With compliance deadlines a few months away, fund managers are scrambling to assemble the data.

With the first SEC deadline for private fund (Form PF) reporting currently less than a few months away for many large hedge funds and managed account platforms, fund managers are searching for creative solutions to support the Form PF requirements.

For funds and their service providers to meet this reporting deadline, it will require an unprecedented amount of work.

“Form PF requires private fund managers who are registered with the SEC to provide quarterly or annual data on fund performance, investors, counterparties, and risk analytics,” Doug Schwenk, president and CEO of Advise Technologies, a provider of compliance software for hedge fund and private equity fund managers, told Markets Media. “These requirements are new, and will impose a substantial burden for hedge fund managers.”

The complex reporting requires aggregating, normalizing and tagging data from multiple sources, including portfolio, risk, collateral, and performance data.

“Form PF itself is 40 pages long, with 2,000 data elements that need to be populated,” said Schwenk. “Those numbers go into an SEC database, and the SEC intends to conduct risk-based exams based on that data. The chance of triggering an exam by having one or two PF elements out of line is very high.”

The regulatory framework under the Dodd-Frank Act establishes the need to look at data holistically and to aggregate data from multiple sources.

Form PF requires hedge funds to consolidate information that may be spread across multiple fund administrators.

“Fund managers who’ve engaged in a mock process by filling out reports by hand from existing systems can take two months to get a filing put together,” said Schwenk. “In the real world, quarterly filers will have to do it every 90 days.”

Paladyne Systems, a provider of investment management technology and part of Broadridge Financial, has integrated Advise Technologies’ Form PF compliance system within the Paladyne suite of data collection and data management products, in order to enable fund managers and service providers to streamline their Form PF processes.

The result is an interactive web-based Form PF interface enabling clients to enrich data, approve calculated data and electronically file with the SEC.

Data storage, calculations, historical auditing and reporting is handled by Paladyne Analytics Master warehouse, which is integrated with Advent’s Geneva, SunGard VPM, RiskMetrics, and all major prime brokers and fund administrators.

“There may be multiple systems involved, both internal as well as external systems with multiple prime brokers and fund administrators,” Sameer Shalaby, president of Paladyne Systems, told Markets Media.
“Our products help to aggregate all of that into a data warehouse and normalize it for various reporting requirements, which creates a staging process that’s helpful for Form PF.”

Added to the formidable data management issues are the ambiguities associated with any new set of regulations.

“It creates an opportunity for firms like ours and Paladyne to come together with a technology platform that allows fund managers to populate forms in a semi-automated way, and to interpret questions and tweak the responses accordingly,” Schwenk said.

The SEC has relaxed somewhat some of the onerous restrictions, such as raising the minimum assets under management (AUM) at which private fund advisers must report from $1 billion to $1.5 billion.

Advisers will also now have a 60-day reporting deadline as opposed to the 15-day deadline that was initially proposed. In addition, Form PF will also take effect later than originally intended with advisors with over $5 billion AUM, the first to be affected, having to report in the middle of 2012.