AIFMD II Annex IV: Building the New Leverage Calculation Template for EU AIFMs

ByOfficer

Last updated: May 2026

The leverage section of Annex IV is where most AIFM reporting teams will feel the full weight of Directive (EU) 2024/927 (AIFMD II). Not because the calculation methodology changes. It does not. Articles 6 to 11 of Commission Delegated Regulation (EU) No 231/2013 still define how you compute gross and commitment leverage. What changes is how much leverage data you report, at what granularity, and in what structure. The revised Article 24 of Directive 2011/61/EU rewrites the reporting scope from “principal markets and instruments” to all exposures, all instruments, all assets. For leverage, that shift turns a pair of summary ratios into a multi-layered data set linking borrowing sources, derivative exposures, netting arrangements, and collateral reuse into a single coherent template.

I have filed Annex IV leverage data under the current ESMA template since 2014 and through the November 2023 Technical Guidance revision 6 update. The existing fields (broadly corresponding to the leverage-related fields in the consolidated AIF-specific section of the Annex IV reporting template defined under CDR 231/2013 and ESMA’s Guidelines 2014/869) compress all leverage information into two ratios and a limited borrowing breakdown. What AIFMD II demands is structurally different. If your team has not started mapping current data feeds against the expanded scope, the gap between what you have and what you will need to submit will become apparent only after the ESMA consultation drops.

Related reading: AIFMD II Liquidity Management Tools: What Changes April 2026

The Leverage Calculation Methods Have Not Changed

This is the first thing reporting teams need to understand clearly. AIFMD II does not rewrite the gross method or the commitment method. The mathematical definitions remain in CDR 231/2013:

The gross method (Article 7) calculates the AIF’s exposure as the sum of the absolute values of all positions, with derivatives converted to their equivalent positions in the underlying asset. No netting, no hedging offsets. Article 7(a) of CDR 231/2013 excludes cash and cash equivalents held in the base currency (where they meet the liquidity, valuation and return conditions) from the exposure calculation itself, not from NAV. Leverage is then expressed as the ratio of that gross exposure to NAV.

The commitment method is set out in Article 8 of CDR 231/2013, supported by Article 10 (derivative conversion methodologies, which apply to both methods) and Article 11 (duration netting rules specific to interest-rate derivatives under the commitment method). It allows netting of positions in the same underlying (Article 8(3)(a) and Article 8(8)), hedging arrangements that meet the conditions in Article 8(6) (positions referring not necessarily to the same underlying asset but to the same asset class, with verifiable risk offset and stress-condition efficiency), and duration netting for interest-rate derivatives within the maturity bands set in Annex III of CDR 231/2013. The commitment method produces a lower leverage figure because it recognises these risk-reducing arrangements.

Both methods remain mandatory. Every AIF reports both ratios. That has not changed. What changes is everything around those ratios: the supporting data that feeds into the calculation, the breakdown fields, and the requirement to demonstrate how you arrived at each figure rather than simply submitting the output.

The common error I see teams making already is assuming that because the methodology is stable, the reporting workload is stable. It is not. A new template can demand the same calculation but require twenty additional fields showing the inputs and adjustments that produce that calculation. That is precisely what the expanded Article 24 scope implies.

What the Revised Article 24 Means for Leverage Data

Under AIFMD I, Article 24(2) required AIFMs to report “the percentage of the AIF’s assets which are subject to special arrangements arising from their illiquid nature” and “any new arrangements for managing the liquidity of the AIF.” For leverage specifically, Article 24(2) required reporting on “the current risk profile of the AIF” and “the main categories of assets in which the AIF invested.” The methodological requirement to calculate exposure under both the gross method and the commitment method comes from Article 6 of CDR 231/2013, with the resulting figures captured through the Annex IV template under the same Regulation.

AIFMD II replaces this structure. The amended Article 24 now requires reporting on:

All markets and instruments in which the AIFM trades on behalf of each AIF (not “principal” or “main”).

All exposures, including leverage exposures, with sufficient detail to allow competent authorities and ESMA to assess the build-up of systemic risk.

Detailed information on borrowing arrangements, counterparties, and the nature and quantum of collateral provided.

