Fund lending is being put on a new footing. With AIFMD II, the European Union is introducing a uniform regulatory framework for private credit across Member States. “This is a win for the market”, says Dr Oliver Decker, Partner at Grant Thornton Rechtsanwaltsgesellschaft and Supervisory Board Member at Super Global. “What may look like tighter regulation at first glance is, in fact, a qualitative leap for private credit.”
A consistent EU-wide framework for lending by funds is now taking shape. The starting point is AIFMD II (Directive (EU) 2024/927), which Member States must transpose into national law by mid-April. In Germany, the federal government has introduced the Fund Risk Limitation Act to implement the Directive. One of the reform’s core objectives is to make fund lending more consistent, transparent and resilient. “The EU is giving private credit a sustainable foundation”, says Decker. “This also strengthens confidence among investors and corporate borrowers.”
Going forward, comparable rules will apply across the Union on when and how investment funds may originate loans. Decker expects that clearer requirements, covering risk management, liquidity management, as well as concentration and leverage limits, will make it easier to structure and scale credit funds in a disciplined way. “The requirements are demanding”, he notes, “but they establish planning certainty.”
Free & non-binding
For capital management companies and credit funds, the reform primarily brings clarity and predictability. Providers benefit from a level playing field as national special regimes are gradually replaced by EU-wide standards – an advantage for established fund jurisdictions such as Germany and Luxembourg. “Well-structured firms will be strengthened, not slowed down, by AIFMD II”, Decker points out. For example, registered capital management companies will no longer be subject to certain banking-law style requirements such as Germany’s KAMaRisk (Minimum Requirements for Risk Management of Capital Management Companies) but instead fall under the harmonised fund regime set out by the EU Directive. “The new rules, differentiating, for instance, by fund size and investor type, ultimately give registered capital management companies a competitive edge”, Decker adds.
For Decker, AIFMD II marks a turning point for the asset class. “Private credit is being legitimised and professionally standardised across the EU”, he says. “Experienced managers can plan and implement private credit structures more effectively, and increased legal certainty lowers the barriers for investors to enter the market.”