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AIFMD – A brief review from London

Date: March 4, 2015

On 19th February, StatPro held an AIFMD Roundup breakfast briefing at the City of London Club. 

52 clients and prospects attended to hear from Benjamin Gauthier, Governance, Risk and Controls Director at PwC Luxembourg and Mattia Prati, Global Product Specialist Manager at StatPro, discuss their views on the Alternative Investment Managers Directive story so far and how fund managers are working with the regulation in regard to risk monitoring and reporting.

At the close the audience was surveyed. One year since our last event, had anything really changed?

Benjamin discussed the minimum requirements being: backtesting, stress testing for the main risk drivers, computation of the leverage, risk measurement for all key categories and for factors that are relevant to the strategy and monitoring of limits. But does everyone know and understand this?

We asked “How well informed do you believe you are about the requirements for the following regulations?” 67% said they felt informed but only 13% felt very informed. What more could the industry and the Directive in particular be doing to ensure the investment community feels well informed and therefore fully able to understand and therefore comply with another regulation. The remaining 20% said were “not very” informed. Could solution providers be assisting with this knowledge?

We asked: “How have you addressed new regulatory reporting responsibilities?” Respondents were able to cite multiple options. 21 said they had “gathered information from auditors, peers, industry websites, advertising and conferences”, 13 attendees said they had “built in-house solutions”, 24 said they “use an existing vendor” and 11 are “seeking or have sought new systems/services from the market”. But as Benjamin presented there is often a large gap between theory and practice. Having procedures does not mean that actual processes are in place.

We asked the audience “What outcome the AIFMD will produce?” Again multiple answers were given. 17 respondents said that the AIFMD will “raise the standards of how funds monitor risk”, 21 suggested it will “reduce competitiveness in the EU market by acting as a barrier to entry”, eight answered that it will provide investor protection” and a huge 28 said it will be a “costly exercise”. Of those that answered a “costly exercise” reasons included “external guidance”, “IT, legal and human resources”, “software costs” to “to implement changes to processes and documentation”.

Mattia responded to Benjamin’s overview with a demonstration of StatPro Revolution. Picking up on Benjamin’s points Mattia detailed a sound risk management process, one which is documented, complete and maintained, may tackle some of the costly exercise concerns the audience had.

 

View all photos from the London AIFMD Roundup event

 

We asked the audience which features of a regulatory reporting system were important to them. They answered:

  • Ability to provide a daily funds monitoring interface- 13
  • Generate automated reporting- 23
  • Create audit trails that show revisions and answers- 23
  • Provide underlying data (positions, notes, assumptions, etc.) to regulators in the event of an audit- 28
  • Workflow/collaboration between compliance, accounting, front office teams etc.- 15
  • Integration with excel or other output formats- 16
  • Overall running cost to your organisation- 25
  • Integration of fund data from accounting systems or fund administrators- 16

Through the use of examples with StatPro Revolution, Mattia answered some of these concerns. He discussed how stress test should be relevant and return meaningful results and that those results and analysis should reach stakeholders (internally and externally) swiftly. He explained how the framework must be transparent in order to explain results when needed. With a robust risk environment, plus documented processes in place detailing automation of processes and reporting, distribution of information and evidence of an audit trail Mattia visualized how there were cost reduction opportunities.

We asked the audience whether they had any plans to “mitigate their running costs” Although some said “no” with verbatim such as “may recruit more people” the majority answered “yes”. Answers included “upon final delivery partial automation to XML delivery”, “in discussions with advisers”, “automation as far as feasible”, “looking at outsourcing options”.

The final questions asked “are you intending to do further work on your fund risk monitoring and reporting processes?” 27 answered “yes” and three, “no” whilst eight were “undecided”. The challenge rumbles on.

Find out more about StatPro Revolution’s award winning Risk Limits and Commitment Leverage Monitoring module.

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