The Alternative Investment Fund Managers Directive (AIFMD) II took effect EU‑wide on 16 April 2026. Ireland has since completed local transposition, enacting the new framework on 1 May 2026 through S.I. Nos. 181 and 182 of 2026.
Our Asset Management team, together with KPMG Law LLP, delves deeper into the topic below to analyse the recent developments, tax considerations and transitional provisions.
Ireland has become a go-to jurisdiction for sponsors and managers establishing private credit vehicles. There are two primary reasons for this:
In addition to the above, the range of vehicles available in Ireland (e.g. the ICAV, Section 110 regime, Investment Limited Partnership) and the broader ecosystem for private credit has resulted in a significant increase in the number of private credit vehicles domiciled in Ireland across the full range of the asset class including direct lending, special situations, mezzanine, royalties, securitisation/ asset‑backed securities and distressed debt.
Until recently, the regulatory regime for direct lending was based on the European Union (Alternative Investment Fund Managers) Regulations 2013 (as amended) (the “AIFM Regulations”) and the Central Bank of Ireland’s (the “CBI”) AIF Rulebook. The regulatory regime in this regard was not fully aligned with other EU jurisdictions where, in certain instances, local implementation of the EU regulations provided greater flexibility. However, this has now changed with the transposition of AIFMD 2.0 into Irish law. At a high level, the revised regime:
creates a level playing field from a regulatory perspective across the EU for loan originating funds – as a result, there should be no material regulatory differences across jurisdictions, meaning a greater focus on broader factors such as ecosystem, ease of doing business, substance considerations, etc. when choosing where to domicile a fund.
codifies many pre-existing practices within a framework which is now more aligned to private credit industry norms.
Our expectation is that these changes will only increase the attractiveness of Ireland as a jurisdiction for private credit. A detailed discussion of the key elements is set out below.
AIFMD 2.0 establishes a single EU regime governing loan origination by AIFs. Ireland has adapted its existing framework to fit within this model, moving away from its previously detailed domestic rule set. The dedicated chapter for loan‑originating QIAIFs has been removed from the AIF Rulebook, replaced by direct reliance on the revised provisions as implemented in the AIFM Regulations. The CBI also eliminated certain legacy restrictions, including the prohibition on QIAIFs granting loans or providing guarantees in respect of third‑party obligations.
In practice, the regulatory focus has shifted from prescriptive local rules to a more standardised set of EU‑level requirements centred on risk control and investor protection.
Key elements:
Scope of loan origination | The definition of loan origination is broad and captures both (i) direct lending by the AIF and (ii) indirect exposure through intermediary entities or structures where the AIF or AIFM has been involved in structuring or determining the key terms of the loan. |
| Risk retention |
Where loans are transferred, the AIF is generally required to retain at least 5% of the notional value of the loan. This requirement is intended to ensure continued alignment between the AIF and the performance of the assets, and to limit originate to distribute strategies.
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Borrower concentration limits
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EU-wide concentration limits have been introduced. In particular, exposure to a single borrower that is a financial undertaking, another AIF or a UCITS must not exceed 20% of the AIF’s capital, subject to limited flexibility during an initial ramp up period.
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Leverage limits
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Loan originating AIFs are subject to leverage caps calculated under the commitment method, being 175% of net asset value for open-ended AIFs and 300% of net asset value for closed-ended AIFs.
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Governance and lending restrictions
| AIFMs must implement robust credit assessment, underwriting and monitoring frameworks, and originate‑to‑distribute strategies are discouraged. Lending to certain connected parties is prohibited, reinforcing the focus on conflicts of interest and investor protection. |
Structure
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There is a general expectation for loan-originating AIFs to be closed-ended, reflecting the illiquid nature of direct lending strategies. However, an open ended structure may be used where the AIFM can demonstrate that the fund’s liquidity risk management framework is appropriately calibrated to its investment strategy and redemption profile. In addition, non-EU AIFMs are permitted to manage closed ended loan originating AIFs, provided all applicable requirements are satisfied.
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Liquidity management is a central feature, particularly for open-ended AIFs where mismatches between asset liquidity and redemption terms are most acute. The regime introduces a more structured approach to the use of liquidity management tools (“LMTs”).
AIFMs must:
Many of these tools are already familiar within Irish fund structures. However, the revised regime standardises their availability and use, requiring managers to take a more deliberate approach to the selection, calibration and disclosure of LMTs throughout the fund’s lifecycle.
Supervisory oversight
The CBI has the power to direct the activation or suspension of specific LMTs where this is considered necessary for investor protection or financial stability. The CBI may also coordinate with other EU regulators where funds are marketed or managed across multiple jurisdictions.
Delegation remains a core feature of Irish fund structures, particularly for managers operating global investment platforms. The revised regime does not introduce prescriptive limits on delegation. However, it reinforces the existing framework by increasing transparency requirements and sharpening regulatory focus on the substance of the AIFM (which in many cases is a third party, particularly for new market entrants).
