In its recently published annual statistical report on EU alternative investment funds, the European Securities and Markets Authority (ESMA) calls for improved data quality in AIFMD Annex IV reports. How to take up the data reporting challenge?
Fund managers must source between 400 and 800 data items to comply with AIFMD, depending on the type of fund in question. Data collection, structuring and maintenance create issues. Once they find a way to get the 400 to 800 data elements needed for AIFMD, fund administrators have to transform them to fill in the 340 fields in their reports to regulators. They also have to produce analysis of the data, such as charts showing in which geographies and countries they have investments. This becomes even more complicated when there’s a data split across multiple legal entities.
Embarking on the AIFMD Annex IV reporting journey
The primary objective of the Annex IV reporting requirement is to enable regulators to monitor systemic risk in the AIF industry.
The challenge of AIFMD Annex IV reporting lie in the comprehensive data analysis. It requires to fill in data fields which are the sum of hundreds of other different data fields. For many AIFMs, reporting under Annex IV of the AIFMD is a massive task. It involves much more than simply collecting and reporting data. Annex IV involves aggregating information from multiple sources and managing different types of data. This includes static data, accounting data and risk measures). Managers are then required to transform and enrich this data before it is fed into reports.
The report template in Appendix IV includes 41 very detailed questions and 340 data fields, i.e. 38 fields are manager-specific and 302 fields are AIF-specific. It requires fund managers to provide a wide range of information, including details on traded instruments, Asset under Management (AuM) and liquidity, borrowings, exposures, stress test results and leverage. Much of this data had not previously been requested by local regulators.
Without the necessary planning and organisation, Annex IV is likely to keep fund managers awake at night. Over time, the process of Annex IV reporting can be embedded into the operation of each AIFM. This may require that fund managers outsource this role to a competent provider.
DOMOS, your single source of truth
The AIFMD Annex IV reporting challenge can be addressed when the right automated solution and team are in place. In building our legal reporting solution, we developed expertise in combining data from different databases and building complex data models with digital intelligence.
The key benefits of DOMOS include:
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