Fewer than 20% of alternative investment fund managers (AIFMSs) have submitted an application to their local regulator for AIFMD authorization, according to a BNY Mellon survey of more than 50 fund managers.
The managers were drawn from across Europe, the United States, Asia and Latin America, and they operate, or are considering operating, a fund that would be subject to AIFMD. They comprise a mix of small, medium and large fund managers—collectively holding over $4 trillion in assets under management, of which over $20 billion fall under AIFMD. Just over one-third of these managers operate more than five alternative investment funds (AIFs).
Full implementation of the Alternative Investment Fund Managers Directive (AIFMD) occurs on July 22, 2014. Given that securing authorization typically takes a number of months, bottlenecks and delays are now likely to develop, putting even greater pressure on AIFMs, depositaries and services providers as they seek to implement the necessary changes in time for July’s deadline, says BNY Mellon.
A significant number of AIFs have yet to finalize their plans towards full compliance, says the custodian, with 37% saying they are unclear as to how they will address the additional requirements around regulatory reporting.
With the majority of respondents still needing to submit applications, the survey found that 41% plan to submit their application in Q1 2014, while a further 20% said they would do so during the final three months period prior to the July 22 deadline, irrespective of the time required for preparing and processing applications.
The survey also found that the mean cost of AIFMD compliance is expected to be $300,000, consistent with the $305,000 figure posited by respondents to BNY Mellon’s previous survey six months ago. The majority of respondents believe the project/one-off costs of fulfilling AIFMD risk and compliance requirements will be at least $100,000, and potentially over $250,000, per institution. However, managers expectations are better for investors; in the survey six months ago, 88% expected the cost of funds to increase, yet only 26% of respondents in this survey expect to pass on some costs to the fund. 46% are still deciding how to absorb the extra cost, but at this point, no respondents expect to pass on all additional costs to investors.
Managers expectations have also improved in the sense that only 5% of AIFs are expected to be closed, merged or re-sold, whereas 39% in the July 2013 survey expected to close some funds, move them out of the EU or merge funds.
For risk and compliance monitoring as part of the Directive, 70% are building in-house systems, with 47% planning to use data from their portfolio managers. Still, a substantial portion, 39% have considered or have implemented at least some outsourcing for their risk and compliance reporting requirements.
AIFMD: Survey Shows Lack of Fund Manager Readiness
Fewer than 20% of alternative investment fund managers (AIFMSs) have submitted an application to their local regulator for AIFMD authorization, according to a BNY Mellon survey of more than 50 fund managers.
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