AFM Market Overview AIFM-light Managers

ANALYSE SECTOR IN BEELD OCTOBER 2024 AIFM-light Market Overview

In brief This report shares the AFM's findings from an exploratory study into AIFM-light managers. These are managers of investment institutions that are exempt from an AIFM license. The strong growth of this population over the past five years prompted this research. The publication consists of a series of graphs depicting various aspects of the market, including numbers, Assets under Management (AuM), asset categories, and types of investors. We observe that the majority of AIFM-light managers have less than €20 million under management, that these managers primarily invest in private equity, and that a relatively large portion of the assets within this population comes from retail investors and from abroad. Furthermore, the number of light managers is higher than in other EU member states.

Contents Introduction 2 Conclusions 4 AIFM-light regime 5 Sources & Data 7 Findings 9

1. Number of light managers grew by 50% between 2019 and 2023 9
2. Number of light funds doubled between 2019 and 2023 9
3. AuM of light manager population grows by 79% 10
4. Over 60% of light managers had an AuM of less than € 20 million 10
5. Private equity most popular asset category among light managers 11
6. Over 80% of light funds are closed-end 11
7. Relatively large portion of light manager AuM comes from retail investors 12
8. Relatively large portion of light fund deposits comes from abroad 12
9. Dutch light regime most accessible for retail investors 13
10. Besides the Netherlands, also in several other investigated EU member states since 2020 significant growth 15
11. Total AuM of light managers in 2022 was higher than in the Netherlands only in Germany 15

AFM shares insights on AIFM-light population 2 ANALYSE SECTOR IN BEELD Introduction 1 Light managers and managers with an AIFM license from the AFM. 2 As elaborated in the Financial Supervision Act (Wft) and Annex C of the Decision on Conduct Supervision of Financial Enterprises (BGfo). 3 Money Laundering and Terrorist Financing Prevention Act (Wwft) (afm.nl) 4 Consumer Protection Enforcement Act (Whc) (afm.nl) 5 PRIIPs (afm.nl) 6 Sustainable Finance Disclosure Regulation (SFDR) (afm.nl) 7 Market Abuse (afm.nl)

Why this publication? The Alternative Investment Fund Managers (AIFM)-light Market Overview is part of an AFM exploration focusing on the population of AIFM light managers (light managers). These are managers who, under certain conditions, are exempt from an AIFM license (see below AIFM-light regime). The publication is a way to share the insights from the research with the market. These insights are based on a unique dataset provided by market parties1, which is relevant for the AFM's supervisory execution.

What is the reason for this AFM exploration? The number of AIFM managers registered with the AFM has been rising for years. Since 2019, an average of approximately 60 new light managers register with the AFM annually. The number of light managers and funds is rising faster than the number of license-holding AIFM managers and the number of funds they manage. When a manager falls under the light regime (see explanation in the next chapter), the 'Conduct Supervision of Financial Enterprises' part of the Financial Supervision Act (Wft) does not apply. This means, among other things, that no assessment of policy makers takes place and no requirements are set for prudent and sound business conduct.2 Light managers do, however, have the obligation under the Wft to report annually to the AFM. Supervision of light managers further includes, among other things, supervision of the Money Laundering and Terrorist Financing Prevention Act (Wwft)3 and the Sanctions Act 1977 (Sw), the Consumer Protection Enforcement Act (Whc)4, the Packaged retail and insurance-based investment products (PRIIPs) regulation5, the Regulation on information disclosure on sustainability (SFDR)6 and the Market Abuse Regulation (MAR)7.

What is the content of this publication? The AIFM-light Market Overview consists of a series of graphs depicting various aspects of the market, including numbers, Assets under Management (AuM), and types of investors within the AIFM-light regime. The accompanying texts contain observations of the market presented as objectively as possible. Besides the national market of the AIFM-light regime, we place the Dutch market in an international perspective by comparing it with other EU member states. This publication first presents the conclusions, followed by an explanation of the AIFM-light regime and the AFM's supervision, then the sources and data used in this AFM exploration. Subsequently, we address the various findings from the AFM research with corresponding graphs. The AFM has the ambition to become a leading data-driven supervisor. Data quality in the field of AIFMD-lighters can be further strengthened. We will continue to work on this in the coming years to be able to provide an even more complete and accurate picture in the future.

AFM shares insights on AIFM-light population 3 ANALYSE SECTOR IN BEELD Who is the target audience for this publication? This publication is intended for a broad public, but is most relevant for market parties and interested (retail) investors.

