The EU’s second Anti-Tax Avoidance Directive (“ATAD 2” or the “Directive”) focuses on preventing hybrid mismatches that result in double non-taxation. Hybrid mismatches are commonplace in the current fund industry. This is mainly because of the wide variety of investors and investment jurisdictions, with each jurisdiction applying their own entity and income qualification rules. ATAD 2 is therefore expected to have a big impact on the real estate and private equity fund sector. In this article, the key risks that fund managers will have to deal with are described. After a brief explanation of the characteristics of the Directive, specific ATAD 2 risks will be discussed using a typical real estate/private equity fund structure as example. Risks include hybrid debt instruments, hybrid funds, platforms and SPVs, as well as double deduction scenarios. The article concludes with the expected trends for a post-ATAD 2 fund landscape.