The prohibition on “letter-box entities” remains unchanged. AIFMs must be able to demonstrate that they retain effective decision-making authority and exercise meaningful oversight of delegated activities. This places continued emphasis on ensuring that key functions are not outsourced to the extent that the AIFM becomes a purely formal presence.
Enhanced reporting and oversight
AIFMs are required to provide more granular information in their regulatory reporting in relation to their delegation arrangements, including:
the scope and nature of delegated functions;
the identity, location and regulatory status of delegates; and
the resources, expertise and functions retained by the AIFM.
These disclosures support increased regulatory scrutiny of how management activities are distributed and whether the AIFM maintains sufficient substance.
Supervisory focus
The CBI continues to apply close scrutiny to:
the role and effectiveness of designated persons;
board oversight and governance structures; and
the ability to evidence genuine decision making and control in Ireland.
Where a third-party AIFM is used, understanding its approach to regulatory compliance is a key part of service provider selection.
The introduction of AIFMD 2.0 has no impact on the well-established range of tax considerations which provide a clear supporting rationale for domiciling a private credit fund in Ireland. These considerations include the following (the specific application of which depends on the type of vehicle used):
fund level tax exemption on investment return;
VAT exemption for fund management and ability to recover VAT incurred;
no withholding tax on payments to non-Irish or Irish exempt investors; and
ability to access Ireland’s existing tax treaty network (75 currently in effect) including the Ireland-US tax treaty, which is crucial for US direct lending or royalty strategy.
AIFMD 2.0 makes a number of targeted adjustments to the depositary regime, rather than introducing a fundamental redesign. In an Irish context, these changes are expected to have a relatively modest impact on existing fund structures.
Existing arrangements: Current depositary models remain largely unaffected, and established Irish structures continue to be compatible with the framework.
Delegation of safekeeping: Additional clarification is provided around the delegation of custody and safekeeping functions. This is of particular relevance to funds operating global custody networks, where assets are held across multiple jurisdictions.
Cross‑border access: Measures aimed at improving access to depositary services in smaller or less developed markets have limited practical relevance in Ireland, given the depth and maturity of the local depositary ecosystem.
Current depositary models remain largely unaffected, and established Irish structures continue to be compatible with the framework.
Additional clarification is provided around the delegation of custody and safekeeping functions. This is of particular relevance to funds operating global custody networks, where assets are held across multiple jurisdictions.
Measures aimed at improving access to depositary services in smaller or less developed markets have limited practical relevance in Ireland, given the depth and maturity of the local depositary ecosystem.
The scope and granularity of regulatory reporting is being expanded, including targeted enhancements to Annex IV reporting. AIFMD 2.0 is intended to provide regulators with a more consistent and detailed view of risk across the European funds landscape.
Irish AIFMs will be required to report additional information across a number of areas, including:
liquidity profiles and stress testing outputs;
leverage metrics and methodologies;
delegation arrangements, including greater detail on delegated functions; and
risk exposures at a more granular level.
These changes are expected to require a more structured approach to data collection, validation and internal reporting processes.
Supervisory focus
The CBI continues to place particular emphasis on the accuracy, consistency and timeliness of regulatory reporting. This includes an ongoing focus on data quality controls and the ability of AIFMs to substantiate reported figures where required.
AIFMD 2.0 does not introduce the third-country passport. Access to the Irish market therefore continues to rely on national private placement regimes (“NPPRs”) for non-EU AIFMs and AIFs.
While the overall access model is unchanged, expectations around transparency have increased and coordination between EU regulators has been strengthened. This reflects a broader shift towards closer supervision of cross‑border marketing activity within the existing NPPR framework.
Ireland’s NPPR regime remains well developed and widely used. However, the operational burden on non‑EU managers is expected to increase, particularly in relation to disclosures and ongoing regulatory engagement.
Transitional provisions are included for certain requirements. In particular:
enhanced reporting requirements will be implemented over a longer timeframe, with the revised Annex IV framework expected to take effect after an initial transition period;
existing loan‑originating AIFs benefit from extended transitional relief in respect of key structural requirements, with some measures deferred for several years following implementation; and
open‑ended AIFs are afforded a limited period to align with the new liquidity management requirements.
For Irish AIFMs and AIFs, AIFMD 2.0 represents an evolution of an already well-developed regulatory framework. Ireland’s regime aligns in many respects with the revised requirements, particularly in areas such as loan origination and delegation oversight.
Nonetheless, the changes introduce important refinements which should serve to increase the attractiveness of Ireland as a jurisdiction to domicile a private credit fund.
We can guide you through AIFMD compliance issues and changing landscape. Reach out to our team to discuss the relevant next steps for your organisation.
