Alternative investment fund (AIF)
Under EU law, an alternative investment fund (AIF) is any collective investment undertaking that raises capital from a number of investors to invest under a defined investment policy, and that isn't a UCITS fund. Private equity, venture capital, real estate and hedge funds are all AIFs. They're regulated mainly through their managers, under the AIFMD.
Types of AIF
| Type | What it invests in | Typical structure |
|---|---|---|
| Private equity | Stakes in private companies, often with control | Closed-ended, 10 years or more, capital called as needed |
| Venture capital | Early-stage companies | Closed-ended, capital called as needed |
| Real estate | Property, directly or through companies | Closed or open-ended |
| Hedge fund | Listed securities and derivatives, often with leverage | Open-ended, periodic redemptions |
| Fund of funds | Other funds | Mirrors the funds it holds |
| Private credit | Loans made or bought by the fund | Closed-ended |
AIF vs UCITS
| AIF | UCITS | |
|---|---|---|
| Typical investors | Mainly professional investors | Retail and professional |
| Liquidity | Often limited, or locked up for years | Frequent redemptions required |
| What it can invest in | Almost anything | Eligible, mostly liquid assets, within diversification limits |
| Leverage | Permitted, but disclosed and monitored | Tightly limited |
| What the EU regulates | The manager (AIFMD) | The fund itself (UCITS Directive) |
| EU marketing passport | To professional investors | To retail investors |
The AIFM and the depositary
Every AIF has a manager, the AIFM, which makes investment decisions and runs risk and liquidity management. AIFMs above certain thresholds need authorisation under the AIFMD: EUR 100 million in assets under management, or EUR 500 million for unleveraged funds with no redemption rights for five years. Smaller managers only need to register.An authorised AIFM must appoint a depositary for each EU AIF it manages. The depositary keeps custody of the assets, checks ownership of assets it can't hold, and monitors the fund's cash flows. That last duty covers every cash account opened in the fund's name, which is why the accounts a fund uses matter to its depositary.The money side of an AIF
An AIF's money moves in a predictable pattern. Investors commit capital, the manager calls it when an investment comes up, the fund pays it out to buy assets, often through special purpose vehicles or holding companies, and proceeds flow back up and out to investors as distributions.Each step needs an account in the right name: the fund's, each SPV's and, where they're used, the feeder vehicles'. Structures with several entities in several countries are where fund administrators most often run into account-opening problems. For how Narvi works with these structures, see business accounts for AIFs and accounts for funds, holdings and hard-to-bank structures.AIFMD II
Directive (EU) 2024/927, known as AIFMD II, amends the original directive. Member states had to apply it from 16 April 2026. It adds rules for funds that originate loans, harmonises liquidity management tools for open-ended funds, tightens rules on delegation and expands reporting. Some technical standards apply later, including the liquidity management tool requirements, which become mandatory from 16 April 2027. See what AIFMD II changes for managers.FAQ
No. A hedge fund is one kind of AIF. Private equity, venture capital, real estate and private credit funds are AIFs too.
Every EU AIF managed by an authorised AIFM does. Smaller, registered managers below the AIFMD thresholds aren't subject to the full depositary rules, though national law may still require one.
Mainly professional investors. Retail investors can access AIFs only where national rules allow it, or through specific regimes such as European long-term investment funds (ELTIFs). Investors with significant private wealth often hold them through family office structures.
Related terms and sources
Ultimate beneficial owner (UBO) · Know your business (KYB) · Source of funds vs source of wealth · Browse the full glossary- Directive 2011/61/EU (AIFMD), Article 4
- Directive (EU) 2024/927 (AIFMD II)
- Jones Day: AIFMD II implementation, the final countdown
Last reviewed October 21, 2026Disclaimer
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
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