US Fund Managers Need to Know These 5 Essentials about AIFMD Third-Country Passport Access
The European Securities and Markets Authority (ESMA) has been evaluating access for third-country participants in the Alternative Investment Fund Managers Directive (AIFMD) ecosystem since 2015. However, as of mid-2025, the Third-Country AIFMD passport remains unavailable for US fund managers.
Under the current regulations, US fund managers, classified as third-country AIFMs under AIFMD, must rely on national private placement regimes (NPPRs) to market funds in the EU. This contrasts with the passporting regime applicable to EU AIFMs, which allows for full European cross-border fund distribution.
The Third-Country AIFMD passport, which could potentially extend to AIFMs from certain third countries like the US, has not been implemented yet, despite the publication of the updated AIFMD II in 2024. The recent AIFMD II update has not changed the status of the Third-Country AIFMD passport.
To market a EU or non-EU AIF in only one Member State, a third country AIFM must choose a Member State of Reference (MSR) according to Article 37 AIFMD. The process of selecting an MSR is disciplined by a Commission implementing regulation and ESMA plays a pivotal role in the determination of the MSR.
Once delegated acts are issued, there will be a transitional period when both the third country AIFMD passport and the local national private placement regime will coexist across European domiciles. During this period, a third country AIFM, once deemed equivalent, will have to be authorised under AIFMD and comply with the whole directive to take advantage of European cross-border fund distribution.
Compliance with certain provisions of the directive might pose difficulties for US fund managers. A third country AIFM, in such cases, is allowed non-compliance if the local law serves the same or similar purpose of the corresponding AIFMD provision and the foreign AIFM must mandatorily comply with such rule.
The selection of the MSR is based on set parameters and is not entirely left to domicile shopping of third country AIFMs. An application must be made by the third country AIFM to the competent authorities of all MSR having potentially authority. A third country AIFM intending to be authorised in Europe will be subject to two different authorities, regimes, and processes - the one of their own state and the one of the MSR chosen - and will be required to comply with two sets of rules.
The deadlines for the process of recognition of third countries to be completed and the phase-out of the national private placement regime were set for 2015 and 2018, but as of today, no delegated acts have been issued. The competent authorities of these MSR will act in concert and with ESMA to issue a joint decision on the competent MSR within one month from the application.
In summary, the Third-Country AIFMD passport remains unavailable for US fund managers, and marketing into the EU must continue via NPPR methods until the EU decides to implement the passport for third countries. The process of extending the passport to third country AIFMs involves both objective and subjective requirements to be met, at the level of the third country domicile and the AIFM. ESMA will assess the regulatory regime of various third countries and release advice, followed by delegated acts from the European Commission to extend the passport to equivalent countries.
- Despite the recent updates to AIFMD II, the Third-Country AIFMD passport remains unavailable for US fund managers, so they must continue investing in the European market via the National Private Placement Regimes (NPPRs).
- For US fund managers to potentially access the Third-Country AIFMD passport, their regulatory regime must be deemed equivalent to the EU's, a process which involves meeting objective and subjective requirements both at the national level and the AIFM level, with ESMA playing a crucial role in the evaluation process.