Delegation and sub-delegation arrangements with granular FTE and oversight data.

The operational consequence for leverage reporting is that the two summary numbers (gross ratio, commitment ratio) will need to be supported by field-level detail showing where the leverage comes from, who provides it, what collateral backs it, and how netting or hedging adjustments reduce the commitment figure. This is not speculation. The directive text requires the data. The ESMA RTS/ITS will define the exact field structure.

Current Annex IV Leverage Fields and Their Limitations

Under the current ESMA reporting template (structured by the 2014/869 guidelines and updated through Technical Guidance revision 6 of November 2023), the leverage section contains a compressed set of fields:

Gross leverage ratio (single numeric value, expressed as a multiple of NAV).

Commitment leverage ratio (single numeric value).

Borrowing sources broken down by type: unsecured borrowing, secured borrowing (prime broker, reverse repo, other), and synthetic leverage through derivatives.

The breakdown is limited. You report how much borrowing by broad category, and the two headline ratios. There is no field for counterparty identification, no collateral type breakdown, no netting methodology disclosure, and no link between individual derivative positions and their contribution to the gross or commitment figure.

For many AIFMs, this simplicity was convenient. A team could compute the gross method in a spreadsheet, sum the absolute notionals, divide by NAV, and submit. The commitment method required identifying eligible netting and hedging, but the reported output was still a single number. Nobody had to show their working.

That approach will not survive the new template. When the revised fields require you to break down borrowing by counterparty, show collateral flows, and itemise derivative contributions to leverage, your calculation process has to produce those intermediate outputs as structured data. If your gross method calculation is currently a black-box formula in an Excel macro or a vendor system that exports only the final ratio, you will need to either open that black box or rebuild the pipeline.

Gross Method: What Additional Fields to Expect

Based on the expanded Article 24 requirements and the systemic risk monitoring objectives that ESMA has articulated in its Article 25 guidelines (ESMA34-32-701), the revised leverage template for the gross method is likely to require at minimum:

Absolute value of long positions by asset class (equities, fixed income, derivatives by type, commodities, FX, other).

Absolute value of short positions by the same asset class breakdown.

Derivative conversion methodology used (standard ESMA conversion or alternative where permitted).

Total gross exposure before and after exclusion of cash and cash equivalents.

NAV used as denominator, with reporting date alignment.

The team error that will surface most often here: inconsistent derivative conversion. Article 7 of CDR 231/2013 requires converting derivative positions to equivalent positions in the underlying asset. For listed futures, that means notional value. For options, it means delta-adjusted equivalent or full notional depending on interpretation. For credit default swaps, it means the notional of the referenced obligation. Many teams use different conversion approaches across asset classes within the same fund, sometimes because different vendor systems handle different product types. When these conversions must be reported field by field rather than aggregated into a single ratio, inconsistencies become visible to NCAs.

This is not a hypothetical problem. I have reviewed leverage calculations where the same AIFM used mark-to-market for equity options and notional-only for interest rate swaps within the same AIF. Under a single-number output, nobody sees that inconsistency. Under a field-level breakdown, it becomes immediately apparent.

Commitment Method: The Netting and Hedging Documentation Gap

The commitment method is where template expansion will create the most operational pain for EU AIFMs. The method itself allows three types of reduction:

Netting: positions in the same underlying that offset each other (Article 8, CDR 231/2013).

Hedging: combinations of derivative or security positions which, under Article 8(3)(b), do not necessarily refer to the same underlying asset but are entered into with the sole aim of offsetting risk. To count toward the commitment-method reduction, the hedging arrangement must meet the conditions in Article 8(6): positions do not aim to generate a return, there is a verifiable reduction of market risk at AIF level, derivative-linked general and specific risks are offset, the arrangement relates to the same asset class, and it remains efficient in stressed market conditions.

Duration netting: interest rate derivatives within the maturity bands defined in Article 11 and Annex III of CDR 231/2013.

Under the current template, you report the commitment ratio. Nobody asks you to itemise which positions you netted, which hedging arrangements you applied, or which maturity buckets you used for duration netting. The new template will almost certainly require this. ESMA’s systemic risk mandate under Article 25 requires NCAs to understand not just how much leverage exists, but how much would exist if hedging arrangements broke down. That analysis is impossible without knowing what those arrangements are.