AFM shares insights on AIFM-light population 4 ANALYSE SECTOR IN BEELD Conclusions 8 Also referred to as non-professional and/or private investors. • The population of light managers in the Netherlands increased more sharply between 2019 and 2023 than the population of managers with an AIFM license (license holders). The population of light managers rose by almost 50%, while the population of license holders rose by only 15%. • The number of light funds in the Netherlands doubled between 2019 and 2023. The majority of light managers manage one fund. • Between 2019 and 2023, the AuM of the light manager population grew by three-quarters to €26 billion, while that of license holders decreased by a fifth (to €932 billion). • Over 70% of light managers had an AuM of less than €20 million in 2022. The average AuM per light manager was around €40 million and per light fund €17 million. • Light managers invest primarily in private equity (€16 billion; 62%), real estate (€3.6 billion; 14%) and other funds (fund of funds) (€2.7 billion; 10%). • More than 80% of the funds managed by the light manager population are closed-end funds. • Compared to license holders, a significantly larger portion of the invested assets of light funds comes from investors established abroad. • 44% of the AuM of light managers comes from retail investors. Among license holders, this is only 3%. This is the case despite the fact that investor protection is more limited with light managers. • As in the Netherlands, it is allowed in 4 of the 6 investigated EU member states to offer participation rights to retail investors8 under the light regime. These are Belgium, Germany, Austria, and Sweden. In these countries, other, and often more or stricter, conditions apply for offering participation rights to retail investors than in the Netherlands. • The Netherlands had the most light managers among the investigated member states in 2023. Significant growth is also visible in several other investigated member states since 2020. In absolute terms, growth is greatest in Germany and the Netherlands; in percentage terms, the Netherlands also belongs to the leading group. Dutch light managers have relatively little AuM. • The total AuM of light managers in the Netherlands (€23.8 billion) was significantly higher in 2022 than in Belgium, Austria, Ireland, and Sweden. Only in Germany was the AuM higher than in the Netherlands in 2022.

AFM shares insights on AIFM-light population 5 ANALYSE SECTOR IN BEELD AIFM-light regime 9 Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 10 Alternative investment funds are collective investment vehicles that are not undertakings for collective investment in transferable securities (UCITS). Among others, private equity, hedge, infrastructure, real estate, equity, and bond funds fall under AIFM supervision. 11 Article 3, second paragraph, AIFMD Directive 12 Article 3, third paragraph, sub a, b and c, AIFMD Directive 13 Article 3, third paragraph, sub d, AIFMD Directive 14 Article 3, third paragraph, sub e, AIFMD Directive 15 Article 3, third paragraph, AIFMD Directive 16 Also referred to as non-professional and/or private investors. The AIFM Directive9 is a European directive containing rules that (in principle) all managers of alternative investment funds10 must comply with. The AIFM Directive stipulates that the license requirement and all associated obligations do not apply to 'small' managers of alternative investment funds, so-called light managers. The total assets under management that these light managers manage (directly or through affiliated companies) may not be greater than €100 million or – provided no leverage is used and if the investment institution is closed-end in the first five years – €500 million.11 The AIFM Directive stipulates that member states must ensure at least that light managers comply with the following obligations: • Registration obligation: A light manager must register with the AFM, simultaneously providing data necessary to identify themselves and the investment institutions they manage and to provide insight into the investment strategies of these institutions.12 • Reporting obligation: A light manager must regularly provide the supervisor with information about the main instruments in which they trade and about the main risk positions and key concentrations of the investment institutions they manage.13 • Notification obligation: If a light manager no longer meets the conditions, it must notify the AFM of this. In that case, the light manager must apply for a license within 30 calendar days.14 Member states may apply stricter rules.15 For example, they may prohibit or attach conditions to the offering of participation rights to retail investors16. In the Netherlands, the above requirements and obligations have been implemented in Article 2:66a of the Wft.

AFM shares insights on AIFM-light population 6 ANALYSE SECTOR IN BEELD The Dutch legislator, when implementing the AIFMD in 2012, chose to allow the exemption from the license requirement (the light regime) to also apply when managers offer funds to retail investors, thereby limiting the extra burdens for managers who could still use an exemption under the Wft at that time. To ensure sufficient investor protection, conditions were set. These are derived from the exemptions that existed at the time.17 Light managers may in the Netherlands offer participation rights to retail investors on condition that the participation rights: • are offered to fewer than 150 persons; • can be acquired for a consideration of at least €100,000 per participant; or • have a nominal value per right of at least €100,000.18 A light manager must – if it does not offer exclusively to professional investors – state in the offer that it is not subject to a license requirement and that no supervision is exercised on it under the Part Prudential Supervision of Financial Enterprises and Part Conduct Supervision of Financial Enterprises.19 17 Parliamentary Papers 33235, no. 3 18 Article 2:66a, first and second paragraph, Wft 19 Article 2:66a, sixth paragraph, Wft

