French law draws a distinction that has no equivalent under the EU Directive 2011/61/EU on alternative investment fund managers (commonly referred to as the “AIFMD”). Article L. 214-24 of the French Monetary and Financial Code (the “MFC”) distinguishes between ‘statutory’ French alternative investment funds (‘‘AIFs’’) governed by paragraph II (also referred to as AIFs “by nature” or de jure AIFs), and “Other AIFs” falling within paragraph III. UCITS are expressly outside this regime.

Statutory AIFs are classified by reference to several criteria including their target investor base (retail/non-professional investors or professional investors, as defined under the MFC), their legal form and their investment purpose or asset class (such as investments in listed securities, unlisted securities/private equity, real estate, etc.).

As regards their legal form, a key distinction is made between AIFs structured as contractual funds, in the form of a fonds commun de placement (“FCP”), and AIFs constituted as corporate vehicles, such as sociétés d’investissement à capital variable (“SICAV”), sociétés de libre partenariat (“SLP”) and sociétés de libre partenariat spéciales (“SLPs”). An FCP is a specific legal construct under the MFC, defined as a co-ownership of financial instruments and deposits without legal personality.

Statutory AIFs include: (i) retail AIFs, such as general purpose investment funds (“FIVG”), retail private equity funds (“FCPR”, “FCPI” and “FIP”), real estate funds including “OPCI” (organismes de placement collectif immobilier – whether structured as a fonds de placement immobilier (“FPI”) or as a société de placement à prépondérance immobilière à capital variable (“SPPICAV”)) and “SCPI” (société civile de placement immobilier), forest investment vehicles, fixed capital investment companies (“SICAF”) and alternative funds of funds; (ii) professional AIFs, such as professional general purpose investment funds (“FPVG”), professional real estate funds (“OPPCI”), professional private equity funds including “FPCI” (fonds professionnels de capital investissement) and “FPS” (fonds professionnels spécialisés, which may notably take the form of a FCP, a SLP or, since the entry into force of French Ordonnance No. 2024 662 of 3 July 2024, a SLPs); (iii) employee savings funds (fonds d’épargne salariale, “FCPE”); and (iv) financing or securitisation vehicles (organismes de titrisation (“OT”) and organismes de financement spécialisé (“OFS”), in a FCP or corporate form).

“Other AIFs” falling within paragraph III are entities, including without limitation companies, established under ‘ordinary’ (non-financial) civil law and/or company law, rather than under the specific statutory regime applicable to de jure AIFs. An entity qualifies as an Other AIF by reason of its characteristics, insofar as it meets the definition of an AIF set out in Article L. 214-24 of the MFC as further interpreted and clarified by the AMF.

In the most used statutory AIF structures, investors’ liability is generally limited to the amount of their committed or contributed capital.

As regards FCPs, the MFC generally provides that unitholders are liable for the debts of the co-ownership only up to the assets of the fund and in proportion to their respective interests.

In a SICAV organised as an SA or SAS, shareholders benefit from the ordinary limited liability rules applicable to those companies.

In an SLP, limited partners (investors) are liable for the partnership’s debts only up to the amount of their contributions, provided that they do not engage in acts of external management other than those expressly permitted under the MFC. As a matter of principle, they may not engage in acts of external management, except where they act, in a separate capacity, as the SLP’s manager or AIFM.

In the case of an SCPI, the MFC provides for a specific liability regime. As a rule, each investor’s liability towards third parties is proportionate to its interest in the SCPI, capped at twice the amount of such interest and may only be pursued after unsuccessful recourse against the SCPI itself. The SCPI’s articles of association may, however, further limit each investor’s liability to the amount of its interest in the SCPI.

Other AIFs may take a wide variety of legal forms and structures. Their liability regime must therefore be assessed on a case-by-case basis, having regard to the specific characteristics of the relevant vehicle, its underlying legal form and its constitutional documents.

There is no single preferred structure across all French AIF strategies.

Private equity funds are frequently established as FPCI or FPS in FCP form. The FCP remains widely used, notably due to its contractual nature, the absence of a corporate governance layer and its well-established operational framework. SLPs have also become a standard structure for institutional private equity and private debt, reflecting both the substantial contractual flexibility afforded by their partnership agreement and their familiarity to international investors.

Real estate strategies are most implemented through SCPIs, OPCIs or OPPCIs, often as a SPPICAV, while Other AIFs are also often used in the retail real estate market.

