Europe’s fund managers have just over one week to prepare for new transparency reporting requirements, however experts are concerned over how prepared the industry is come January 31.
Under the Alternative Investment Fund Managers Directive (AIFMD), managers will have to meet a comprehensive reporting template which consists of 41 highly detailed questions with 340 data fields on their strategy, borrowings, liquidity, stress test results and leverage.
The first wave of reporting for some fund managers came into effect on October 31 2014, and with the second wave all of Europe’s alternative investment fund managers (AIFMs) will have to report.
However according to a survey conducted by the financial services team of law firm Moore Stephens of fund managers earlier this month, it highlighted that only half of respondents are fully aware of the reporting requirements.
On the one hand, some experts argue that firms have failed to comprehend the huge technological task of compiling and sending these reports to the regulators.
“For AIFMs who have been mapping and testing processes ahead of this month, January will be a test of whether the work put in has created a repeatable, scalable process,” says Tim Thornton, chief data officer, Mitsubishi UFJ Fund Services. “For those who have not prepared in advance the tasks could provide a significant wakeup call as to the efforts required to comply with the regulation.”
“Many alternative investment managers underestimated the Annex IV compliance requirement when they scoped out their AIFMD programmes, and Annex IV reporting has turned out to be the most IT and process intensive compliance aspect of the Directive,” adds Rolf Bachner, managing director, product management, Asset Servicing at BNY Mellon.
On the other, some have attributed the lack of preparedness to a lack of guidance by Europe’s regulatory authorities. This is because details on the rules were not published until November 2013, which was two years after AIFMD was adopted and less than a year before the first reporting deadline came into force.
Since then, regulators have provided additional information on the technical aspects of reporting, and on Tuesday, the U.K. Financial Conduct Authority (FCA) published a Q&A document addressing certain problems that have arisen from its reporting system, GABRIEL. According to the document, some funds of U.K. and non-EU AIFMs were not visible for the reporting period to December 31 2014.
The main issue for the future of Europe’s fund industry is how they will deal with the extra costs of complying with additional regulatory burdens.
“With a potentially very tight turnaround between finalizing NAVs and having to report, this will be a big test for managers and service providers as to whether they will be able to handle the data challenge,” says Thornton.
Europe’s Fund Managers Gear For Annex IV Test
Europe’s fund managers have just over one week to prepare for new transparency reporting requirements, however experts are concerned over how prepared the industry is come January 31.