Fresh off of the heels the industry's first Alternative Investment Fund Managers Directive (AIFMD) Annex IV reporting deadline, for the period ending on Dec. 31, 2014, asset managers and third-party service providers on both sides of the Atlantic are working feverishly to identify how to improve the extensive reporting process going forward.
Completing the first AIFMD transparency reporting obligations capped a tumultuous year for alternative asset managers in the European Union,” said Thomas Pfister, manager of EMEA market management at Confluence, a provider of investment data management automation for regulatory, financial and investor reporting. “Moving from a non-regulated to a fully regulated business environment involved adjusting nearly all aspect of the business, from remuneration and valuation policies to complex and localized transparency reporting requirements."
Satisfying the Directive has required a significant investment of time and resources. The complexity of the regulatory filing alone includes collecting more than 400 data points, many of which were previously unreported or did not exist in internal systems.
“Managers had to integrate with external data providers and third-party administrators, while simultaneously navigating the challenges posed by unique reporting requirements in each regulatory jurisdiction,” Pfister said.
Confluence has seen considerable growth in the use of its Unity NXT AIFMD Transparency Reporting product by asset managers, which provides assistance in complying with AIFMD by streamlining the reporting process and providing automated validation and audit controls.
Hugh Byrne, managing director EMEA business development at Confluence said in a release: "AIFMD was an important piece of legislation for the fund management industry, presenting major implementation and compliance challenges. Meeting this milestone regulatory reporting deadline was a real test to see if managers had the systems and processes in place to manage the report's complex data challenges, and deliver the necessary documentation to the regulators accurately and on time.”
The Dec. 31 reporting period is the most significant to date since it represents the first time that all authorized AIFMs, regardless of size or types of AIFs managed, must report to the required national authorities.
While much of the industry has viewed AIFMD as a burden, forward-thinking firms are embracing this new norm of intense regulatory oversight and investor transparency as an opportunity, Pfister said.
“For them, AIFMD represents a turning point for the industry that will create considerable growth,” he said. “Going forward, success will be determined by the managers that can best enhance operational efficiency by improving data management processes while remaining flexible within a complex regulatory environment."
Pfister added, "Asset managers need to implement a flexible technology-backed operating model that allows them to comply with current regulations and enables them to quickly and efficiently comply with future requirements that are yet to be defined."