The choice is driven principally by investor base, asset class, governance requirements, liquidity profile, tax treatment and the intended marketing regime.

French law does not apply a general open-ended/closed-ended classification. It distinguishes primarily between de jure AIFs and Other AIFs. For de jure AIFs, the applicable regime further depends on the target investor base and the relevant asset class or strategy. Whether a fund is open- or closed-ended must therefore be assessed by reference to the legal rules applicable to the relevant fund category and its constitutional documents.

Retail funds investing predominantly in liquid assets, such as FIVGs, are typically structured as open-ended funds, reflecting the liquidity profile of their underlying portfolio.

Retail AIFs are also generally subject to more prescriptive investment, diversification, liquidity and disclosure rules.

Professional funds and funds investing in less liquid assets, such as professional private equity funds, have traditionally been commonly operated on a closed-ended basis. This is becoming materially less systematic, as an increasing number of professional funds and funds investing in less liquid assets are established for longer terms and incorporate various liquidity mechanisms for investors. Regulation (EU) 2015/760 on European Long-Term Investment Funds (“ELTIF Regulation”), as amended by Regulation (EU) 2023/606 (“ELTIF 2”), has materially reshaped the market enabling the establishment and cross-border marketing of long-term investment funds, including funds classified as professional AIFs under the MFC, to retail investors across different member States on the basis of a harmonised EU regulatory framework.

Professional AIFs, particularly FPCI, FPS, and SLP allow substantially greater contractual flexibility, with the MFC leaving a significant number of matters to be determined in their constitutional documents.

The permitted restrictions depend on the type, asset class and constitutional documents.

For retail AIFs such as FIVGs, investors generally benefit from redemption rights. For FIVGs, those rights may only be suspended in the circumstances provided for by the applicable legal framework: temporarily suspension or limitation of redemptions, including through gating mechanisms, in exceptional circumstances where required in the interests of investors or the public, etc.

SCPI liquidity arrangements depend primarily on whether the SCPI has variable or fixed capital. In a variable capital SCPI, investors may submit redemption requests, although their execution generally depends on matching subscriptions and may therefore be delayed. In a fixed capital SCPI, liquidity is primarily provided through transfers of units.

For retail private equity funds, the MFC permits redemption rights to be blocked for an extended but finite period, up to fifteen years for FCPRs.

Professional funds such as FPCI, FPS, SLP have considerably more flexibility and may, in particular, exclude investor-initiated redemptions during the fund term, provide long lock-up periods or only allow limited redemption windows.

For Other AIFs, redemption and liquidity arrangements are primarily governed by their constitutional and contractual documentation, subject to the rules applicable to their underlying legal form.

The liquidity offered should notably be consistent with the investment strategy, liquidity of the underlying assets, valuation frequency and expected cash flows.

Directive (EU) 2024/927, commonly referred to as “AIFMD 2”, and AMF doctrine provide for the use of appropriate liquidity management tools by open-ended AIFs.

Liquidity tools, as defined by Annexe IV of the AIFMD 2, include temporary suspension of subscriptions or redemptions, redemption gates, extension of notice periods, redemption fees, swing pricing, anti-dilution levies, dual pricing, redemptions in kind, and segregation of illiquid assets through a side pocket.

Managers may also maintain liquidity buffers, limit leverage, use borrowing facilities for short term liquidity needs and conduct liquidity stress tests.

The degree of restriction varies according to the nature, statutory regime and constitutive documents of the AIF.

As a general matter, transfers in open-ended retail AIFs are generally permitted, subject to any investor eligibility requirements set out in the fund documents.

Closed-ended and professional funds may impose more extensive restrictions. Any transferee in a professional AIF must be eligible to subscribe to units or shares of that type of AIF (i.e., as a professional investor or another category of sophisticated investor as defined by the MFC or the AMF General Regulation, for example by meeting a minimum investment threshold of EUR 100,000). FPCI, FPS and SLP’s constitutive documents moreover commonly include transfer consent requirements and transfer restrictions designed, in particular, to preserve the fund’s regulatory or tax status.

For SCPIs, transfers are notably subject to the specific regime applicable to their capital structure (variable Vs. fixed capital) and to specific procedures laid down by the MFC and the AMF General Regulation.

First, a manager’s ability to manage an AIF requires it to hold the authorisations appropriate to the activities it conducts. In particular, an AMF authorization to manage AIFs investing in one category of assets or instruments (listed securities, real estate assets, etc.) does not authorise the manager to manage AIFs investing in all other asset or instrument categories. A manager must remain within the scope of its approved programme of operations. Managers, once authorised, remain more generally subject to rules stemming from the AIFMD, including on risk management, valuation, conflicts of interests and fair treatment of investors, delegation and asset safekeeping.

