Regulatory reporting remains a pertinent issue for a lot of fund managers under AIFMD. One of the attractions of going with a fully outsourced AIFM, which can also provide sub-fund capabilities for those dipping their toe into Europe, is that the reporting and operational compliance function is taken care of.
But for those managers who wish to continue to privately place their offshore funds into Europe, the regulatory reporting requirement under Annex IV is a key operational task; and one that they increasingly rely on their fund administrator to help with.
ConceptONE, LLC, which specialises in regulatory reporting and risk and portfolio analytics, has developed a regulatory enterprise risk management solution – RegERMTM – to meet the regulatory reporting challenge. A holistic solution, it arms managers with the tools needed to meet today's myriad reporting needs: not just Annex IV, but Form PF, CPO-PQR under Dodd Frank and EMIR.
"ManCo or no ManCo, our technology can support either scenario," says Ethan Wishnick (pictured), Associate General Counsel & Vice President, ConceptONE, LLC. "We work closely with the funds' administrators and other service providers to take as much of the reporting process into our own hands as possible. We find that this works particularly well when managers are going through their first Annex IV filing."
By aggregating the fund data directly from the administrator, outsourced risk provider etc., into the ConceptONE system, it provides a single interface to easily review all of the regulatory information prior to filing.
This is especially helpful for third party AIFMs looking to attract business from non-EU managers as it helps reassure them that the process of running an EU AIF need not be an operational nightmare. "It takes a significant workload off the fund, knowing that the AIFM only has to review the filing that we put together for them.
"That said, we only have a small number of managers currently using an outsourced AIFM. When we speak to new managers, many often decide that the ManCo option is not right for them. By choosing a ManCo you give up a significant amount of control of your business to someone else and I think that is the biggest concern that we are hearing among clients, particularly in the US," says Wishnick.
This is a cultural shift that will take time to establish. It is a new concept for private funds and private fund managers to go with the outsourced AIFM option, "but it will be a growing business in Europe based on the success of the external ManCo under UCITS," adds Wishnick. He notes that the level of dialogue is increasing with ManCos to provide them with regulatory reporting, risk and portfolio analytics reporting, so that they can provide a more complete package to managers who join their platforms and launch funds in Europe.
"We've spoken to a few AIFMs recently who are looking for something like our RegERM solution. But, the majority of interest we are fielding is coming from mid-sized and smaller fund administrators who want to provide this service to their fund manager clients. Especially as US managers are choosing to continue either with reverse solicitation or to market their fund(s) into selective European markets under the NPPRs.
"It would be interesting to know whether the ManCos are pushing their fund administrators to have such capabilities in place rather than take on the burden themselves," concludes Wishnick.
