Proposal on Danish implementation of AIFMD II
Published 20 May 2025
Category: AIFs
On 9 April 2025, the Danish Government presented a proposal for amendments in the Danish financial regulation, including the Danish Alternative Investment Fund Managers (“AIFM”) Act. The proposal is available here (in Danish).
The purpose of the amendments to the Danish AIFM Act is to implement the AIFM Directive II which entered into force on 15 April 2024 and which the EU Member States must implement into national legislation within two years from the effective date.
The amendments implicate authorized AIFMs and include both open-ended and closed-ended AIFs, but with certain provisions that only apply to open-ended AIFs. Below, we outline the key takeaways and implications:
Loan-Originating Funds
AIFMs of loan-originating AIFs must operate with effective policies, procedures and processes for granting loans. Long-term illiquid loans can lead to a liquidity mismatch, if an open-ended structure allows investors to frequently redeem their interests. Thus, as a general rule, loan-originating AIFs must be established as closed-ended funds. However, it shall be possible to establish open-ended loan-originating AIFs, if certain requirements are met, including that a liquidity management system is established, and that leverage of the fund does not exceed 175 percent (compared to 300 percent for a closed-ended AIF).
Additionally, to mitigate potential conflicts of interest, AIFs may not grant loans to its AIFM or its employees and its depositary, and the AIF must commit to retain an economic interest of at least 5 percent of the nominal value of the loans that are granted and sold.
Cross-Border Depositary Services
An AIFM can now assign a depositary incorporated in a member state other than the member state in which the AIF has its place of business provided that the total amount in the national depositary market in the home country of the AIF, which are transferred for safekeeping on behalf of AIFs managed by EU AIFMs, does not exceed EUR 50 billion, and provided that the Danish FSA approves such assignment based on an individual assessment of the need for relevant depositary services in the AIFs home country.
In addition, AIFMs may not assign depositaries incorporated in (i) high risk third countries according to the anti-money laundering directive (2015/849) which replaces FATF’s list of high risk third countries or (ii) countries listed on the EU list of non-cooperative jurisdictions for tax purposes.
Delegation Arrangements
It is now specified that the AIFM can delegate all types of functions to third parties, meaning that all tasks and services may be delegated. If delegation takes place, the AIFM’s obligations and liability remain with the AIFM and is not influenced by a delegation to a third party and also any sub-delegation.
Liquidity Management Tools
To enhance liquidity management for AIFMs, it will be a requirement to adopt at least two liquidity management tools in open-ended AIFs. In addition, managers must ensure that detailed policies and procedures for activation and deactivation of the adopted liquidity management tools are in place as well as operational and administrative arrangements for the application of such tools. The rules will include a notification system where AIFMs are obliged to notify the Danish FSA of the selected liquidity management tools as well as notification of activation and deactivation under certain circumstances.
Improved data collection, reporting, knowledge sharing, and cooperation between authorities
AIFMD II introduces strengthened requirements aimed at enhancing data collection, regulatory reporting, and cooperation among financial supervisory authorities across the EU. Among other measures, this includes:
- AIFMs will be required to submit more detailed information to the Danish FSA, including data on all markets and instruments in which they operate – not just the most significant ones.
- They must also report information on all risk exposures and asset concentrations for each fund under management. This includes the use of asset identification codes to enable regulators to link reported data with other regulatory or publicly available sources.
- In addition, AIFMs must provide detailed disclosures on delegation arrangements, including who is responsible for delegated portfolio or risk management functions, the number of staff involved, and the mechanisms in place for oversight.
- To improve transparency in cross-border fund distribution, AIFMs must also indicate which EU member states their funds are actively marketed in.
Next steps: The proposal for the amendments are currently undergoing first reading in the Danish Parliament, with the next steps being the second and third readings. If the amendments are adopted by the Danish parliament, the amendments are expected to take effect 1 July 2025.
Tags: AIFMDAIFMD reviewCross-BorderDanish RegulationRisk Management
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