The manager must also comply with additional constraints pertaining to the relevant category of AIF.

FIVGs, notably, are subject to detailed eligible assets and stringent risk diversification and counterparty rules.

Retail private equity funds must comply with statutory investment quotas (listed Vs. non-listed assets) and ratios. Regulatory requirements may be supplemented by more stringent tax investment quotas stemming from the French tax code, in order for the fund and/or its investors to benefit from certain preferential French tax regimes.

Professional private equity funds (FPCI, FPS and SLP) are designed to permit substantially more flexible investment policies, subject to their constitutional documents. FPCIs and SLPs may remain subject to investment and tax quota requirements broadly similar to those applicable to retail private equity funds, without being subject to the same investment ratio constraints.

OPCIs and SCPIs are subject to rules tailored to real estate assets, liquidity and borrowing.

Other AIFs are not subject to the product specific diversification ratios or quotas applicable to statutory retail AIFs, but remain subject to the rules attached to their legal form and AIFMD status.

Beyond strictly applicable legal and regulatory requirements, de jure and Other AIFs’ constitutional documents frequently impose additional investment restrictions, in particular to reflect or anticipate investor requirements. These may include specific asset-eligibility criteria (sectoral or geographic limitations) and concentration or diversification ratios.

French tax treatment depends on the investor, the legal and tax regime of the AIF, the nature and source of the underlying income, and any applicable tax treaty.

French resident individuals are generally taxed when income or gains are effectively distributed by the AIF. The standard flat tax regime may apply to dividends and capital gains, while specific private equity vehicles such as FCPRs, FPCIs and SLPs may offer favorable regimes if statutory holding and investment conditions are met.

French corporate investors are generally subject to corporate income tax at the ordinary rate and may be subject to ‘mark-to-market’ rules unless an exemption applies.

The transfer of units or shares in an AIF by a French resident (individual or corporate) will also generally give rise to taxation, unless a specific tax regime or exemption applies.

Depending notably on the nature of the amounts distributed (), distributions made to non-resident investors may be subject to French withholding tax, subject to any applicable exemptions or treaty relief.

There is no general French tax immunity for sovereign wealth funds. Certain non-residents may benefit from specific French tax treatments, including tax treatment applicable to certain non-profit organisations, depending on their legal characteristics and jurisdiction of residence.

Tax considerations and prior analysis are often decisive when selecting between an FCP, SLP, SPPICAV, FPI or another structure, particularly for private equity and real estate strategies.

As shareholders or unitholders, investors are generally entitled to receive a share of the AIF’s income, proceeds and/or realised capital gains, although distributions may be deferred and/or such amounts may be fully or partly reinvested in accordance with the fund’s terms.

Investors are also entitled to the information required by the MFC, the AMF General Regulation and the relevant product rules. This includes pre-investment disclosure inter alia on strategy, risks, leverage, liquidity, valuation, fees, service providers and preferential treatment. Non-professional investors must receive a key information document in accordance with EU Regulation No.1286/2014 (“PRIIPs Regulation”). It also includes a right to receive annual reports and, where applicable, more frequent periodic information in accordance with the reporting requirements applicable to the relevant AIF.

Corporate AIFs’ shareholders exercise the voting rights attached to their shares, under the articles of association and company law.

Professional funds frequently establish advisory committees or investor committees with consultation, conflict review or information functions. Amendments to the fund’s constitutional documents are also commonly subject to investor approval, in accordance with the consent thresholds and procedures set out therein.

Those arrangements must not deprive the AIFM of its discretionary management authority or result in the fund being managed on an investor direct basis. Accordingly, investors shall not interfere in investment or disinvestment decisions that must be taken by the AIFM. Investors are therefore generally restricted from instructing the AIFM on individual acquisitions or disposals.

Professional structures are generally preferred where extensive customisation is required.

FPCI, FPS, SLP or OFS are particularly well suited to this purpose, as their constitutional documents can accommodate bespoke investment strategies and restrictions, commitment mechanics, distribution waterfalls, governance arrangements and investor specific rights. FCPs are widely used, notably due to the flexibility they generally afford. The SLP is also frequently selected for institutional private equity, private debt and infrastructure strategies.

