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ARTICLE · 28 APRIL 2026

AIFMD II Risk Retention Rules – How May They Impact Cross Trades Between Credit Funds?

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AIFMD II introduces risk retention rules requiring EU authorized alternative investment fund managers to retain at least 5% exposure when transferring originated loans to third parties.

LuxembourgFinance and Banking
Frank van Kuijk
Frank van Kuijk
Agata Szymoniak
Agata Szymoniak

Credit funds managed by the same sponsor may engage in cross trades, whereby credit assets are transferred between different funds under the sponsor’s management. This may happen for a variety of reasons. A loan may be transferred because it aligns better with a fund pursuing a different credit strategy, to achieve diversification, optimise the portfolio’s risk-return profile, or because the transferor fund reaches the end of its term. In case of parallel funds, transfers may be required for rebalancing purposes.  

The incoming risk retention rules

AIFMD II introduces risk retention rules (RR Rules) that will apply as from April 16, 2026. The RR Rules provide that an EU authorised alternative investment fund manager (EU AIFM) must ensure that when originated loans are transferred to third parties, the transferring alternative investment fund (AIF) retains exposure to at least 5% of the notional value of the transferred loan until the earlier of maturity or 8 years after the loan

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