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AIFM - 06. Initial capital requirements

AIFM

Back to Directive on Alternative Investment Fund Managers (AIFM) main page.

Minimum capital requirements

The Directive establishes minimum capital requirements for managed AIF to be observed by AIFM, in particular:

  • a minimum initial capital of at least EUR 300,000 if the AIF is internally managed (Article 9(1));
  • a minimum initial capital of EUR 125,000 for any AIF which is managed by the AIFM acting as external manager together with additional amounts reflecting the assets it has under management as described below (Article 9(2)).

For external AIFM managing assets within one or more AIF in excess of EUR 250 million (in aggregate), the AIFM will be obliged to increase its own funds by an additional amount equaling 0.02% of the amount by which the value of the managed portfolio exceeds EUR 250 million (subject to a cap of total capital of EUR 10 million representing both elements).

Compliance with Capital Requirements Directive

Where the AIFM is also subject to the Capital Requirements Directive1 the provisions of Article 21 of the Capital Requirements Directive will continue to apply. This means that such an AIFM will be required to maintain the greater of:

  • the amount calculated under the Directive; and
  • the amount that it is required to hold by Article 21 of the Capital Requirements Directive.2
  • Replacement of minimum capital by security

Member States may permit AIFM to meet 50% of its regulatory capital requirement with security in form of a guarantee by a credit institution or an insurance undertaking (provided that such guarantor has its registered office in a Member State or a third country which meets regulatory standards equaling the standards under EU law).

Professional liability risk cover required

AIFM must also hold either:

  • professional indemnity insurance; or
  • sufficient own funds to cover risks arising from its professional negligence.

Investment of own funds

Amounts that an AIFM is required to hold as capital must be held in liquid assets or in assets readily convertible into cash in the short term. They may not include speculative positions.

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Footnotes: 1. Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions.

2. Article 21 of the Capital Requirements Directive provides, in summary, that a firm must hold own funds equivalent to one quarter of its preceding year's fixed overheads.

Back to Directive on Alternative Investment Fund Managers (AIFM) main page.

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