A dedicated FIVG or other authorised AIF may also be used where a regulated product format is desirable. French law permits certain funds to be reserved to a limited number or defined category of investors. This notably allows institutional investors to implement bespoke or dedicated investment solutions.

The final choice depends on asset class, tax profile, investor eligibility, governance and the intended degree of liquidity.

AIF managers

A French AIF may be internally managed, where the AIF/ its internal governing body itself performs the portfolio and risk management functions and is treated as the AIFM for regulatory purposes, or externally managed, where those functions are entrusted to a separate portfolio management company. Our analysis focuses on the latter structure.

As a matter of principle, a French entity may only manage AIFs if it is authorised and supervised as a portfolio management company by the Autorité des marchés financiers (AMF) pursuant to the MFC.

By way of exemption, under French law, managers of Other AIFs may be registered with the AMF rather than being fully authorized, provided that, and for so long as, the following conditions are cumulatively satisfied: (i) the total value of assets under management is below the AIFMD thresholds, i.e., EUR100 million or EUR500 million as provided for by the MFC, and (ii) all investors of the AIF are professional investors. Those managers do not benefit from the AIFMD provisions, including primarily the management and marketing passports regimes allowing fully authorized AIFMs to manage AIFs established in other EU/ EEA States and to market AIFS in other EU/EEA States to professional investors. Specific EU regimes may also apply, including under Regulation (EU) No 345/2013 on European venture capital funds (EuVECA).

Entities located in another EU/EEA State may manage French AIFs under the AIFMD management passport, provided that they are duly authorised as an AIFM pursuant to the AIFMD by their home member State competent authority and subject to the applicable prior notification procedure.

For entities established in third countries, specific regimes and procedures apply under French law. The management or marketing in France of French AIFs by a third country entity is not freely permitted and is subject to applicable authorisation, regulatory and/or notification requirements.

Specific rules apply where an entity manages an AIF not as its ‘appointed AIFM’, but as a delegate of that AIFM. EU rules permit portfolio management to be delegated to a narrowly defined category of appropriately authorised or registered entities not limited to duly authorised AIFMs, subject to the applicable AIFMD delegation requirements. These delegation rules are not further addressed in this Q&A.

AIF advisers

Investment advisers are separately regulated. Entities providing in France the investment service of investment advice (conseil en investissement), as defined and regulated under the MFC, must generally be authorised in France as an investment service provider (prestataire de services d’investissement, “PSI”) or registered and supervised as a French financial investment adviser (conseiller en investissements financiers, “CIF”), or operate under an available EU passport.

Unlike the status of PSI, the status of CIF is not necessarily compatible with the provision of other investment services that may arise, in particular in connection with the marketing of an AIF. In particular, although a CIF may provide the investment service of reception and transmission of orders relating to the subscription or redemption of units or shares of de jure FIAs, it may not provide this service in relation to orders relating to Other AIFs.

The answer depends on the AIF category.

French retail AIFs are generally subject to prior AMF approval. This includes FIVGs, retail private equity funds and OPCIs.

Among professional AIFs, FPVGs and OPPCIs are authorised products.

FPS, SLP and FPCI are generally subject to a declaration to the AMF rather than prior product approval, unless they are subject to the ELTIF Regulation. In this case, the fund itself is subject to a specific authorisation procedure.

SCPI are not, as such, subject to an AMF product authorisation or declaration regime comparable to that applicable to approved or declared AIFs. However, any public offering of their units requires the prior approval (visa) of the AMF on their information memorandum.

OTs and OFSs are not subject to prior AMF product approval. OFSs are subject to a declaration regime, while OTs are subject to a specific regulatory framework which may include visa requirements.

The applicable approval or declaration process is governed by the MFC, the AMF General Regulation and relevant AMF instructions.

Other AIFs are not, as such, subject to prior product approval. Where securities issued by an Other AIF are offered to the public, a prospectus may require to be published in accordance with Regulation (EU) 2017/1129 (the “Prospectus Regulation”), if the offer does not benefit from an exemption.

From a French financial and regulatory law perspective, a French AIF does not necessarily require a French AIFM.

An AIFM established in another EU/EEA State may manage a French AIF on a cross-border basis or through a branch under the AIFMD passport, provided that it is duly authorised to manage AIFs by its home member State competent authority and that the applicable passport notification procedure has been completed.

A third country manager does not benefit from the ordinary EU management passport and must rely on the specific French and AIFMD third country framework, including AMF prior authorisation, cooperation arrangements between the AMF and the relevant third country supervisory authorities, bilateral or multilateral tax treaty between its home country and France and a local representation.