AFM shares insights on AIFM-light population 7 ANALYSE SECTOR IN BEELD Sources & Data 20 Ex Article 2:66a, third paragraph, Wft, see: Reporting obligations (afm.nl) 21 20210415 AeLg-20081658 Sector brief AIFM light managers.pdf (stelan.nl) 22 Within the AIFMD, a manager may, under certain conditions, use a 'no reporting flag' in the manager report and/or fund report, meaning the manager does not need to fill in further information. With a 'no reporting flag', the manager indicates that there is nothing to report for the respective manager or fund. A manager might use a 'no reporting flag' when there is a delay between the start date of the license or registration and the start of activities of a manager or fund, or between establishment and the first investments. 23 Periodic questionnaire on Wwft and Sanctions Act (afm.nl) 24 Previously, the Wwft inquiry was conducted annually (instead of biennially). Data Sources Most graphs in this publication are based on internal AFM data. This concerns AIFMD reporting data, data from the Wwft & Sw questionnaire provided biennially by light managers, and AFM register data. Additionally, the AFM requested data from the national supervisors of various EU member states. Because there are differences between the AIFMD reports and Wwft/Sw data regarding period and the number of reporting managers (see below), the information from these sources is split in this publication. The AFM notes that certain developments in the data, for example a larger number of funds, may also be the result of better compliance with the reporting obligation. AIFMD Reports Light managers are obligated to submit annually the AIFMD report of the manager (manager report) and the funds under management (fund report).20 This reporting obligation thus applies to both managers and the underlying funds and includes, among other things, inquiries about the AuM of the funds under management, the main financial instruments in which they trade, the main risk positions, and the key concentrations of the funds they manage.21 A caveat here is that due to non-response (missing reports due to negligence, no reporting flags22, and missing values) in these reports, not all reportable data for all light managers and their funds is always available to the AFM. Additionally, there is some 'delay' until data on a light manager becomes available because a new light manager is only obligated to submit the AIFMD report (for that year) after the expiration of a full calendar year. Light managers who registered in 2023 only need to report for the first time in January 2025 (for 2024). The light funds newly registered in 2023 are therefore not visible in the Market Overview. This Market Overview uses AIFMD reporting data from 2019 to 2023 (with each time December 31 of the respective year as the reference date). Wwft/Sw Questionnaires The AFM supervises compliance with the Wwft and Sw in a risk-based manner. In this context, the AFM receives completed Wwft/Sw questionnaires from light managers biennially. The information obtained is used to create risk profiles and provides a general picture of the state of the market regarding inherent money laundering and terrorist financing risks and the degree of control of these risks. This information is requested in the context of Wwft/Sw supervision and light managers are therefore obligated to cooperate.23 The response rate of the total population (all managers of investment institutions) to this inquiry was 96.5% in 2023. This publication uses Wwft data from 2021 and 2022 (with each time December 31 of the respective year as the reference date).24 This concerns the most recent inquiry.

AFM shares insights on AIFM-light population 8 ANALYSE SECTOR IN BEELD Register Data Besides the above information, data recorded in the register regarding light managers and the funds they manage has also been used to map the population. This register of managers with light registration states, among other things, whether parties offer to retail and/or professional investors and the conditions under which offerings to retail investors are made. The data in the register is based on information provided by managers upon their registration and that of their funds to the AFM. Data EU Member States Finally, as part of its exploration, the AFM received data from the national supervisors of seven different EU member states, in order to place the Dutch light regime and market overview in an international perspective. The AFM attempted to contact a diverse group of member states based on the size of the asset management sector and the geographical location of the member state. The requested data includes, among other things, the implementation of the regime in national legislation, the numbers of light managers, and the size of the AuM of the light manager population in the respective countries. Data from six member states has been processed in this publication: Belgium, Sweden, Austria, Germany, Ireland, and France.

AFM shares insights on AIFM-light population 9 ANALYSE SECTOR IN BEELD Findings 25 https://www.afm.nl/~/profmedia/files/registers/register-aifmd-light.xls 26 Register of investment institutions (afm.nl) and https://www.afm.nl/~/profmedia/files/registers/register-aifm.xlsx 27 The average number of funds is calculated based on AIFMD data. The register on the AFM website lists 749 light managers and 1621 light funds as of December 31, 2023. The AIFMD data differs from the register data because the reporting obligation (yet) does not apply to all funds in the register and/or has not been complied with (see Sources & Data).

