GAIM Ops: Managers urged to collect static Annex IV data

10 Oct, 2014

Fund managers impacted by the Alternative Investment Fund Managers Directive (AIFMD) should begin collecting static data from their counterparties to start populating the Annex IV report so as to avoid a mad rush when the deadline approaches.

Firms which had received authorisation as AIFMs from their home state regulators by 22 July 2014 are required to file Annex IV reports no later than 31 October 2014. Other affected firms can expect to file Annex IV no later than 31 January 2015, or even April 2015.

“There is limited time to complete Annex IV for impacted managers. The European Securities and Markets Authority (ESMA) wants the form completed within 30 days of the end of the quarter. Most managers and their service providers– fund administrators, prime brokers and custodian banks – will have the bulk of the data. It would be advised managers collect the static data now as that will rarely change, and then spend the 30 day turnaround period obtaining the rest of the information and allowing for adequate time to review and approve the final submissions,” said Dan Connell, director at ConceptOne, speaking at GAIM Ops in Dublin.

Annex IV, which consists of 301 data fields to populate, requires managers to provide information on instruments traded, borrowings, exposures, stress test results and leverage. Reporting frequency for Annex IV is determined by assets under management (AuM). Firms running between €500 million and €1 billion are expected to file Annex IV on a semi-annual basis, while managers in excess of €1 billion must submit the report quarterly. Those managing between €100 million and €500 million must file annually.  Even hedge and private equity funds managing sums below these thresholds and marketing in Europe, must also supply some detail to regulators in those jurisdictions where they are marketing. 

The reporting frequency and scope is also subject to leverage calculations. A firm managing €500 million that is leveraged is expected to file Annex IV reports semi-annually or even quarterly, rather than annually, as regulators incorporate leverage into the AuM calculation.  Unleveraged private equity funds must provide Annex IV annually irrespective of AuM.  Regulators are allowed to arbitrarily ask certain AIFMs to increase their reporting frequency if they feel it is necessary.

Most managers appear to be devoting little time to Annex IV. “Most managers have not started collecting the necessary data. They should be doing this now otherwise they could find themselves behind the curve as reporting deadlines fast approach. The problem is particularly acute among US managers,” said Peter Cripwell, chief executive officer at RiskSystem.

The challenge is compounded by other regulatory reporting requirements elsewhere, namely Form PF with the Securities and Exchange Commission (SEC) under Dodd-Frank and Open Protocol Enabling Risk Aggregation (Open Protocol), the risk reporting toolkit developed by Albourne Partners. All of these reports prescribe different methodologies to calculate the various data sets.

“While managers are expected to provide standardised and consistent data across all of these regulatory reports, this is going to be impossible. Annex IV, for example, includes the notional value of derivatives and leverage in its calculation of “AuM” whereas Form PF does not under the Regulatory Assets under Management (RAuM) calculation. This is going to lead to inconsistency,” commented Connell.

While managers cannot replicate the data provided in Form PF or Form  CPO-PQR to the National Futures Authority, they can leverage the experience accrued during these filings.

Determining who pays for the Annex IV filing is also proving contentious. A survey –conducted by BNY Mellon and FTI Consulting – published on the eve of AIFMD’s implementation found that 13 per-cent of managers would offset all of their AIFMD regulatory costs to the fund itself. A further 29 per-cent of managers told the survey they would charge some of the costs to their funds.

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