An investment adviser may also be established outside France, provided that its appointment and regulatory status comply with the rules applicable to the provision of investment advice in France and with AIFMD outsourcing provisions. In practice, this will typically concern EU/EEA investment service providers operating in France under the EU Directive 2014/64/CE (“MIFID Directive”) passporting regime.

As a general principle under the MFC, the registered office and central administration of an AIF or of its AIFM (when the AIF is externally managed) must be located in France, without prejudice to the AIFMD passporting regime allowing an AIFM established in another EU/ EEA member State to manage a French AIF on a cross-border basis.

This requirement is most often reiterated in the provisions specifically governing French statutory AIFs established in corporate form.

MFC provisions specifically governing the authorisation of AIFMs also reiterate this requirement. There is no general requirement that all managers or members of internal committees be French residents; However, a French AIFM must maintain sufficient and permanent resources, including human resources, to carry out its activities effectively while complying with the aforementioned requirement. As part of these resources, the AIFM must notably maintain, as a minimum, staffing corresponding to three full-time equivalents, be effectively managed by at least two suitably experienced and reputable natural persons with sufficient availability, appoint a person responsible for compliance and internal control function and at least two full-time portfolio managers authorised to take investment and divestment decisions for the AIFs. Where investment decisions are taken collectively by an investment or management committee, and pursuant to the AMF doctrine, more than half of the portfolio managers effectively participating in the relevant investment decision must be resident or physically present in France, or in a branch of the French portfolio management company established in another EU/EEA Member State.

An EU/EEA AIFM operating under the passport remains principally subject to its home state requirements as regards its own organisation and internal functioning, without prejudice to compliance with applicable French product rules governing the relevant AIF.

Advisers must satisfy the substance and licensing requirements attached to their own regulatory status.

French AIFs are, as a matter of principle, required to appoint the following service providers:

• A depositary, to carry out functions including safekeeping or recordkeeping of assets, cash flow monitoring and oversight duties;
• A statutory auditor, to certify the AIF’s accounts.

AIFMs are responsible for the proper valuation of the AIF’s assets and the calculation of its net asset value. Where the valuation function is not performed internally by the AIFM, the AIFM must also appoint an external valuer to carry out the valuation independently.

The appointment of additional specialists may be mandatory under the product rules governing certain categories of statutory AIFs. These requirements include, in particular, as regards OPCI or OPPCI, the appointment of (an) independent external real estate valuer(s).

There is no general requirement that all managers or members of internal committees of French AIFMs or AIFs be French residents. Their governance arrangements and resources must nevertheless be such as to ensure compliance with the requirement that their registered office and central administration be located in France while, in the case of an AIFM, complying with the aforementioned substance and organization requirements. Separate tax considerations may also need to be taken into account.

An EU/EEA AIFM operating under the management passport remains principally subject to its home state organisational requirements, with no specific need under French regulatory and financial laws for local resident directors or trustees.

A manager established in a third country, i.e. outside the EU/EEA, that intends to manage EU AIFs or market in the EU units or shares of AIFs that it manages must obtain prior authorisation from the AMF where France is its member State of reference, as determined in accordance withthe MFC. Such manager must appoint a legal representative established in France, vested with the resources necessary to perform its functions. This representative acts as its EU contact point for competent authorities, investors and ESMA and is responsible for monitoring the manager’s compliance with the applicable management and marketing requirements.

EU/EEA AIFMs may manage French AIFs through the AIFMD passport after completion of the home State notification procedure. They remain primarily supervised by their home regulator and subject to the regulatory requirements of their home State, while complying with French product rules governing the relevant statutory French AIF. Where the EU/ EEA AIFM manages an AIF in France through a branch, it shall also comply with French conduct-of-business and investor information and protection requirements made expressly applicable under the MFC, subject to AMF supervision.

Third country managers do not benefit from the EU AIFMD passport. Where France is their member State of reference, they must obtain prior authorisation from the AMF in accordance notably with the conditions applicable to the authorisation of French AIFMs. Their ability to manage EU AIFs is subject to conditions relating to their home jurisdiction, including appropriate cooperation arrangements between the relevant supervisory authorities, a tax agreement with France ensuring effective exchange of tax information, and the requirement that the third country in which the manager is established is not listed as a non-cooperative jurisdiction by the FATF. Third country managers must where applicable comply with French product rules governing the relevant statutory French AIF. They are, in principle, subject both to the requirements applicable in their home jurisdiction and to the French statutory and regulatory requirements governing portfolio management companies.