The documentation gap here is severe across the industry. Many AIFMs have internal policies that say “we apply netting and hedging per CDR 231/2013” without specifying, trade by trade, which positions qualify. The qualification criteria in Article 8(6) are not trivial. A hedging arrangement must: have positions that do not aim to generate a return, produce a verifiable market-risk reduction at AIF level, offset the general and specific risks linked to derivative instruments, relate to the same asset class, and remain efficient in stressed market conditions. Article 11 separately governs duration netting for interest-rate derivatives under the commitment method and is not the source of these hedging conditions. If the template asks you to report the gross-to-commitment reduction with a field-level breakdown of each netting set, you need structured records of which positions form each set.

Teams that rely on vendor systems for commitment leverage often receive only the final ratio. The vendor applies netting logic internally but does not export the intermediate netting sets as structured data. When the template requires those intermediates, you either need your vendor to expose that layer, or you rebuild the commitment calculation in-house with full audit trail.

Collateral and Borrowing: From Category to Counterparty

The current Annex IV template reports borrowing in broad categories: unsecured cash borrowing, secured borrowing (broken into prime broker, reverse repo, and other), and synthetic leverage through derivatives. There is no counterparty identification. An AIFM borrowing from three prime brokers reports one aggregated “prime broker” figure.

AIFMD II’s expanded scope, combined with the systemic risk monitoring objectives, points toward counterparty-level borrowing disclosure. The directive requires information “sufficient to allow competent authorities to assess the extent to which the use of leverage by an AIFM… contributes to the build-up of systemic risk.” Counterparty concentration is a core systemic risk indicator. An aggregate borrowing figure tells you nothing about concentration.

For leverage template preparation, this means:

Borrowing data will likely need LEI-level counterparty identification for each credit facility, repo line, and prime brokerage arrangement.

Collateral posted against borrowing will likely need type classification (cash, government securities, corporate bonds, equities, other) and value.

Collateral reuse rights (rehypothecation) will likely require a separate flag or field, given that AIFMD II explicitly addresses collateral reuse in the revised investor disclosure requirements.

The teams that will struggle most are those managing multiple AIFs through a single prime brokerage arrangement with cross-margining. Allocating borrowing and collateral to individual fund level when the facility operates at umbrella or account level requires allocation methodology that many firms have never needed to formalise because the current template did not ask for fund-level counterparty splits.

Timeline and Status: What is Confirmed, What is Expected

Confirmed dates:

26 March 2024: Directive (EU) 2024/927 (AIFMD II) published in the Official Journal of the European Union.

16 April 2026: Transposition deadline for Member States. Most major fund jurisdictions (Luxembourg, Ireland, Germany, France, the Netherlands) have transposed or are finalising transposition. Luxembourg transposed via the Law of 3 March 2026.

16 April 2027: the date by which ESMA’s draft RTS and ITS specifying the detailed Annex IV reporting template, XML schema, reporting frequencies, and validation rules are required to be in place, and from which the new Article 24 reporting requirements apply for Member States.

What is not yet confirmed:

The exact date of ESMA’s consultation paper on the Annex IV RTS/ITS. Industry expectations point to H2 2026, but ESMA has not published a fixed consultation launch date as of May 2026.

The first reporting reference date under the new template. This depends on when the Commission adopts the RTS/ITS after ESMA’s submission and when Member States apply the new standards. A reasonable estimate is Q4 2027 or Q1 2028 for first filings, but no authority has confirmed this.

Whether ESMA will run a dry-run or parallel-reporting period. No formal announcement exists, though precedent from other template transitions (EMIR Refit, SFTR) suggests some form of testing window.

The operational trap here is waiting for certainty. The directive text already tells you what data you need to report. The RTS/ITS will define the field structure, but the underlying data requirements are in Article 24. Teams that wait for the consultation paper before starting data gap analysis will have, at best, six to eight months between consultation publication and compliance. That is not enough time to build new data pipelines for leverage decomposition, counterparty borrowing splits, and netting set documentation if those capabilities do not exist today.

