AIFMD requires alternative fund managers managing and marketing funds in Europe- to comply with new operational, transparency and reporting requirements. Funds within the scope of the directive include direct real estate and infrastructure funds as well as hedge and private equity fund managers among others.
To assist alternative investment managers with their reporting obligations, BNP Paribas Securities Services has developed and launched The AIFMD reporting challenge – A practical guide to meeting Annex IV requirements.
“The AIFMD Annex IV transparency reporting requirements represent a major challenge for fund managers in that they are required to periodically report to regulators on each alternative investment fund they manage or market within the European Union,” notes Justin Burman, Head of product, Asset and Fund Services at BNP Paribas Securities Services in Australia.
He says: “Fund managers must disclose details of principal markets and instruments in which the AIFM trades on behalf of the managed fund, along with key instruments that are actively traded and principal exposures and concentrations for each AIF. The AIF reports also cover a number of risk topics including market, counterparty, and liquidity risks.”
“Compiling the report entails collecting, enriching, classifying and validating data from multiple sources and performing complex calculations. Fund managers must ensure that the reports are delivered on time and in the correct format, which will depend on the system used by the national competent authority in question.”
Mr Burman explains BNP Paribas Securities Services developed the guide to provide an overview of the reporting obligations and outline the main considerations and issues. “For fund managers who are faced with the prospect of reporting to a number of different national competent authorities, the guide provides a compilation of useful information from key European Union member states.”
Mr Burman cautions: “Under AIFMD, the portfolio management can be delegated, but the risk management then has to remain with the appointed AIFM. Some managers consider risk management as the responsibility of the person making the portfolio management decisions. AIFMD introduces the concept of a split between portfolio management and risk management. We have noticed that a lot of management company providers are now hiring risk management professionals in response to AIFMD.
“This applies to Australian managers with alternative investment funds marketed within the European Union, such as real estate, infrastructure and private equity funds or European alternative holdings marketed outside Europe.”
He adds: “Depending on the fund manager, the cost of setting up a reporting infrastructure for AIFMD could be in the range of hundreds of thousands to millions of euros. It is a demanding process for which we have developed a solution which will help ease the burden for our clients and allow them to focus their effort on the strategic management of their funds.”