AIFMD implementation sucessful, but doubts remain on regulatory data

The funds industry has successfully implemented the requirements of the Alternative Investment Fund Managers Directive over the past year but has doubts about the use of data being gathered by regulators and question whether it is helping regulators to better spot threats and systemic risks that may impact market stability.

In the fourth in an annual series of surveys conducted by investment fund software specialist Multifonds, the majority of respondents (56%) expressed uncertainty as to how regulators would use all the data collected from AIFMs while less than a quarter (23%) believe that AIFMD actually enables regulators to better identify threats to market stability.

In the year since implementation that has seen the majority of AIFMs complete their registration and authorisation process and submit their first sets of Annex IV reports, regulatory reporting has presented the biggest challenge, with the proportion of respondents citing regulatory reporting as their biggest concern rising to 81%, up from 66% in 2014. Over the last year, the AIFMs have had to work out how to marry their multiple systems together and then aggregate, store and report the resulting data. Now the focus is on the regulators to do the same.

“While it is encouraging the fund industry believes AIFMD has been successfully implemented, it is now on the shoulders of regulators toemonstrate the real value of the extensive efforts made by fund managers and administrators to comply with the directive,” said Keith Hale, Multifonds’ executive vice president for client and business development. “With regulatory reporting clearly an increasing concern across the board, it is crucial that regulators vocalise the importance of AIFMD and clearly outline how the data will be used, otherwise it will be at risk of being perceived merely as an administrative or bureaucratic burden with little tangible value.”

Despite these doubts, the consensus within the industry is that local regulators have been successful in their introduction of the directive, with 85% agreeing that it has been well implemented. Costs, particularly depositary costs, have also stabilised in line with expectations. The majority (56%) have experienced an increase in depositary costs of less than 2.5 basis points. This is in line with the industry predictions made in Multifonds’ 2014 survey, when nearly half (49%) expected depositary costs to be lower than 2.5bps but in contrast with earlier estimates (in 2013) that predicted depositary costs could rise by up to 100 basis points.

The successful implementation has cemented the industry’s expectation of AIFMD becoming a global brand to rival UCITS, with the overwhelming majority (87%) believing AIFMD will come to rival UCITS as a de facto international standard for distributing AIFs. This is significantly more than the figure in Multifonds’ 2014 survey, when just over half (54%) thought the same.

The extension of the AIFMD passport is seen as a critical milestone in AIFMD’s journey to becoming a global brand. The fund industry is in agreement in regards to the extension, with nearly three quarters (74%) believing that the AIFMD passport should be extended to EU managers from non-EU AIFs. However, of the three quarters that agree with the extension, 39% think this should only take place once private placement is abolished, suggesting that the existing channels are meeting the current market needs.