AIFMD II: Inside the EU - Or just outside it?

AIFMD II has quickly moved from background noise to a live structuring consideration for private equity managers. It is not a wholesale rewrite of the rules but it is prompting some very practical decisions about how funds are formed, marketed and operated.

The real impact is less about what has changed on paper and more about the fact that managers are now actively reassessing where they sit from a regulatory perspective.

AIFMD II in a nutshell

At its core, AIFMD II builds on the existing Alternative Investment Fund Managers Directive regime rather than replacing it. The key updates include:

• Increased scrutiny around delegation
• Enhanced reporting and transparency requirements
• A more developed framework for loan origination funds
• A stronger EU focus on third-country oversight (including AML and tax cooperation)

None of these changes are individually transformative. Taken together, however, they reinforce a clear direction of travel - towards a more detailed and more prescriptive EU framework.

As implementation progresses, that is bringing a familiar but increasingly important question into sharper focus: where do managers want to sit in relation to that framework?

The structuring question remains, but the balance has shifted

The fundamentals of structuring have not changed. Managers are still asking:

• Where are our investors?
• How are we raising capital?
• How complex does the structure need to be?

What has changed is the clarity of the trade-off.

An EU structure brings access to the passport,  but with additional cost, regulatory overlay and operational burden. A Guernsey structure sits outside that perimeter, offering greater flexibility and proportionality, but without passporting rights.

As a result, the choice is becoming more deliberate. Rather than defaulting to an EU model, managers are increasingly designing structures around their specific strategy and investor base.

The key question is no longer theoretical: do we need the passport, or are we paying for something we will not fully use?

How important is the passport in practice?

For many private equity managers, particularly those raising from a targeted institutional investor base, the passport is not always decisive.

In practice:

• Fundraising is often relationship-driven
• Investor pools are relatively concentrated
• National private placement regimes remain well understood and workable

That does not diminish the value of the passport. Where a strategy requires broad, pan-European distribution at scale, it remains a powerful tool. However, for a significant part of the market - particularly mid-market private equity, it is a commercial judgement rather than a necessity.

Looking beyond fundraising

While much of the AIFMD discussion focuses on marketing, the practical advantages of structure often become more apparent once capital is deployed. This is where Guernsey tends to resonate most strongly with private equity managers.

From a deal execution perspective, the benefits are familiar but important:

• Speed and certainty of execution
• Flexible and straightforward company law
• A pragmatic, commercially focused approach

These characteristics lend themselves particularly well to:

• Buy-and-build strategies
• Single-asset vehicles
• Continuation funds and co-investment structures

They are equally relevant in the context of financing and distributions, where a less prescriptive environment can make it easier to structure efficient cashflows and respond to evolving deal dynamics.

In simple terms, fundraising matters, but the real test of a structure is how it performs during the life of the fund. That is where flexibility becomes critical.

Relevance across adjacent strategies

Although the focus is often on private equity, the same themes apply across other alternative asset classes.

• Real estate and infrastructure: long-term, asset-heavy strategies benefit from stable but adaptable structures
• Private credit: AIFMD II’s loan origination rules have increased interest in more flexible non-EU frameworks
• Venture capital: speed, cost-efficiency and simplicity are key, particularly for follow-on and co-investment activity

Across all of these strategies, the underlying requirement is consistent - structures that are practical, proportionate and capable of evolving alongside the investment strategy.

A final observation

If there is a single theme running through current structuring discussions, it is flexibility. Not just at launch, but throughout the lifecycle of a fund.

The ability to:

• Adjust structures as strategies evolve
• Move quickly when opportunities arise
• Respond to investor expectations

is increasingly valuable in a market where execution timelines are tighter and capital is more selective.

AIFMD II has not fundamentally changed the rules of private equity structuring. What it has done is sharpen the decision-making process. For many managers, that is reinforcing a simple point: the structure should fit the strategy, not the other way around.

Jurisdictions such as Guernsey continue to play an important role in that analysis, offering a credible, well-understood and flexible alternative alongside onshore structures.