What Teams Commonly Get Wrong About AIFMD II Leverage Reporting

Three recurring misunderstandings I see across EU AIFMs preparing for this change:

First: confusing the calculation mandate with the reporting mandate. The calculation rules (CDR 231/2013) define how to compute gross and commitment leverage. The reporting template defines what you submit to your NCA. AIFMD II changes the reporting template substantially while leaving the calculation methodology untouched. Teams that say “nothing changes for us because the formula is the same” are wrong. The formula is the same. The reporting output is not.

Second: assuming the existing Annex IV template will receive minor field additions. The scale of change in Article 24 suggests a template redesign, not a patch. Moving from “principal markets and instruments” to “all markets, instruments, and exposures” is not a delta you accommodate by adding three rows to an XML schema. It is a structural expansion that affects how leverage data flows from position-keeping systems through calculation engines into the submission file.

Third: treating leverage reporting as independent from other Annex IV changes. The leverage section interacts with the new delegation fields (who manages the leveraged positions), the expanded instrument breakdown (which positions generate leverage), and the borrowing/counterparty data (who provides the leverage). These are not separate reporting silos. A team preparing leverage fields in isolation from the broader template redesign will find data dependencies they did not map.

Preparation Steps Before the ESMA Consultation

You do not need to wait for the final template to begin preparation. The following steps are grounded in what Article 24 already requires and what the existing calculation methodology demands:

Step 1: Map your current gross method pipeline end to end. Document where each position type gets its absolute value, how derivatives are converted to underlying equivalents, and which systems produce the NAV denominator. Identify where the pipeline aggregates data and loses granularity. Those aggregation points are where you will need to preserve field-level detail under the new template.

Step 2: Document every netting set and hedging arrangement used in your commitment method calculation. For each AIF, record which positions form netting pairs, which hedging arrangements meet the Article 8(6) criteria, and which interest rate positions use duration netting under Article 11 and Annex III of CDR 231/2013. If you cannot produce this documentation today, you have a gap that exists independently of AIFMD II.

Step 3: Identify borrowing data by counterparty at fund level. If your prime brokerage or repo facilities operate at umbrella level, define the allocation methodology that splits borrowing and collateral to individual AIF level. Test whether your administrator or custodian can provide this split in structured format.

Step 4: Assess vendor readiness. If you use a third-party system for Annex IV filing, contact your vendor about their AIFMD II roadmap. Specifically ask whether they plan to expose intermediate calculation outputs (netting sets, derivative conversions, borrowing splits) as reportable fields, or only the final ratios as today.

Step 5: Review your AIFM’s internal leverage policy. Under AIFMD II, the policy framework around leverage limits and monitoring feeds directly into what you report. If your policy documents reference “maximum leverage of 200% gross” but your reporting infrastructure cannot produce the field-level data showing how that 200% is constituted, you have a disconnect between governance and operations.

The EU-Wide Dimension: Why This Is Not a Single-Jurisdiction Problem

AIFMD II is a directive, transposed into national law by each Member State. But the Annex IV template is defined by ESMA through directly applicable RTS/ITS. This means the reporting format will be uniform across the EU. An AIFM authorised in Ireland files the same template as one in Luxembourg or Germany. The NCA portal may differ, the submission frequency may vary by fund size (as it does today under Article 110 of CDR 231/2013), but the data structure is harmonised.

For groups operating across multiple EU jurisdictions, this simplifies some aspects and complicates others. The simplification: one template design to implement, not twenty-seven. The complication: firms that previously relied on local NCA interpretations to minimise reporting burden (for example, a lighter-touch approach to the “principal markets” filter in smaller jurisdictions) will lose that flexibility. “All instruments and exposures” is not subject to proportionality at the template level.

Luxembourg matters here as an example because it is the EU’s largest fund domicile by assets, hosting several thousand AIFs across SIF, SICAR, RAIF and Part II UCI regimes and the CSSF has historically supplemented ESMA’s template with national guidance (most recently Circular CSSF 23/844, which repealed Circular 14/581). Under the harmonised RTS/ITS, national add-ons of that kind are less likely for the core template. NCAs may retain supplementary reporting (the CSSF already collects additional data via its own platform), but the Annex IV template itself becomes an ESMA-governed standard.

