Majority of AIFMs Concerned With Reporting to Local Regulators

While 95% of alternative investment fund managers say they feel informed on the requirements of the Alternative Investment Fund Managers Directive (AIFMD), 67% say they are still concerned with reporting to local regulators, according to a Confluence survey.
By Jake Safane(2147484770)
While 95% of alternative investment fund managers say they feel informed on the requirements of the Alternative Investment Fund Managers Directive (AIFMD), 67% say they are still concerned with reporting to local regulators, according to a Confluence survey.

The survey, conducted in collaboration with market research firm Candice Bennett & Associates, polled 60 AIFMs and third-party administrators.

The results show that in addition to the concerns with local reporting, 42% of AIFMs and third-party administrators are unsure of what solution they will use to solve the reporting challenge. For survey respondents who have decided on a solution, 52% say they plan to use a software solution for AIFMD transparency.

“Fund managers and third-party administrators are facing one of the most complex regulatory reporting challenges the industry has had to manage to date,” says Melvin Jayawardana, European market manager at Confluence. “At the heart of their concern is AIFMD’s requirement for reports to be validated, formatted and posted as quickly as 30 days after the end of the reviewed period. This is a major hurdle for an industry that has not implemented methods for handling such reporting granularity or frequency in a very narrow window before now.”

As deadlines draw near, 82% of third party administrators say their organization will support clients by offering an AIFMD transparency reporting solution, with 38% saying they will use a software solution, a figure that Jayawardana describes as disappointing because that means the majority think they can handle the data manually. Over time, though, he thinks most will realize the enormity of the required data necessitates an automated solution. 

“AIFMD is creating an urgent need for fast and reliable solutions,” says Jayawardana. “At Confluence, we believe the number of AIFMs and third-party administrators looking for innovative and dependable software solutions will accelerate the trend toward data automation in the back office. We see this need as providing a tremendous opportunity to usher in a new era of operational sophistication and streamlined business processes for the alternative investment sector, which will likely open up doors to new investors and lead to significant growth in the sector over the next several years.”

While administrators are offering support in terms of providing solutions, 59% say their organization will not accept liability for the quality of reporting provided to regulators. And in addition to AIFMs themselves being concerned about reporting, managers are also very concerned with risk management (says 52%), cost of depositary (42%), marketing of funds (38%), and remuneration (33%).

Lastly, 76% of AIFMs say they are especially concerned with the need for software to provide audit trails and include workflow features that allow for collaboration with their own legal and accounting teams; this figure supports the long-term notion that managers will look to implement a comprehensive software solution in order to handle these needs.

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