As regards foreign advisers, an EU/EEA investment firm authorised to provide investment services in another member State in accordance with the MIFID Directive may generally rely on a MiFID passport to provide services in France, provided that it complies with the requirements of its home member State and with the French rules governing the incoming passport.

AIFMs, third country managers and persons involved in the marketing of AIFs must also ensure compliance with the specific rules governing the marketing of AIFs in France.

Breaches of professional or regulatory requirements may give rise to enforcement proceedings and sanctions by the AMF’s Commission des sanctions. Sanctions may in particular include a warning (avertissement), a reprimand (blâme), a temporary or permanent prohibition on carrying out all or part of the relevant activities or services, and financial penalties.

Marketing or managing an AIF in France without the required notification or authorisation is a particularly material risk. The MFC notably and expressly provides that managing an AIF in France without the required authorisation constitutes a criminal offence and may, in the case of an individual, be punishable by up to three years’ imprisonment and a fine of EUR 375,000, in addition to possible ancillary penalties.

The AMF may also withdraw its authorisation, including where the AIFM no longer satisfies the conditions or commitments on which its authorisation was granted.

Management fees depend on the strategy, investor base, fund size and liquidity of the portfolio.

Open-ended and retail funds commonly charge a percentage of net asset value.

Professional and closed-ended funds, including private equity and private debt AIFs, commonly charge a percentage of investors’ commitments during the investment period and, thereafter, a percentage of invested capital, acquisition cost or another reduced base.

Private market rates are often around 1% to 2% per year, but lower rates may be negotiated by institutional investors and higher rates may apply, in particular to non-institutional private equity funds.

Real estate funds use a variety of net or gross asset value and transaction related fees.

Fees borne directly or indirectly by investors are not limited to fixed management fees. Depending on the AIF and its investment strategy, it may also include variable or performance-based management fees, subscription or redemption fees and, in particular for real estate funds, transaction fees.

Performance fees are common in liquid, open-ended and debt AIFs. Carried interest is standard in private equity, venture capital, infrastructure and many private debt funds.

For performance fees, the calculation methodology must be disclosed and consistent with the fund’s investment objective and risk profile. The AMF applies the ESMA performance fee framework to the AIFs within its scope, including crystallisation and recovery of past underperformance. There is no single prescribed performance fee model under French law. In practice, performance fees are commonly calculated as a percentage of the fund’s outperformance against a benchmark or performance objective, typically subject to a high-water mark, loss recovery or equivalent reference period mechanism.

Carried interest is mostly implemented through a separate class of units or shares and a distribution waterfall which defines the order in which distributions are allocated between common investors and carried interest holders. A preferred return (or hurdle), payable to investors before carried interest becomes due, is common in market practice and often combined with a catch-up mechanism benefiting the carried interest holders. Whole fund waterfalls combined with clawback and/or escrow protections are most commonly provided for in the fund documentation. The precise economics are contractual and not prescribed by a single French statutory model.

Closed-ended funds commonly use equalisation and late-closing interest mechanisms. Subsequent investors are typically required to fund their share of prior drawdowns together with a late-closing interest to ensure that they bear an appropriate share of costs and are placed economically alongside earlier investors. Earlier investors may benefit from late-closing interest either directly or indirectly, where it is paid to and retained by the AIF.

Founders or early investors may also benefit from preferential rights, including reduced management fees and/or a lower carried interest rate, which may be implemented by a separate founder share class, enhanced co-investment rights or other negotiated arrangements.

In retail or open-ended funds, the subscription mechanics are also generally designed to ensure that initial investors are not economically disadvantaged by subsequent subscriptions. Depending on the relevant fund rules, this may involve requiring later investors to subscribe at the higher of the initial subscription price and the then current net asset value.

Formal management fee “break-points” does not appear to constitute a standard market practice in France. AIFs may, however, in practice, notably establish different classes of units or shares, access to which is notably subject to a minimum commitment amount, with larger ticket or early investors benefiting from lower fee levels than investors subscribing for smaller amounts or at a later stage. Such reduced fee classes may, for example, be found in certain fund-of-funds structures designed to broaden or “retailise” access to private equity funds.

They are not a standard source of capital for French AIFs. In practice, French sponsors more commonly make an ordinary GP or management team commitment alongside investors rather than provide a formal 10%-20% first loss tranche.

