Many AIFMs Still Uncertain of How to Solve Reporting Problem
As the April and July AIFMD compliance deadlines draw near, more than two-thirds (67%) of alternative investment fund managers say they are still concerned with reporting to local regulators, despite nearly all (95%) saying they feel informed on the requirements of AIFMD. This is one of the key findings of Confluence's 2014 Alternative Investment Fund Management Directive Transparency Reporting Survey, which polled 60 AIFMs and third party administrators to assess perceptions of and attitudes toward AIFMD regulation and compliance.
“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. “At the heart of their concern is AIFMD's requirement for reports to be validated, formatted and posted as quickly as 30 days after the end of the reviewed period. 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."
In addition to their concerns with local reporting, almost half (42%) of AIFMs and third-party administrators say they are unsure of how they will solve the reporting challenge. For survey respondents who have decided on a solution, roughly half (52%) say they plan to use a software solution for AIFMD transparency.
The vast majority (82%) of third party administrators say their organization will support clients by offering an AIFMD transparency reporting solution, with 38% saying they will use a software solution. Despite this support, more than half (59%) say their organization will not accept liability for the quality of reporting provided to regulators.
"AIFMD is creating an urgent need for fast and reliable solutions," Jayawardana said. "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."
Other key insights from the survey include:
- In addition to reporting to local regulators, AIFMs say they are 'very concerned' with risk management (52%), cost of depositary (42%), marketing of funds (38%), and remuneration (33%).
- More than three quarters (76%) of AIFMs say they are especially concerned with the need for software to provide audit trails and include workflow features that allow for collaboration with their own legal and accounting teams.
Confluence collaborated with Candice Bennett & Associates, Inc., on the 2014 Alternative Investment Fund Management Directive Transparency Reporting Survey. The fund and asset servicing industry survey was conducted between January 20, 2014 and February 24, 2014. A total of 60 interviews we conducted with AIFMs and Third Party Administrators to assess perceptions of and attitudes toward AIFMD regulation and compliance.