AIFMD II took effect across EU member states on 16 April 2026. For UK litigation funders, the immediate operational impact is limited. But the regulatory divergence between the EU and UK now matters more than the directive itself.
What AIFMD II Actually Changes for EU Managers
The directive introduces several substantive requirements for alternative investment fund managers operating within the EU.
Open-ended AIFs must now select at least two liquidity management tools from a harmonised list. Enhanced delegation rules require managers to demonstrate a clear rationale for any outsourced arrangements. And loan-originating funds face a specific new framework designed to limit systemic risk.
Reporting changes under the new Annex IV template do not apply until April 2027. But the governance and delegation requirements are live now.
For EU-domiciled litigation funders — or UK managers with EU-licensed entities — AIFMD II creates an immediate compliance layer.
Why the UK Is Not Following
The UK government and FCA have been explicit. Neither proposes to track the EU AIFMD II amendments. For the first time since AIFMD was introduced, the UK and EU are taking substantially divergent approaches to regulating alternative investment fund managers.
The direction in the UK is the opposite of Brussels. HM Treasury and the FCA are consulting on simplification — a more graduated, proportionate framework that reduces the regulatory burden on fund managers rather than adding to it.
This is not a delay. It is a deliberate policy choice rooted in post-Brexit autonomy and economic competitiveness.
The FCA's Separate Direction
The FCA's emerging UK AIFM framework has two distinguishing features. It is being designed to be proportionate to fund size and risk profile, rather than applying uniform rules regardless of scale. And it is being consulted on openly, meaning UK managers have a real opportunity to shape the outcome.
For UK litigation funders, this means the near-term regulatory question is not how to implement AIFMD II. It is how to engage with the FCA consultation and understand what a graduated UK framework means operationally.
The FCA has not yet finalised the new regime. The consultation is ongoing. Funders should be tracking it.
The Cross-Jurisdiction Complication
The divergence creates one specific problem for managers operating across both markets. Many investment management groups have licensed entities in both UK and EU jurisdictions.
Where there is delegation from an EU AIFM to a UK portfolio manager — or vice versa — the firm now faces two substantively different regulatory frameworks. That increases compliance cost and operational complexity.
For litigation funders considering European expansion or managing EU investor relationships, the structural question is whether to maintain separate governance tracks for each jurisdiction or build an infrastructure layer that can accommodate both without redundancy.
What This Means for UK Funder Operations
The practical implication for UK litigation funders is not immediate regulatory pressure. It is strategic clarity.
AIFMD II is not coming to the UK. The FCA is building something different, and the details are not yet final. That window — between EU implementation and UK framework finalisation — is the period to establish operational practices that will satisfy both investor expectations and whatever the FCA produces.
Both regimes, however different in design, are asking the same question: can you demonstrate that your fund is managed with appropriate oversight, reporting discipline, and evidence of decision-making?
For litigation funders, that means structured mandate compliance monitoring, diligence-ready reporting, and audit trails that hold up to scrutiny from investors, secondary buyers, and regulators in any jurisdiction.
That is what Lexivoa Mandate is built to support — portfolio oversight infrastructure that produces the evidence layer regulators and investors ask for, regardless of which framework applies.
The Question for UK Funders Now
The EU has acted. The UK is building something different. The question for UK litigation funders is not which framework to follow.
It is whether the operational infrastructure you are building today will be sufficient when the FCA framework arrives — and whether your investors, auditors, and secondary market counterparties are already asking for the evidence it will require.
Sources: Directive (EU) 2024/927 — AIFMD II, EUR-Lex, FCA DP23/2: Updating and improving the UK regime for asset management, HM Treasury: Investment Management Strategy II
Lexivoa Mandate
Build governance infrastructure that works across both frameworks
Lexivoa Mandate structures mandate compliance, reporting and audit trails that satisfy investor expectations and the regulatory direction of travel in both the UK and EU.
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