You’ll have noticed the amount of coverage on Alternative Investment Fund Managers Directive (AIFMD) reporting has jumped in the last month or so. It’s no coincidence why. When speaking with compliance officers (both from within and outside of the EU), they’re almost appear eager to turn the conversation towards the stress that comes with understanding what’s known as Annex IV reporting. But their time to gain a handle on it is winding down.
A survey released in September reveals how late some GPs have left it. Over half (57 percent) of EU-based managers subject to the directive said they hadn’t begun their reporting preparations. Four months on, and it seems progress is still needed. A Moore Stephens poll unveiled this month found that 42 percent of fund managers are unsure of the information required by Annex IV and almost 35 percent said they are still not prepared for the reporting process. A similar readership poll run on our website this year found the same.
Considering that most AIFMD-authorized managers will file their first Annex IV report at the end of this month, it was equally surprising to learn that 88 percent of managers in the Moore Stephens survey feel confident about their ability to successfully meet the deadline. What we understand is that GPs are relying on their fund administrators and other third party arrangements to complete the process, but for some that confidence may be somewhat misplaced.
Peter Cripwell, head of reporting software provider RiskSystem, cautions that supply may not be able to meet demand here.
“External administrators are overwhelmed by requests to complete the Annex IV reporting requirements, and are having to turn away potential clients due to system overloads and capacity.”
Another compliance consultant whose firm is offering a reporting solution says he’s also turning away GPs who join the game too late. “We are closing the door on support because you need a four to five week lead in time for this report.”
The reason? It takes a lot of effort and time to complete the reports mainly because of the bespoke nature of each filing. Just trying to figure out what questions each GP needs to answer has resulted in a considerable amount of GP head-scratching; partly because Annex IV contains three types of questions: mandatory, optional and conditional mandatory. And answering a question in a particular way has a cascading effect on the questions that follow. The little known fact is that working out how questions need to be answered is buried deep in the Annex IV’s technical guidance, which some market sources say GPs have not studied enough.
The key takeaway of course is to act now, but unfortunately for some, it may be too little too late. Subscribers to pfm are encouraged to read our February issue, which tackles the challenge in greater depth. (Although if your being a subscriber reflects your level of interest in this topic, you’re probably not amongst those who need the most help).