1. Number of light managers grew by 50% between 2019 and 2023 Number of light managers & license holders 2019 2020 2021 2022 2023 Light managers AIFM license 0 100 200 300 400 500 600 700 800 504 96 99 100 106 110 553 628 696 747 Source: Register data, as of December 31 The population of light managers increased by almost 50% between 2019 and 2023, while the population of license holders rose by only 15%. The population of light managers thus grew faster than the license holders. Between 2019 and 2023, the number of light managers increased by 243 (48%). In 2023, there were a total of 747 AFM-registered light managers.25 This number is significantly higher than the number of license holders, namely 11026. The number of license holders increased much less sharply in that same period. 14 license holders were added, i.e., an increase of 15%.
2. Number of light funds doubled between 2019 and 2023 Number of funds 2019 2020 2021 2022 2023 0 500 1000 1500 2000 753 915 1195 1391 1542 Source: AIFMD data, as of December 31 In 2023, an AIFMD report was submitted for 1,542 funds. This is an increase of 100% compared to 2019. This increase is significantly larger than the increase in the number of reporting light managers. The number of reporting light managers increased by 86%. The average number of funds per light manager increased from 2.1 to 2.3 funds per light manager.27 59% of light managers (389) manage one fund. The average number of funds per reporting license holder in 2023 (13.7) was many times higher than for light managers (2.3 in 2023).

AFM shares insights on AIFM-light population 10 ANALYSE SECTOR IN BEELD 3. AuM of light manager population grows by 79% AuM and NAV light managers (in billions) NAV AuM 0 5 10 15 20 25 30 2019 2020 2021 2022 2023 13,3 14,6 15,7 17,2 19,0 20,8 21,2 23,8 23,8 25,8 Source: AIFMD data, as of December 31 In the period between 2019 and 2023, the AuM of the light manager population grew by more than three-quarters to €25.8 billion. Besides the total AuM, the average AuM per light manager also increased from €37.4 million to €39.1 million. There was a considerable increase especially in 2021 and 2022. The AuM represent the total market value of a manager's investments and thus provide insight into the size of a party.28 Besides an increase in the AuM of the light manager population between 2019 and 2023, the Net Asset Value (NAV) also rose strongly (78%). The AuM of license holders decreased by a fifth in the period between 2019 and 2023. 28 Developments in the value of the assets in which one invests also impact the development of the AuM. 29 Managers with more than €180 million AuM are omitted from the graph. 4. Over 70% of light managers had an AuM of less than € 20 million Total managed assets per manager (in millions)29 0-20 20-40 40-60 60-80 80-100 100-120 120-140 140-160 160-180 0 100 200 300 400 500 127 484 63 36 18 16 11 14 3 Source: AIFMD data, as of December 31 In 2024, 661 light managers filled in the AIFM report for 2023. Over 70% (484) managed an AuM of less than €20 million. A quarter of light managers had an AuM of less than €5 million. AIFMD data further shows that light managers had an average of €39.1 million under management in 2023 and that the average size per light fund was €17 million. The average AuM per light manager of around €40 million is only a fraction of the average AuM of €10 billion per license holder. This average is, however, significantly influenced by a number of large license holders, including pension fund managers. In the period between 2019 and 2023, the average AuM per light manager remained fairly stable.

AFM shares insights on AIFM-light population 11 ANALYSE SECTOR IN BEELD 5. Private equity most popular asset category among light managers Fund of funds Hedge fund None Other Private equity Real estate AIFM license Light manager Managed assets (AuM) by strategy 10% 14% 2% 2% 2% 11% 62% 14% 68% 13% Source: AIFMD data, as of December 31 Light managers invest primarily in private equity (62%), real estate (14%), and in other funds (fund of funds; 10%). With private equity, this partly (32%) involves venture capital30. For license holders, private equity funds make up only 5% of total AuM. Real estate funds are offered relatively more to retail investors than other types of light funds. The category 'other' also includes investments in crypto assets. The AFM observes an increase in the number of light managers investing in crypto assets. License holders, on the other hand, seem not to invest or hardly invest in crypto assets. A possible explanation for this is that it is mandatory for license holders to have a custodian, and that in 2023 there were no Dutch custodians who were allowed to take custody of crypto assets based on their license. Light managers are not subject to the obligation to have a custodian. 30 Venture capital involves investing in start-up companies. 6. More than 80% of light funds are closed-end Closed-end Open-end AIFM license Light manager Number of clo