ESMA publishes final report on open-ended loan originating AIFs

On 21 October 2025, ESMA publishes its awaited Final Report on open-ended loan originating AIFs (the Final Report).

This contains ESMA's proposed draft Level 2 RTS, which set out the requirements with which loan-originating AIFs must comply in order to be considered open-ended.

What happens next?

ESMA's draft RTS have now been submitted to the European Commission. Under the usual legislative procedure, the Commission now has three months (which it can extend by a further month) to decide whether or not it will adopt the RTS.

According to ESMA's draft, the new rules would then apply from 16 April 2026, in line with the other changes to AIFMD made by the Amending Directive.

However, it should be noted that these RTS appear on the list of non-essential Level 2 acts that the Commission has announced that it will not adopt before 1 October 2027 at the earliest. (See item 45 on the list contained in the annex to the Commission's letter.)

What's the background to the Final Report?

One of the key changes made to the AIFMD by the Amending Directive was the introduction of a loan-originating regime for AIFs.

Among other things, this requires a loan-originating AIF to be closed-ended except where its AIFM can demonstrate to its home NCA that the AIF's liquidity risk management system "is compatible with its investment strategy and redemption policy". ESMA was mandated to develop RTS to determine the elements and factors an AIFM must consider when seeking to demonstrate this to its NCA.

These requirements had to include:

• a sound liquidity management system
• the availability of liquid assets and stress testing and
• an appropriate redemption policy in light of the liquidity profile of loan-originating AIFs.

In addition, the RTS had to take into account

• the underlying loan exposures
• the average repayment time of the loans and
• the overall granularity and composition of the portfolios of loan-originating AIFs.

As we reported at the time, ESMA consulted on its proposals in December 2024.

What changes have been made to ESMA's original proposals?

By and large, ESMA's final proposals mirror those set out in its consultation paper.

The Final Report, though, flags three areas where ESMA has made changes to its draft RTS:

(a) Removing the requirement for AIFMS to determine a target appropriate amount of liquid assets

The loan origination regime requires an AIFM to determine an appropriate amount of liquid assets that an open-ended loan originating AIF must hold in order to meet redemption requests.

Feedback to ESMA's consultation paper emphasised that, for in open-ended loan originating AIFs, effective liquidity management depends more on the liquidity arising from the loans granted by the funds than it does on constantly holding a fixed amount of liquid assets.

In light of this, ESMA has removed the fixed asset requirement and stipulated, instead, that an AIFM must ensure that its open-ended loan originating AIFs have sufficient liquidity to honour redemption requests.

(b) Frequency of liquidity stress testing

ESMA's draft RTS now require an AIFM which is managing an open-ended loan originating AIF to carry out liquidity stress tests at least once a year, rather than ever quarter as it had originally proposed.

(c) Clarification of some provisions

In the draft RTS, ESMA's referred to AIFMs that 'intend to manage' open-ended loan originating AIFs.

Respondents felt that this might be interpreted as requiring an AIFM to seek pre-authorisation from its NCA before managing an open-ended loan originating AIF.

As a result, ESMA has replaced the phrase 'intend to manage' with 'AIFMs that manage'.

The Final Report also notes that certain open-ended loan originating AIFs may still be subject to pre-authorisation under national laws.