Funds Congress Highlights

• Moderator: Katie Carter, Partner, Dechert LLP
• Gavin Curran, Head of Funds Supervision, Central Bank of Ireland (CBI)
• Aidan McEvoy, Head of Asset Management, Financial Conduct Authority (FCA)
• Evert van Walsum, Head of Investor Protection and Sustainable Finance Department, European Securities and Markets Authority (ESMA)
• Marco Zwick, Director, Commission de Surveillance du Secteur Financier (CSSF)

This session examined the 2026 regulatory landscape, exploring UK and European developments, areas of convergence and divergence, and opportunities arising from regulatory gaps, covering Alternative Investment Fund Managers Directive (AIFMD) 2.0 implementation, UK regulatory reform, simplification efforts, market integration and technology adoption.

AIFMD 2.0 and harmonisation: At the time of our present discussion,with less than 70 days remaining until the 16 April 2026 implementation deadline, AIFMD 2.0 and corresponding changes to the Undertakings for Investment in Transferable Securities (UCITS) directive represent an immediate priority. Regulatory technical standards for liquidity management tools have been developed, with guidelines on calibration and application published. Integrated reporting represents a significant upcoming workstream beyond the April 2026 deadline, with plans to publish a report later in 2026 addressing how to collect, centralise and store data as efficiently as possible, aiming for harmonised data collection and improved analytical capabilities.

UK divergence and tailored approaches: The UK is undertaking a comprehensive review of its regulatory framework for UK Alternative Investment Fund Managers (AIFMs), moving away from the inherited EU regime to pursuing a more principles-based approach with a three-tier system which, among other things, aims to remove cliff-edge scenarios that AIFMs currently face when moving between thresholds. The review also includes proposals to (i) tailor the UK AIFM regime for firms undertaking different activities (for example a more bespoke regime for managers of venture capital and growth capital funds and investment trust managers), (ii) tweak the regime for listed investment companies, and (iii) remove certain disclosure rules for professional customers. Following the initial call for evidence, a consultation paper is intended for mid-2026, with a policy statement in early 2027.

Sustainable finance and simplification: Sustainable Finance Disclosure Regulation (SFDR) 2 will, hopefully, provide greater clarification for investment managers and investors alike, moving away from the unintended use of Article 8 and 9 funds as label regimes. The framework remains complex, and the proposals are at an early stage. One welcome change is the recognition of the transition to sustainable investments, as opposed to being focused on investments that are already sustainable.

Market integration and convergence: The EU’s market integration package, part of the Savings and Investment Union strategy, addresses fragmentation through removing national discretions, transferring directive provisions to directly applicable regulations, and providing ESMA with tools to resolve home-host conflicts. Strong support was expressed for convergence, though concerns were raised about the Eligible Assets Directive potentially reducing standards and undermining successful existing products. In the UK there is also a focus on burden reduction, with the FCA noting that around 100 outdated rules have been identified for removal. Other simplification initiatives include streamlining capital requirements, eliminating conflicts rule duplication, and clarifying proportionate consumer duty obligations for asset managers.

UK growth strategy and retail engagement: The UK’s financial services growth and competitiveness strategy emphasises supporting responsible growth and facilitating innovation. The Consumer Composite Investments regime, which is the new UK regime that will replace the Packaged Retail and Insurance-based Investment Products regime  and UCITS disclosure requirements with a single framework tailored for UK consumers and markets, aims to equip consumers with information that will enable them to make the right decisions for their circumstances, not inadvertently deter them from investing.

Technology and innovation: Luxembourg has established legal frameworks for blockchain technology, including the first completely tokenised money market fund, with future developments expected on the asset side of funds. Valuation remains a critical focus for semi-liquid funds and private markets, with ESMA’s Common Supervisory Action identifying challenges requiring ongoing attention.

Unresolved challenges: Key unresolved issues include (i) the technical details relating to SFDR 2 implementation, specifically the pending Level 2 measures, (ii) concerns relating to the possible expansion of the UCITS Eligible Assets Directive, (iii) valuation practices in private markets requiring enhanced supervisory focus, and (iv) tensions between achieving European convergence across the EU 27 whilst avoiding lowest-common-denominator outcomes.