There is no standard or market practice French seeding or acceleration program. Where applicable, terms are negotiated case by case. An anchor or seed investor may provide a substantial initial commitment in consideration for preferential economic terms and/or specific contractual rights, such as reduced management fees or carried interest, co-investment access, enhanced reporting or limited governance rights.

A significant market trend is continued investor scrutiny of fee levels and fund economics, particularly from institutional investors, resulting in increased pressure on managers to justify, negotiate or mitigate management fees and other fund level costs.

This trend is expected to be reinforced by ongoing EU regulatory developments under the ‘Retail Investment Strategy’, which would notably introduce enhanced ‘undue costs’ requirements and ‘value for money’ assessment for retail AIFs.

From 1 January 2026, French AMF rules now also provide, as a matter of principle, that AIFMs may no longer receive ‘commissions de mouvement’ in connection with the management of AIFs, subject to specific rules in relation to the management of private equity funds and OPCIs or OPPCI.

Recent decisions of the AMF’s Commission des sanctions have served as a reminder of the requirements applicable to management fee retrocessions paid by AIFMs to distributors under the French inducement regime, including transparency obligations and the requirement that such payments contribute to enhancing the quality of the service provided to investors. Further regulatory work is currently under way in this area and is expected to lead to additional clarification of the AMF’s doctrine during the second half of 2026.

There is no binding French norm distinguishing, to our knowledge, primary and secondary funds.

Marketing is regulated by the MFC, the AMF General Regulation and the relevant AMF instructions, positions and guidelines.

Marketing is defined by the MFC as any direct or indirect offer or placement, at the initiative of or on behalf of a French portfolio management company, an EU management company or a third-country manager, of units or shares of an AIF managed by it, to investors domiciled or having their registered office in the European Union. This definition is further clarified by the AMF doctrine, including approaches to investors which are generally not defined as marketing.

The regulatory conditions governing the marketing of AIFs in France depend on the category of investors targeted (professional or non-professional) and on the jurisdiction of establishment of the AIF and of its manager. As a general rule, marketing to non-professional investors in France requires prior AMF authorisation, subject to specific regimes such as the ELTIF Regulation. Marketing to professional investors is subject either to a prior notification procedure, in the case of EU AIFMs duly authorised under the AIFMD, or to a prior auhorisation procedure.

Marketing AIFs in France without complying with the applicable authorisation or notification requirements may expose the relevant persons to regulatory, disciplinary and, where applicable, criminal sanctions.

A harmonised EU framework for pre-marketing has applied since 2 August 2021, following the transposition of Directive (EU) 2019/1160 on the cross-border distribution of collective investment undertakings.

Under the harmonised EU regime, EU AIFM may perform pre-marketing activities across the EU.

Pre-marketing is the direct or indirect provision of information or communication on investment strategies or investment ideas by, or on behalf of, an authorised AIFM to potential professional investors domiciled or having their registered office in the EU, in order to test their interest in an EU AIF or compartment that is not yet established or, if already established, has not yet been notified for marketing in the relevant member State, provided that such activity does not amount to an offer or placement.

These provisions have been implemented in the MFC to govern pre-marketing carried out by, or on behalf of, a French AIFM.

The regulatory provisions of the MFC require that the information provided at a pre-marketing stage is not sufficient to enable an investor to subscribe, that no subscription form is provided and that any draft constitutional or offering documents remain sufficiently incomplete and carries required disclaimers.

Prior to that harmonised regime, the AMF had already developed a French domestic approach through Position-Recommendation AMF DOC-2014-04, which clarified the boundary between marketing and certain preliminary approaches to investors that did not yet constitute marketing. It should be noted that the AMF has maintained a local pre-marketing regime which, for the launch of certain professional funds such as FPCIs, permits pre-marketing in France not only to professional investors, as under the harmonised EU regime, but also to certain non-professional investors whose initial subscription amount would be at least EUR 100,000.

AIFs may, as a matter of principle, be marketed to retail investors in France only subject to the applicable prior AMF approval requirements.

The ability to market statutory AIFs to non-professional investors in France depends on the relevant AIF category and the regulatory regime applicable to it. French AIFs specifically designed for retail investors, such as FIVGs, are subject to prior AMF product authorisation, which enables them to be offered to non-professional investors in France. Some statutory professional AIFs, such as FPCIs, FPSs and SLPs, can be marketed to specified categories of non-professional investors subject to the relevant AMF product instructions, which specify the conditions and procedure for obtaining prior AMF authorisation; conditions depend in particular on whether the request is made at the time of the fund’s initial declaration or subsequently. For completeness, notwithstanding their qualification as “professional” funds, such AIFs may be open not only to professional investors within the meaning of the MFC, but also to certain other eligible or sufficiently sophisticated investors meeting the conditions applicable under French law (such as minimum initial subscription of EUR 100,000).

