulation, the introduction of a European Single Access Point and a review of the MiFIR Regulation, the proposal also introduces a proposal to amend the AIFM Directive and the UCITS Directive.

2. Art. 69 of the AIFMD contains a 'review' clause which indicates that review of AIFMD should have started in 2017 already. However, rumor has it that the review was shelved for a while in light of the importance of the fund industry as a Brexit negotiation point.

3. Such small, 'sub-threshold' AIFMs are AIFMs with assets under management of maximum EUR 100 million (including assets acquired through use of leverage) or EUR 500 million (if only unleveraged AIFs that have no redemption rights exercisable during a period of 5 years): art. 3(2) of the AIFMD. Calculation rules for AuM are set out in Level 2 Regulation.

4. Letter on AIFMD-review dated 18 August 2020, available on

5. Questions and contributions are available for download on

6. From a Belgian perspective, this is a risky strategy, given the very limited scope of reverse enquiry under Belgian law.

7. Noting that the EuVECA Regulation has not proven to be an effective solution as it is often subject to prior review by competent regulators, and different regulatory practices have emerged. so here too, respondents have suggested further optimization and harmonization of the EuVECA Regime instead.

8. Available on

9. Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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