AIFMD Imposes Reporting Burdens

Terry Flanagan

Alternative Investment Fund Managers Directive requires that alternative investment funds meet stringent risk management standards for monitoring, measuring, and reporting. Under the European Union directive, funds need to provide supervisory authorities with detailed investment data on a quarterly or bi-annual basis.

“AIFMD represents another large, complex filing that requires clients to pull relevant data from multiple data sources across historical time periods,” said Phil Christianson, associate director of product management at Eze Software Group. “Contrary to previous filings, AIFMD requires clients to reevaluate, recalculate, and reformat that data to correspond with ESMA reporting guidelines.”

AIFMD’s Annex IV is the reporting requirement which requires U.S. fund managers to file a quarterly or annual report.

“The wording does say that if they market their fund in EU jurisdictions they will need to comply with AIFMD, which means they will need to file this Annex IV report,” Christianson said. “It’s very similar to what we saw with Form PF — the filing itself is similar in content. They’ve obviously got their own spin on it so unfortunately it’s not a copy/paste per se, but it is a lot of similar questions.”

Eze Software Group has extended its Regulatory Filings Manager to support AIFMD Annex IV filings. Many of the challenges associated with Form PF apply to AIFMD. “If you’ve never done a large-scale filing like Form PF then AIFMD is probably going to be quite a learning experience,” said Christianson. “The people that have done Form PF probably are more prepared, just from an understanding of where the data is in their organization, what it means operationally to pull together a filing like this, who the right players are.”

He added, “These filings are somewhere in the neighborhood of a thousand data points. We we see it take anywhere from two weeks to two months to get this information together and put together a filing like this.” However, this time can be reduced using data repositories,

Interpreting questions can be challenging, especially in the beginning, as is building a repeatable process. “This is not a one-time filing,” Christianson said. “For larger funds this is a quarterly filing. So funds are looking for ways to make it repeatable and make it a simpler process that they can build upon, quarter over quarter.”

One-third of fund managers targeted by AIFMD reporting requirements were unprepared to meet the July 22 deadline, according to a survey conducted by Confluence, a provider of investment data management automation for the asset management industry.

The survey, which included 116 responses from asset managers and fund administration service providers, was conducted between June 17 and July 1, during n the run up to the AIFMD July deadline, when European Union (EU) AIFMs were required to submit their application for authorization.

When asked how prepared they believed AIFMs are to meet the Transparency Reporting requirements of AIFMD, 34% of the respondents felt that AIFMs were not very ready or were not sure of their level of preparedness. Of those that responded, only 16% said they believed AIFMs were ‘very prepared’ ahead of the deadline.

“European asset managers and fund administrators face big challenges getting up to speed on the full ramifications of the directive and the scope of work it will require of their back-office operations,” said Melvin Jayawardana, Confluence’s European markets manager.

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