A recent survey assessed the state of readiness of European fund managers relating to deadline for compliance with the new AIFMD regulations. “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, a leader in investment data management automation. “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.”
These deadlines are as follows:
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AIFMD Transparency Reporting Survey
The 2014 Alternative Investment Fund Management Directive Transparency Reporting Survey, a joint effort of Confluence and Candice Bennett & Associates, Inc., conducted 60 interviews with Alternative Investment Fund Managers (AIFMs) and Third-Party Administrators (TPAs) for their views on AIFMD regulations and their compliance.
Regulatory and customer demands from fund managers
Fund managers need to comply with European regulators’ implementation of AIFMD within arduous timelines on the one hand, and demands from investors, particularly institutions, for greater transparency and more data on fund operations, on the other.
It turns out most AIFMs and TPAs are reasonably aware of the regulatory demands from AIFMD. Nearly all of the participants (95%) said they were aware of AIFMD requirements.
Furthermore, a significant percentage of the participants (76% AIFMs, 67% Third Party Administrators) had completed a review of the various data elements required for AIFMD compliance, as shown in the graph below.
A key area of worry related to reporting to local regulators, with nearly 67% of AIFMs and 49% of TPAs saying they were still concerned about this aspect. Risk management was next in line, with 52% of AIFMs and 56% of TPAs expressing concern.
On technology, 52% of AIFMs plan to add software solutions to handle AIFMD transparency reporting, 14% will do without and about a third are still undecided. On the other hand, only 38% of TPAs intend to go the software route, 15% do not plan on software and nearly half (46%) are still on the fence.
Seeking help on regulatory compliance issues
Nearly a third of AIFMs said they would use the services of an existing vendor for regulatory compliance and roughly a fifth (19%) said they would either build up in-house capabilities or seek help from auditors.
Though AIFMD brings with it many compliance responsibilities, according to Jayawardana, it 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 error of operational sophistication and streamline business processes for the alternative investment sector, which will likely open up doors to new investors and lead to significant growth the sector over the next several years.”