The top three challenges for managers when it comes to the Alternative Investment Fund Managers Directive (AIFMD) Annex IV reporting, according to financial services advisory and consultancy Kinetic Partners, are knowing when/which sections to report, valuing certain instruments such as asset-backed securities, and handling the “look-through” provision.
In terms of the timelines, Kinetic recommends that AIFMs refer to the flowcharts in Annex I of the European Securities and Markets Authority’s (ESMA’s) Final Report to confirm the frequency of reporting and to know which sections need to be completed for the AIFM and the individual AIFs. ESMA has a consolidated template, which Kinetic advises firms to use to see what information they should be gathering and analyzing for their own reports.
“Reporting obligations for AIFMs will vary depending on whether the AIF is managed or marketed in the EEA (European Economic Area) or not,” says Andrew Shrimpton, global head of regulatory compliance at Kinetic Partners. “AIFMs therefore need to establish their reporting obligations and determine when their first report is due, the frequency with which they should report, which AIFs they should be reporting on and the sections of the report which they should complete.
For hard-to-value instruments, Kinetic says that AIFMs should use estimated figures if they can not accurately obtain valuations on time. Once the figures can be finalized, firms should the request a resubmission, though this should be within one month of the submission deadline.
In handling look-through on investments, Kinetic says that for master/feeder structures, there is no look-through to the master when AIFMs are completing a report on the feeder AIF. There is also no requirement to look through to the holdings in the funds held by a fund of funds AIF. And if a private equity firm is making investments in entities through special purpose vehicles, then there is no requirement to look through these vehicles.
This past February, Kinetic gained its owned AIFM license in Luxembourg, where it can operate as a “Super ManCo,” offering outsourced fund management services to third party AIFs in addition to UCITS funds.
Kinetic Partners Issues Guidance on Top Three Annex IV Challenges
The top three challenges for managers when it comes to the Alternative Investment Fund Managers Directive (AIFMD) Annex IV reporting, according to financial services advisory and consultancy Kinetic Partners, are knowing when/which sections to report, valuing certain instruments such as asset-backed securities, and handling the "look-through" provision.