GlobeOp offers several pragmatic insights gained during private fund (Form PF) test filings on behalf of clients. The first SEC filing deadlines for hedge funds become effective in less than 100 days.
“Four broadly applicable lessons emerged as we coordinated practice filings with clients wanting to be well-prepared and confident when their reporting becomes mandatory at the end of June,” said Vernon Barback, GlobeOp president and chief operating officer. “Our dedicated Form PF team led by Tony Glickman, global head of Client Solutions, has produced test reports across a range of fund strategies and managed accounts. It’s been an instructive process for us all, including putting our automated data systems and the SEC’s electronic format through their paces. We’ve also been able to work with the regulators to discuss client questions and further refine the sustainable processes needed as Form PF becomes an ongoing fact of life for hedge funds.”
Outlining the findings, Barback noted that:
- Regulatory AUM (RAUM) calculations created confusion for some fund management companies who were under the impression that filing was driven by the fund’s net asset value (NAV). Following initial use in CFTC filings, RAUM was adopted by the SEC for fund registration and Form PF reporting. It is a measure of the gross assets on a firm’s balance sheet, including derivatives. Firms with even modest leverage can therefore have significantly higher RAUM than their normal NAV or AUM measures. This can affect a fund’s specific category of filing deadlines, frequency and content.
- The XML filing format requirements released by FINRA earlier this month have technology development implications for funds or service providers planning to prepare Form PF reports. The XML format is the most practical reporting option for large funds filing submissions on the IARD website.
- There is considerable room for interpretation in the way a fund management company completes Form PF. For many questions, there is no single answer. Managers should consider when developing their responses that Form PF, or parts of it, could potentially become a future element of investor due diligence. Data reporting choices made now could significantly affect how funds may be viewed in future by investors.
- There’s no doubt about the value of early preparation. Sourcing and processing such a wide range of data is a challenge in itself - organized, controlled and sustainable procedures are essential. Time, dedicated resources and access to expert advice are also required.
Form PF is a US regulatory requirement requiring a private, confidential filing by SEC-registered investment advisers on a quarterly or annual basis. Designed to assist the Financial Stability Oversight Council in monitoring systemic risk, it requires a broad range of data, including portfolio, performance and risk information. The first reporting period covers April 1-June 29, 2012. GlobeOp can minimize the operational burden of reporting by leveraging existing, integrated fund data infrastructures – including the general ledger, risk and pricing engines. Reports are prepared within a customized regulatory reporting environment and data warehouse. Using automated and controlled processes, GlobeOp gathers, maps and aggregates client data and produces Form PF reports for clients to review, authorize and submit electronically. As all funds must be included in a single report, GlobeOp will also aggregate data from client sources or other administrators. Fund management companies retain ownership of fund data and SEC filing.