Hedge funds still lagging with Form PF preparation, according to COOConnect poll

Fund AdministrationOperational RiskOutsourcingRegulation
16 Mar, 2012

Hedge funds appear to be lagging behind with their Form PF (Private Fund) preparations, according to a poll by COOConnect.

Approximately 38% of respondents said managers were behind the curve while 38% also acknowledged progress was being made albeit at a grudgingly slow pace.  Only 8% claimed managers were meeting their Form PF requirements in good time.

Submission deadlines for Form PF are fast approaching. Managers with more than $1.5 billion in assets are required to submit their Form PF to US regulators no later than December 2012 while $5 billion plus managers must hand it in by June 2012.

“Managers who have a June filing deadline are relatively advanced in their preparations and some may have even performed dry-runs. However, managers with December deadlines are probably less prepared as the deadline is not as imminent. They will need to focus on it through the summer months so that they are ready to start in August or September. However, the SEC’s decision to extend the deadline in October 2011, could have led to some managers putting Form PF on the backburner,” said Vernon Barback, president and chief operating officer at GlobeOp.

The data required, which will be utilised by the Financial Stability Oversight Council (FSOC) to monitor systemic risk, is incredibly detailed. It will include information about hedge funds’ exposures by asset class, counterparty risk, leverage, geographical concentration, risk profile, investor details, collateral details, liquidity, strategy coverage and turnover by asset class. Managers could even be required to report other risk measures such as stress test results and Value at Risk (VaR) data.

There is also confusion about the exact nature of what the Securities and Exchange Commission (SEC) means by regulatory AuM. Some managers still remain unaware regulatory AuM is in effect gross AuM and will incorporate leverage and the notional value of derivatives contracts.

This is a cause for concern, according to Barback. “There is a risk a few managers might be working towards the wrong Form PF deadline because they have misinterpreted the SEC’s definition of AuM. A manager might believe they have less than $5 billion AuM when in fact leverage and the notional value of derivatives could push AuM northwards of $5 billion. This will be a problem for these managers as anyone with more than $5 billion must submit their Form PF filing for June,” commented Barback.


Written by Owen Dickson