Since the FSMA’s clarification in 2023 on how to calculate assets under management (AuM) and define leverage within Alternative Investment Fund (AIF) structures, many Belgian real estate fund managers have found themselves reevaluating long-standing assumptions about their regulatory status. This regulatory update, while framed as a clarification, has triggered a series of tangible consequences for funds that had previously operated under the assumption that they fell below AIFMD thresholds or were not considered leveraged.
When “unleveraged” no longer means what you thought: the consequences of FSMA’s clarification for Belgian Real Estate Funds.
A shift in interpretation and its ripple effect
During the summer 2023, the FSMA issued guidance confirming that when assessing a fund’s leverage status, debt held further down the structure (for example within SPVs or underlying property companies) must be taken into account. This “look-through” approach, consistent with ESMA’s interpretation of AIFMD, alters how both leverage and assets under management are calculated.
For many real estate funds, this has changed the picture entirely. Structures previously deemed unleveraged under a more restrictive interpretation may now exceed regulatory thresholds, which unintentionally places the manager outside the limits of the sub-threshold regime.
FSMA letters: what’s happening in practice
Since the publication of the guidelines, several managers have received formal letters from the FSMA requesting:
- Clarification on the method used to calculate AuM and leverage
- A remediation plan, where relevant, to bring the structure into compliance
Importantly, the FSMA is not prescribing one route or another. Instead, managers are expected to assess the impact of the guidance on their own structures and propose an appropriate course of action. This has introduced new complexity, particularly for funds with embedded leverage that was not previously considered material from a regulatory perspective.
Common remediation options
While each case is specific, the typical options being considered by affected fund managers often include:
1. Applying for an AIFM authorisation
A full licence requires submitting a comprehensive application with the FSMA, including a business plan, governance framework, compliance policies and risk procedures. The process can take 12+ months, and external legal and advisory costs of hundred thousands of EURs depending on the complexity of the structure and support required.
2. Appointing an external AIFM
Some managers opt to outsource AIFM responsibilities to a third party. This can reduce regulatory risk and avoid the heavy licensing process but may involve trade-offs in terms of strategic autonomy, cost, and operational alignment depending on the external AIFM.
Broader implications for the market
While the FSMA’s clarification has brought much-needed consistency to the interpretation of leverage, it has also introduced uncertainty for fund managers who were previously compliant under a narrower reading of the rules. Many are now facing new reporting obligations, structural changes, or cost implications.
This situation underscores the importance of regularly reviewing the regulatory classification of AIF structures, especially those involving debt at multiple levels. What was valid under one interpretation may not hold when the regulatory lens shifts.
Our approach at Wanaka Fund Management
At Wanaka Fund Management, we continue to support clients and stakeholders in navigating these regulatory developments. As the holder of the first AIFM licence for real estate funds in Belgium, we bring deep expertise in designing pragmatic and efficient AIF governance models, making only the necessary adjustments to ensure full compliance without overcomplicating the structure.
Need guidance navigating AIFMD compliance or recent regulatory changes? Wanaka Fund Management is here to help you make informed, strategic decisions with confidence.
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