The assets under management of fund managers under the light regime often do not correspond to the portfolio value and can be significantly higher. As a result, managers unknowingly risk exceeding this strict limit, with all the consequences that entails.
Investing for others is taking off in the Netherlands, especially due to fund managers operating under the so‑called light regime of the AIFMD (Alternative Investment Fund Managers Directive). This regime provides relief for managers who meet specific conditions, such as staying below the 100 million euro assets under management threshold.
This article explains what the regulations say, how the calculation works and what you must do if you unexpectedly exceed the threshold.
Vermogensgrenzen vanuit regelgeving
In Nederland is de AIFMD-richtlijn geïmplementeerd in de Wet financieel toezicht (Wft). Artikel 2:66a van de Wft laat toe dat beheerders onder minder strenge eisen vallen wanneer zij minder dan 100 miljoen euro beheren in open-end fondsen, waarbij beleggers tussentijds opnames kunnen verrichten. Deze grens kan zelfs worden verhoogd naar 500 miljoen euro, mits beleggers in de eerste vijf jaar niet kunnen uitstappen (closed-end) en er geen gebruik wordt gemaakt van hefboomwerking door bijvoorbeeld het gebruik van leningen of derivaten.
An important detail, often overlooked, is that these asset limits apply to the total assets under management across all funds under the same manager — not per fund. Setting up an additional "management entity" does not solve this, as the regulator looks at the underlying individuals responsible for managing these entities: the so‑called joint enterprise.
Points of attention for the calculation method
The calculation of assets under management requires that all positions held within a fund be included, as prescribed in the ESMA guidelines. This includes direct investments, derivatives and products with leverage. Contrary to what is often thought, the total exposure from these elements can be significantly higher than the portfolio value alone.
For equity positions, for example, the full value counts, even if these positions are (partly) financed with margin (borrowed money). Suppose a fund uses 51 million euros of its own capital to buy shares and takes on 51 million euros in margin loans. In that case, the total exposure is calculated as 102 million euros, with both the capital and the margin loan included.
For derivatives the key distinction is between options and futures. Futures are fully counted based on their contract value, i.e., the nominal value. Options, on the other hand, are accounted for based on their delta‑adjusted notional value. Delta is a measure indicating how much an option reacts to price changes in the underlying asset. Thus an option with a notional value of 1 million euros and a delta of 0.5 is counted as 500,000 euros of exposure.
It is important to emphasize that under the light regime rules no corrections are applied for hedging or netting. This means that all positions are counted in full, even if they are intended to limit risks. For example, if a fund combines a long position in shares with a short future as a hedge or a written put option, both the share position and the derivatives are counted separately in the calculation of assets under management.
Although the assets under management of the light funds are reported to the supervisor annually, it is the manager’s responsibility to keep track of the 100 million euro threshold.
An incidental exceedance, which according to the manager is temporary in nature, must be reported to the AFM immediately. The report must clearly explain why it was a one-off and what measures have been taken to prevent a recurrence. In the case of a structural exceedance, the manager is required to inform the supervisor within thirty days and start a licensing process.
This process requires significant preparation and adds extra responsibilities, including (i) drafting comprehensive policy documents on governance, risk management, compliance and capital requirements, (ii) adapting your organization to meet stricter reporting and transparency requirements, and (iii) demonstrating that you have sufficient own funds to cover risks.
On the one hand, the light regime under the AIFMD offers advantages for the smaller funds. At the same time, managers are expected to pay sufficient attention to monitoring and compliance. By proactively keeping an eye on the “assets under management,” especially when using derivatives or leverage, and by involving specialists such as lawyers, a depositary and an administration office in good time, managers can prevent pitfalls in the investment policy and sanctions from the supervisor.
