AIFMD: in house or outsource?

The UK regulatory reporting system for the Alternative Investment Funds Managers Directive (AIFMD) is live, but for many their first reporting deadline still looms on the horizon.

While some firms completed the necessary ‘Annex IV’ reporting for the directive last week, many do not have to submit their responses until January next year. With information such as details of investment strategies, market liquidity risk, and stress test results required, what challenges are they facing in the lead up to this important deadline?

Phil Christianson, associate director of product management at Eze Software Group, a service provider that has developed solutions for regulatory reporting, says for the majority of his clients, the end of January is the focus. “We didn’t hear about a lot of filers happening in October or November so the end of January does seem to be a big crunch time,” he says.

Christianson sees a range of issues that clients must tackle to complete the reporting successfully. He says it is easy to become distracted in the basic process of interpretation; ensuring that questions are understood, answers are organised correctly and fund structures are right, and forget that the process will need to be completed again and again after this laborious first round.

“We think repeatability is the largest challenge. Once clients have figured out what it all means, where the data is coming from, it really becomes a question of repeatability: how do you make this easier from quarter to quarter? It’s certainly something that people can lose sight of, especially in the beginning,” he says.

One option is to outsource, placing the tasks connected with the complex reporting requirements with an external provider.
Christianson says: “I think that there’s tendency to outsource in the beginning, because it’s a large scary thing to have to put together … it seems to be the path of least resistance to some extent.”

However, he adds that some firms are reluctant to take this option because of high, on-going costs. An alternative is to establish and internal process, using data warehousing tools, which allow specific data to be collected with less manual input. That data can then be repurposed for different requirements, such as investor newsletters, portfolio management reports or performance information.

“That type of data that’s being served up to these filings is a very valuable data set if you can get it organised and consolidated in a single place,” he says.

It’s very hard for people to think about that now because it feels like so much, but its important to look at the long game.”

While early registrants may be breathing a sigh of relief after tackling this first hurdle, in the lead up to the end of January many others will face the choice of how best to approach the reporting, and what will be sustainable in the future.

©2014 funds europe



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