Alternative investment fund managers (AIFMs) must report each AIF they manage or market within the European Union to the national competent authority. The timing of this reporting together with the procedures have to be followed by the AIFMs in order to prevent warnings or fines from the national competent authority.

Alternative Investment Fund Managers (AIFMs) should report information under Article 3 and 24 to their national competent authorities (NCAs). AIFMs should start reporting from the first day of the following quarter after they have information to report, until the end of the first reporting period. 

For example: when an AIFM is subject to half-yearly reporting obligations, AIFMs that have information to report as from 16 February would start reporting information as from the 1st of April to the 30th of June. AIFMs have to report only once per reporting period, covering the entire reporting period. 

The scope of AIFMD Annex IV reporting to be completed depends on a number of factors including the assets under management (AuM), the degree of leverage, the type of assets held and whether the AIFM is registered or authorised.

AUM calculation

For funds that hold derivatives the regulatory AUM is not the same as the NAV.  A specific calculation is needed to value the aggregate nominal value of the derivative underlying.

Leverage

This is calculated as the risk exposure divided by the NAV – but there are two risk exposure calculation methods (commitment and gross).

Classification

ESMA guidelines prescribe a classification schema for portfolio assets and these need to be mapped against existing characteristics in your core systems.

Submission

Once finalized the report has to be rendered into the correct XML format required by the country’s national competent authority, and then needs to be submitted. This requires in-depth technical knowledge.

Control

Syntax and logical checks must be performed. Fund managers must make sure that they have a clear audit trail to explain, field by field, where the data originated from, how it was transformed, and if there were amendments, who did what. 

The report

Compiling the report entails collecting, enriching, classifying and validating data from multiple sources and performing complex calculations. In total there are 41 detailed questions. Fund managers must ensure that the reports are delivered on time and in the correct format (which will depend on the system used by the national competent authority in question).

In order to create the AIFMD reporting XML you need in-depth technical knowledge of Microsoft Excel. XML stands for Extensible Markup Language that defines a set of rules to interpret a document. With the help of a developer you can convert your data from CSV into the required XML formatted file. The XML format must be compliant with the most recent format published by the ESMA. Looking for an automated solution? Then you might want to consider our AIFMD Annex IV reporting software. 

The AIFMD regulates the management and marketing of alternative investment funds (such as hedge funds, private equity and real estate funds) in the EU. It provides for a European ‘passport’ which allows alternative investment funds managers (AIFMs) to manage and/or market alternative investment funds (AIFs) across the European Union (EU), on the basis of a single authorization by their local regulator.

Non-EU / EEA (Third Country) AIFMs, for example Caymen Islands Hong Kong, Singapore Switzerland, the United States but also Guernsey, Jersey & Isle of Man, wishing to manage or market AIFs in the EU, and EU AIFMs marketing non-EU AIFs, do not have a European passport, so any marketing of such AIFs may only be carried out in compliance with the private placement rules of each EU country into which the AIF is sold and require regular filings of the AIFMD annex IV report to each of the regulators of the relevant EU countries.

In the future the AIFMD envisages the extension of the European passport to AIFMs and AIFs from third countries, and has mandated the European Securities and Markets Authority (ESMA) to advise the European Parliament, Council and the European Commission. At this moment no Third country passports have been granted.