backOn 21 October 2025, the European Securities and Markets Authority (“ESMA”) published its final report on the amended RTS for OE LO AIFs. The RTS lays down the requirements with which OE LO AIFs must comply in order to maintain an open-ended structure. These include a sound liquidity management system, availability of liquid assets and stress testing, and an appropriate redemption policy aligned with the liquidity profile of a particular OE LO AIF.
Background
The Alternative Investment Fund Managers Directive, as amended on 13 March 2024 (the “AIFMD”), tasks ESMA under Art. 16(2)(f) with developing RTS to determine the requirements with which LO AIFs are to comply to maintain an open-ended structure. As a result, ESMA published a Consultation Paper on 12 December 2024 (the “CP”) seeking views on the proposed draft RTS which closed on 12 March 2025. The RTS have been submitted to the European Commission for adoption and will apply from 16 April 2026.
Amendments to RTS
In response to the CP, ESMA has discussed the below notable amendments to the RTS.
Removal of requirement of OE LO AIFs determine a target appropriate amount of liquid assets
Under the initially proposed rules, OE LO AIFs were required to hold a fixed amount in assets in order to satisfy the liquidity requirements. As noted by ESMA, many respondents to the CP suggested that effective liquidity management of OE LO AIFs depends more on the liquidity arising from the loans granted by the funds as opposed to the fixed amount of liquid assets that is held by them. It was further stated that this requirement could in fact undermine performance.
Accordingly, ESMA embraced the suggestions and removed the fixed asset requirement and instead obliges funds to maintain sufficient liquidity to honour redemption requests based on the characteristics of the liquidity of the loans.
This amendment should be welcomed as dispensing with the holding requirement offers OE LO AIFs more flexibility. At the same time, liquidity issues are mitigated by examining the loans instead for the purposes of satisfying redemption requests.
Annual liquidity stress testing instead of quarterly
The CP initially suggested that OE LO AIF managers will be required to carry out liquidity stress tests quarterly. However, respondents argued that managers often do not have a full breakdown of investors and so testing at that frequency would be impractical. For similar reasons, it was mentioned that for newly set up funds, private assets would likely not exist at the time of the first quarterly stress test, rendering this approach ineffective.
Therefore, ESMA once again took the responses onboard and laid down an annual liquidity stress testing requirement. The regulator also stated that no new parameters should be taken into account when performing the stress tests. However, the proposal that there may be circumstances where no liquidity stress testing is needed was rejected.
Once again, this change is to be welcomed by the industry as annual testing lowers the regulatory burden of OE LO AIFs while ensuring that their liquidity is not compromised by testing it on a regular basis.
Removal of “intending to manage” from scope of RTS
Currently, the draft RTS are phrased to read that they apply to managers of OE LO AIFs that “intend to manage”. Many respondents observed that this created ambiguity in ESMA’s guidance as it suggested that some form of pre-authorisation from national competent authorities (“NCAs”) was required before undertaking their activities.
This, however, was not the case and ESMA recognised the potential for confusion. As a result, all references to “intend to manage” have been replaced with “AIFMs that manage”. Nonetheless, the regulator has noted that this is not to the exclusion of pre-authorisation requirements mandated by some NCAs, noting that the AIFMD does not regulate AIF authorisation procedures at the national level.
Albeit a minor change, it is nonetheless a positive one as it aligns the RTS with the original text of the AIFMD which, under Recital 13, is stated to apply to “AIFMs that manage AIFs” as opposed to those that “intend to manage”.
Preserving list of factors in Arts. 2 and 3 of RTS
The RTS contemplate a list of factors enumerated under Art. 3 which OE LO AIFs must consider when defining an appropriate redemption policy as mandated by Art. 2. Many respondents, including the Loan Markets Association, reported that a specific list was not needed as it undermines the flexibility and adaptability needed in a competitive global environment. It was suggested that not all factors would be relevant to a particular fund given varying investment policies and other characteristics. Therefore, it would be more efficient if OE LO AIFs were able to choose the factors relevant to them.
However, ESMA rejected this proposal claiming that adopting it would reduce legal certainty as to which factors should be considered for the purposes of adopting a redemption policy.
Excluding ESG-related factors from RTS
One of the questions to the public in the CP was whether Environmental, Social and Governance (“ESG”) factors should be brought within the ambit of the RTS. This proposal was generally met with adversity by respondents. Some expressed concerns that adding an ESG layer to the RTS would be duplicative of other regulatory instruments whose function is to address ESG concerns. Others reiterated that the RTS should focus exclusively on liquidity issues relating to OE LO AIFs.
As a result, ESMA concluded that ESG-related aspects were not within the scope of the RTS. This view was again welcomed by the industry, since ESG issues are already governed by different arms of the regulatory regime and conflating them would indeed create duplication and confusion.