Ireland’s Central Bank of Ireland, Germany’s BaFin, and France’s AMF will implement the same template. AIFMs domiciled in any of these jurisdictions face identical leverage reporting requirements. The preparation steps above apply uniformly regardless of where the AIFM holds its authorisation.

Frequently Asked Questions

Does AIFMD II change how I calculate gross or commitment leverage?

No. The calculation methodology remains defined by Articles 6 to 11 of Commission Delegated Regulation (EU) No 231/2013. The gross method sums absolute values of all positions. The commitment method applies netting and hedging offsets. AIFMD II changes what you report about that calculation, not how you perform it.

When will the new Annex IV template be available?

ESMA must submit final draft RTS/ITS to the European Commission by 16 April 2027. A consultation paper is expected in H2 2026, but no specific date has been confirmed. The Commission then has three months to endorse or reject the standards. First filings under the new template are likely in late 2027 or early 2028.

Do both the gross and commitment ratios still need to be reported?

Yes. Article 24 of the directive as amended by AIFMD II continues to require leverage calculation under both methods. The change is that each ratio will likely need supporting field-level data rather than a standalone number.

Will there be a parallel reporting period?

No formal parallel reporting period has been announced by ESMA as of May 2026. Precedent from EMIR Refit and SFTR transitions suggests some form of testing or dry-run may be offered, but this remains unconfirmed.

What happens if my vendor only produces the final leverage ratio?

You will likely need intermediate outputs: netting set composition, derivative conversions by position, borrowing by counterparty. Ask your vendor now whether their AIFMD II roadmap includes exposing these data layers. If not, plan for in-house supplementation or an alternative provider.

Is the template the same across all EU Member States?

Yes. The RTS/ITS defines a directly applicable EU-wide template. Your NCA may operate a different submission portal, and reporting frequency still varies by AIF size and type, but the data structure is uniform.

Do sub-threshold AIFMs need to prepare?

AIFMs below the thresholds in Article 3(2) of Directive 2011/61/EU (100 million euros including leverage, or 500 million euros without leverage and with no redemption rights for five years) are registered, not authorised, and are not subject to full Annex IV reporting. However, Member States may impose national reporting requirements on registered managers. Check your NCA’s position.

How does this interact with AIFMD II’s new delegation reporting?

Leverage data and delegation data will sit in the same revised Annex IV template. If portfolio management is delegated, the leverage arising from the delegate’s trading activity still needs to be captured, attributed, and reported by the AIFM. This requires data flows from delegates into your leverage calculation pipeline.

Key Takeaways

  • AIFMD II does not change how you calculate leverage. Articles 6 to 11 of CDR 231/2013 remain in force. What changes is the granularity, scope, and structure of what you report.
  • The revised Article 24 moves from “principal markets and instruments” to all instruments and exposures. For leverage, this means decomposed data, not just headline ratios.
  • ESMA must submit final Annex IV RTS/ITS by 16 April 2027. A consultation paper is expected H2 2026 but not yet confirmed.
  • Gross method reporting will likely require asset-class breakdowns of absolute exposures and derivative conversion methodology disclosure.
  • Commitment method reporting will likely require documentation of every netting set and hedging arrangement, not just the net figure.
  • Borrowing data will likely shift from broad category reporting to counterparty-level (LEI) disclosure with collateral type and reuse flags.
  • The template is EU-wide via directly applicable ESMA RTS/ITS. All authorised AIFMs across Member States file the same structure.
  • Teams should map their current calculation pipeline, document netting arrangements, and assess vendor readiness now, before the consultation paper arrives.

Related Articles

Sources and References

  • Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC (AIFMD II): EUR-Lex
  • Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (AIFMD): EUR-Lex
  • Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU (Articles 6-11 on leverage calculation): EUR-Lex
  • ESMA Guidelines on reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of the AIFMD (2014/869): ESMA
  • ESMA Guidelines on Article 25 of Directive 2011/61/EU (ESMA34-32-701): ESMA
  • CSSF Circular 23/844 on reporting obligations for AIFMs (repealing Circular 14/581): CSSF

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