On 10 January 2025, the European Securities and Markets Authority (ESMA) published two important updates in its Questions and Answers (Q&A) document regarding the application of Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD).  

These updates provide clarification on (1) the delegation of portfolio or risk management functions by AIFMs to non-supervised undertakings outside the EU and (2) the holding of client money by AIFMs.  

Delegation to non-supervised undertakings outside the EU 

Q: Are AIFMs allowed to delegate portfolio or risk management to non-supervised undertakings established outside of the EU? 

No. AIFMs may not delegate portfolio or risk management functions to non-supervised undertakings in third countries. Such delegation requires that cooperation between the competent authorities of the AIFM’s home Member State and the supervisory authority of the third-country undertaking is ensured. 

Holding of client money by AIFMs 

Q: Are AIFMs permitted to hold client money, particularly under Article 6(4)(b)(ii) of AIFMD? Will this situation change following the AIFMD Review? 

No. AIFMs are not permitted to hold client money, and this prohibition will remain in effect even after the legislative changes introduced by the AIFMD Review 

In both cases, the answers reaffirm that these clarifications are based on existing legislation. They neither create new obligations nor extend the rights of market participants.  

For further details, the full Q&A documents are available on ESMA’s website: 

https://www.esma.europa.eu/publications-data/questions-answers/2229 

https://www.esma.europa.eu/publications-data/questions-answers/2230 

Don’t hesitate to contact our investment management team should you need our assistance.