How to Simplify the Complexity of AIFMD Reporting

Under today’s modern Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) framework that is in place throughout the European Union (EU), Alternative Investment Fund Managers (AIFMs) face an uphill struggle to meet their AIFMD reporting obligations. There are two types of Annex IV report: (1) the Alternative Investment Fund (AIF) report; and (2) the AIFM report. Whilst the AIF report provides details of the manager and a consolidated report of the assets managed, the AIFM report which must be completed for each fund must identify, for example, the fund risks (liquidity, market, counterparty), principal markets and instruments in which the AIFM trades, and the diversification of the AIF’s portfolio, i.e. principle exposures and concentrations for each AIF.

In practice Annex IV reporting can be highly complex and time consuming for AIFMDs. If AIFMDs are managing different types of funds they will be required to report data at different frequencies and according to different reporting periods. They must file within 30 days after the end of each reporting period. They must carry out a range of complex calculations and collect, classify, validate, and submit highly granular date from multiple sources. Indeed, the Financial Conduct Authority (FCA) has identified a huge range of common validation errors (FCA Common AIFMD Validation Errors).  Firms must also comprehensively understand ESMA’s AIFMD Reporting Guidelines. There are hundreds of fields to populate for each AIF, with a large number of highly detailed questions, and multiple variations of AIF and AIFM reports.

AIFMDs need to apply a new portfolio assets classification schema against existing classification or reference databases. They need to understand the new leverage framework and risk exposure calculation methods (gross and commitment), as well as how to correctly calculate Assets Under Management (AUM). The difficulty that many AIFMD face is that many AIFMDs have unique data management systems that often combine custom and third-party systems that hold multiple sub-sets of data (e.g. counterparty risk, investor data, positions data, trading data, liquidity risk). Simply trying to source all the data required from multiple disparate sources and combining, refining, and auditing the data into a single aggregated format is a highly complex challenge. Not to mention undertaking full workflow mapping, testing and validation procedures, and mapping the data to the correct AIFMD reporting taxonomy.

So, how can AIFMDs simplify Annex IV reporting? Simple, AIFMDs should use a highly cost-effective third party Annex IV reporting provider that has the professional experience and expertise to be able to provide them with a superior Annex IV reporting experience. By leveraging a reporting provider’s wealth of industry reporting experience they can benefit from a simplified and streamlined Annex IV reporting framework. AIFMDs can save time, they can save effort, and they can save costs. At DataTracks we make it our business to understand the new and highly complex AIFMD operational framework, and we strive to provide cost-effective reporting solutions for firms.

For more information on our AIFMD reporting solutions and prices, please feel free to email us at: enquiry@datatracks.eu.