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ESMA guidelines make risk stats mandatory requirement for AIFMD reporting

Investor Analytics sees ESMA’s recently updated guidelines as firmly placing risk statistics like value-at-risk and sensitivity analysis as mandatory requirements for AIFMD reporting.

Investor Analytics has seen a tremendous increase in clients’ interest to better understand the risk reporting requirements of Annex IV, which is part of the sweeping Alternative Investment Funds Manager Directive (AIFMD).
The European Securities and Markets Authority (ESMA) has recently responded to stakeholders’ questions and has clarified the reporting requirements for alternative investment fund managers to include a wide array of risk analytics.
Highlights of the 1 October final report issued by ESMA include the following reporting requirements:
• Portfolio concentration: by investment strategy, principal markets/instruments, value and turnover;
• Risk measures, liquidity and leverage of the AIF;
• Exposure, leverage and value‐at-risk;
• Vega, net FX delta, and commodity delta, DV01 and CS01 (both by maturity bucket);
• Various stresses such as: yield curve stresses, credit stresses, equity stresses, commodity stresses, currency stresses and implied volatility stresses
The new template contains additionally required data about security identifiers, counterparty identification, more granular asset class coverage, more granular investor groups, codes for options and short positions and a host of other new requirements.
Unlike other regulations, the AIFMD leaves no room for managers to opt-out or provide only cursory risk information.
ESMA’s clarifying statements make it clear that all hedge funds falling under the AIFMD must submit detailed risk information that will require significant investments in time, data consolidation efforts, and risk analytics expertise.
Given this recent clarification of the AIFMD reporting requirements, Investor Analytics believes ESMA has visibly raised the awareness and importance of risk reporting by fund managers.

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