ESMA Final Report on Draft Regulatory Technical Standards on Open-Ended Loan-Originating AIFs

On 21 October 2025, the European Securities and Markets Authority ("ESMA") has published its final report on draft Regulatory Technical Standards ("RTS") on open-ended loan-originating alternative investment funds ("open-ended loan-originating AIFs") under Directive 2011/61/EU on alternative investment fund managers, as amended by Directive 2024/927/EU ("AIFMD"). This final report follows the mandate given to ESMA under AIFMD to specify the requirements for open-ended loan-originating AIFs to maintain an open-ended structure and builds on ESMA's consultation paper published on 12 December 2024 (the "Consultation Paper"). 

The RTS aim to harmonize regulatory requirements across the EU, with a particular focus on liquidity management, redemption policies, stress testing, and the consideration of loan portfolio characteristics.

Key Elements of the RTS

1. Liquidity Management and Redemption Policy

AIFMs managing open-ended loan-originating AIFs must demonstrate to their home Member State competent authorities that the fund’s liquidity risk management system is compatible with its investment strategy and redemption policy.

AIFMs are required to define an appropriate redemption policy which must take into account a number of factors, including those listed in Article 3 of the RTS, i.e. the redemption frequency, the availability of liquid assets held by the fund, the portfolio diversification and the liquidity profile of the assets held, the investment policy and strategy, the credit quality of the loans, the investor base, the level of subscriptions and redemptions, the minimum holding period, the length of the notice period (as well as any other redemption conditions) and of the settlement period, the expected incoming cash flows of the portfolio, the market conditions, the liquidity management tools selected, the results of liquidity stress tests and the availability of reliable, sound and up-to-date valuation of the assets in the portfolio.

Following feedback received by ESMA on the Consultation Paper, the RTS are no longer requiring AIFMs to set a fixed amount of liquid assets an open-ended loan-originating AIF shall hold to meet redemption requests. Instead, ESMA took a more flexible approach requiring AIFMs to ensure that sufficient liquidity is available to meet redemption requests, considering the specific characteristics of the fund and its portfolio.

2. Liquid Assets and Cash Flow

The RTS set out a non-exhaustive list of factors that AIFMs have to consider to ensure that open-ended loan-originating AIFs they manage have sufficient liquidity to meet redemption requests. These factors include (without being limited to) the portfolio diversification and the liquidity profile of the assets, the redemption policy, the length of the notice period, of the settlement period and of the minimum holding period, the liquidity management tools, the incoming cash flows of the portfolio, the investor base, the level of leverage and any other liabilities. 

AIFMs have to specifically consider the repayment terms and schedules, the maturities, the credit quality, the underlying exposures and the estimated default rates and rescheduling of the loans granted by the fund.

Based on feedback received on the Consultation Paper, the RTS clarify that expected cash flows from loans originated by open-ended loan-originating AIFs shall be considered as liquid assets. However, ESMA has removed the possibility for AIFMs to classify other assets as liquid, citing concerns over interpretative uncertainty and insufficient normative clarity.

AIFMs are required to conduct liquidity stress tests at least annually, unless the fund’s characteristics justify more frequent testing.

Stress tests must separately assess assets and liabilities, using severe but plausible scenarios as regards changes in interest rates, credit spreads, defaults in loans granted and redemption requests. Also, scenarios with a low probability, but with a high impact on the ability of the AIFM to value the loans shall be considered.

Taking into account the feedback received on the Consultation Paper, ESMA abstained from requiring a quarterly liquidity stress testing. 

AIFMs must implement an appropriate liquidity management system to be able to continuously monitor key parameters, including portfolio concentration, unencumbered cash, cash flows, subscriptions and redemptions, loan repayments, investor behaviour, portfolio composition and concentration, loan maturities, early-warning signals of loan impairment, leverage as well as the liquidity and liability of the fund.

The monitoring framework is designed to ensure that the fund’s liquidity management remains aligned with its investment strategy and redemption policy.

ESMA amended the RTS to avoid the impression that they require AIFMs to seek pre-authorisation from competent authorities before managing open-ended loan-originating AIFs, but acknowledged that AIFMD does not specifically harmonise the authorisation of funds and that certain open-ended loan-originating AIFs may still be subject to pre-authorisation under applicable national laws.

The RTS avoid a “one-size-fits-all” approach, allowing AIFMs to tailor liquidity management and redemption policies to the specific features of each open-ended loan-originating AIF.

The RTS will apply from 16 April 2026, subject to adoption by the European Commission.