For EU AIFs, the passporting regime as set out by the AIFMD only applies at this stage for marketing AIFs to professional investors. However, the ELTIF Regulation provides a harmonised EU framework allowing authorised ELTIFs to be marketed cross-border to retail investors throughout the EU.

The MFC provides for several French statutory AIF categories specifically designed to be open to non-professional investors, including FIVGs, FCPRs, FCPIs, FIPs, OPCIs and SCPIs. Statutory professional AIFs, such as FPCIs, may also be marketed to specified categories of non-professional investors, subject to applicable French law (see Section 4.3).

An EU AIF authorised as an ELTIF may be marketed to retail investors in France, subject to the ELTIF Regulation. French AIFs which are authorised pursuant to ELTIF Regulation may also be marketed to retail investors in other member States of the UE.

There is no single investor qualification test for all French AIFs.

Qualification requirements differ depending on the type of AIFs (as categorized by law), rather than on their asset class.

The categories of non-professional investors eligible to invest in professional AIFs are not fully uniform and depend on the relevant fund category. In addition to professional investors, the AMF General Regulation may permit, depending on the fund category, investors meeting a minimum subscription threshold (typically EUR 100,000), certain sophisticated investors meeting lower thresholds and specific experience or involvement criteria, investors subscribing under a discretionary portfolio management mandate and, for certain funds, managers, employees or other persons connected with the management company. Retail investors may also be admitted where the fund is authorised as an ELTIF.

As a general rule, statutory AIFs specifically designed to be open to retail investors do not impose investor-qualification requirements comparable to those applicable to professional AIFs, although specific eligibility requirements may apply depending on the AIF’s constitutive documents. Access to certain classes of units or shares may be restricted by reference inter alia to the nature or status of the investors concerned and/or to the distribution channel.

French marketing rules do not, as such, impose any specific restriction on the marketing of AIFs solely by reason of an investor qualifying as a sovereign wealth fund, pension fund, public entity or insurance undertaking.

Those investors themselves, and/or the AIF as a direct or indirect consequence of their investment, may, however, be subject to sector-specific rules, including, in particular, investment constraints applicable to insurance undertakings and State aid rules applicable to public-sector investors. For example, public-sector investors may be permitted to invest only where the fund attracts a specified minimum level of independent private capital.

Fundraising activity may constitute investment advice, which is a regulated investment service, and may also entail the provision of other regulated investment services such as the reception and transmission of orders. An intermediary that distributes AIF interests, receives or transmits orders, or advises investors must hold the regulatory status required for the activity. Reference is made to Section 2.1.

AIFMs must also ensure compliance with their own programme of activities and with applicable requirements of French and Europeans law, including, where relevant, the inducements regime.

Side letters are widely used, particularly in professional AIFs. Their terms must nevertheless remain consistent with mandatory law, the AIF’s constitutional documents and the AIFM’s regulatory duties. In particular, a side letter cannot lawfully transfer investment decision-making power to an investor in a manner that compromises the AIFM’s independent management responsibility. Preferential rights must also comply with the AIFMD principles on preferential treatment. Preferential treatments may be granted only where disclosed in the AIF’s rules or instruments of incorporation, and the arrangement must not create an overall material disadvantage for other investors.

Yes. AIFMD requires any preferential treatment to be appropriately disclosed to investors. Information shall include the nature of any preferential treatment, the type of investors benefiting from it and, where relevant, their legal or economic links with the AIF or AIFM. Disclosure is generally made through an AIF’s pre-investment information appended to the AIF’s constitutive documents, the constitutive documents and may be supplemented by periodic disclosure where required.

The terms of side letters typically vary depending on the nature and profile of the investor to which they are granted.

Common terms include enhanced reporting such as tax and regulatory information, ESG reporting and portfolio composition, ESG and sustainability commitments, co-investment rights, advisory committee representation, confidentiality arrangements, information on carried interest and carried interest holders, transfer accommodations.

Managers tend to standardise side letter clauses and MFN election processes in order to streamline negotiations and to reduce operational complexity. The rapidly increasing use of artificial intelligence tools to review, categorise and administer side letter and MFN provisions is also contributing to greater standardisation.