AIFMD Reporting Deadline Looms

Hedge fund managers who have registered to manage or market alternative funds in the European Union face another regulatory hurdle at the end of this month: submission of their Annex IV reports.

The information included in the Annex IV includes the main instruments traded by the manager, its investment strategies and focus (geography, sector); the markets in which the manager trades; and the  diversification of its portfolio—including principal exposures and concentrations.

Under Europe's Alternative Investment Fund Managers Directive, managers that registered with regulators by July 22, 2014 must submit their initial Annex IV reports by January 31, 2015. Managers have only a 30-day period to prepare and submit forms, compared to the 60-day filing period allowed for the U.S. Form PF, and national regulators within the EU may require different versions of the AIFMD forms.

SEI's Investment Manager Services division, which has expanded the regulatory compliance component of its global operating platform to meet Annex IV transparency reporting requirements, told FINalternatives there are three key things U.S. managers should know about the Annex IV:

1) You can’t take a one-size-fits-all approach to reporting. Each individual country in the EU has different reporting requirements and formats that are required and they are all different.

2) You may need to offer additional services. Each country also may require additional depository or depository-like services on top of reporting requirements.

3) It’s not like Form PF. There are significant and complex differences between Form PF and AIFMD that U.S. managers need to be aware of.

While there is some overlap between AIFMD Annex IV reporting and Form PF, the new European rules demand significantly more data, including detailed information on compensation, risk exposure, and liquidity. Moreover, the Annex IV reports use different definitions and calculation methods than Form PF, further complicating the compliance effort. For example, interest-rate derivatives must be reported as 10-year equivalents on Form PF, but as notional amounts for purposes of the AIFMD.