Asset managers expect to allocate a larger portion of their budgets to regulation this year with many finding they need to spend more on compliance with the Alternative Investment Fund Managers Directive (AIFMD) than they had planned.
A survey of major asset managers with a combined £6 trillion (€8.4 trillion) of assets under management finds that over three quarters of them expect to spend more on regulation in budgetary terms this year compared to last.
The survey, by consultancy Alpha FMC, also reveals that asset managers are sceptical about the aims of individual regulations and they ”bemoan” the lack of clarity in the regulatory agenda.
Duncan Spencer, a director at Alpha FMC, says that “most of the asset managers we’ve spoken to have bemoaned the lack of clear or consistent understanding of what each regulation is actually driving at”.
He adds: “There is also scepticism as to the extent to which the regulatory agenda is being considered within the context of existing and future regulatory framework by policy makers.”
Asset managers want regulators to clarify the “true objectives of all regulation, and consider regulation in the round - rather than as a collection of initiatives to be regarded in individual siloes”, Spencer says.
Overspend on the AIFMD is an issue for two thirds of the managers.
However, the updated Markets in Financial Instruments Directive (MiFID II) and the European Market Infrastructure Directive (Emir), along with Solvency II are the greatest concern for asset managers in terms of budgetary spend.
MiFID II is the regulation of primary concerns for managers in the coming years, Spencer says.
Overlapping areas of MiFID II and Emir are part of the concern. The survey highlights a need for greater consistency of data standards in terms of regulatory reporting.
The survey also finds that many firms expect to create a central team for regulatory reporting, though 80% do not currently have one.
Managers also have to confront what they see as contradictory elements in regulations for packaged retail and insurance-based investment products, known as Priips, and traditional investment funds under the Ucits directive.
Despite the challenge, most asset managers consider that they are well set up to manage the regulatory agenda, with half the firms polled having created a specific function to deal with regulatory change.
A further issue on the minds of asset managers is the proposals from the European Securities and Markets Authority (Esma) for the passporting of alternative funds from outside the EU, which are due to be published imminently.
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