According to a recent survey, two-thirds of alternative investment fund managers are concerned about meeting the reporting requirements of the AIFM Directive, while just over half are worried about meeting the risk management provisions.
The data, which is based on a poll of 60 AIFMs and third-party administrators conducted on behalf of Confluence, suggests that much of the industry will struggle to meet the looming deadlines.
AIFMD is designed to offer a greater level of transparency to investors and other stakeholders. In order to achieve this, the fund managers will have to compile, format and post detailed reports to their local regulators within 30 days of the end of the period under review. This requires the collation of a large amount of data from a variety of different sources and the performance of a number of complex calculations.
AIFMs authorised between 22 July 2013 and 30 June 2014 will have to transmit their first report covering the period from 1st July either by the end of October or the end of January depending on whether they report quarterly or half-yearly.
“Fund managers and third-party administrators are facing one of the most complex regulatory reporting challenges the industry has had to manage to date,” said Melvin Jayawardana, European Market Manager at Confluence. “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.”
More than half of the fund managers surveyed (52%) said that they plan to use a software solution to provide AIFMD transparency reporting, with a further third still undecided. Some of the larger firms have begun to write their own in-house code, but the more popular option is to use a third-party vendor.
The key features that AIFMs look for in these programs are: the ability to provide the underlying data, integration with accounting systems, a full audit trail, integration with Excel and workflow/collaboration with their legal & accounting team.
“AIFMD is creating an urgent need for fast and reliable solutions,” said 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."
For more information see the Confluence 2014 AIFMD Transparency Reporting Survey.