By Ben Cook, Managing Director, Ipes UK
The principle of AIFM reporting under Annex IV is simple. However, as Confucius once said, “Life is really simple, but we insist on making it complicated”.
Thankfully, ESMA has issued some very helpful guidance to help the industry get to grips with the reporting requirements. The FCA followed up with its guidance on 29th September 2014. This bulletin discusses the first thing to think about: frequency of reporting under the FCA’s rules.
It is important to remember that FCA requires both AIFMs and AIFs to report separately. AIF Depositaries, including Ipes, act for AIFMs and AIFs and are able to produce the reporting for both entities and have much of the data required for the reporting.
AIF Depositaries act for AIFMs and AIFs under the provisions of FUND 3.11.12R, which is reproduced below:
An AIFM that manages a UK AIF which:
- has no redemption rights exercisable during the period of five years from the date of the initial investments; and
- in accordance with its core investment policy:
- does not generally invest in AIF custodial assets; or
- generally invests in issuers or non-listed companies in order to potentially acquire control over such companies in accordance with regulation 35 of the AIFMD UK regulation
All AIFs need to report at least annually. The first step is to confirm whether the AIF meets the criteria below:
All reported funds are:
- unleveraged AIFs and;
- investing in non-listed companies and issuers in order to acquire control.
Under FCA rules, many Private Equity AIFMs fit this definition and can take advantage of the annual reporting cycle. If the AIF is leveraged, or holds listed securities, then the annual option is removed and reporting reverts to AUM to define the frequency. The table below sets this out:
|Sum(€)||Reporting frequency (on calendar basis)|
|100m/ 500m (unleveraged)||Six monthly|
|> 1 bn||Quarterly|
|Any single AIF with AUM > 500m||Quarterly|
Table 1: reporting frequency by AUM
To illustrate by way of example, if a Private Equity AIFM manages three funds as follows:
Fund I: €550m
Fund II: €150m
Fund III: €1,400m
The AIFM and AIF reporting would be annual if the first step above can be answered ‘yes’. If Fund I has exited an investment through initial public offering and retains a resultant holding in a listed company, reporting for the AIFM would be quarterly and, for the AIF, half yearly as the first step response would be ‘no’. If Fund III had made the exit, both the AIFM and AIF would require quarterly reporting, as Fund III has more than €1bn AUM.
The difference in reporting frequency should be carefully checked to ensure the deadlines are met. In all cases, unless the AIF is a fund of funds, returns must be filed within one month of the end of the reporting period. Fund of Fund AIFs are granted an additional 15 days.
The next step is to confirm which of the 333 questions in the reporting templates apply. 38 questions relate to the AIFM, of which a high proportion is static data. 295 questions relate to the AIF and that is where there is more complexity.
So, when does the reporting start? The good news is that there is no requirement to report until the end of the period after authorisation. So, for Managers authorised in July (2014) who are on a quarterly cycle the first report will be required by the end of January 2015, covering the period 1 October – 31 December 2014.
In our next update, we will discuss the AIF reporting questions in more detail, and will provide a summary of the FCA’s newly published advice on Annex IV reporting.
Ipes provides its Depositary clients with support and reporting templates as part of our standard service. If you would like to discuss this in greater detail, please give me a call.