AIFMD Regulatory Session - Valuation Risk Forum
New regulation, new data requirements, and new technology. It’s not surprising that close to 100 market participants turned up to discuss industry developments at our Valuation Risk Forum at the London Stock Exchange on 26 November.
Event Page & More ContentWith financial organisations being hit with constant changes, it’s hard to keep up with what needs to be done to meet new requirements and stay ahead of the competition. The forum was the ideal place for industry experts to meet and discuss what’s on the horizon.
The first keynote by Andrew Shrimpton, global head of regulatory compliance, Kinetic Partners, created a stir in the audience. A number of the delegates wanted to take the opportunity to get all their AIFMD and Annex IV questions answered after Shrimpton had highlighted why these were the big issues for the buy-side this year.
Under AIFMD, which is very much putting the liability on the manager, firms have had to ensure their valuation function – a concept introduced by the directive – is independent from the portfolio manager, including a valuation committee with representation from both middle and back office as well as portfolio management. It may sound straightforward, but this may involve reviewing renumeration policies and involving multiple parties in the organization.
It doesn’t stop there though. The next big thing for many buy-side firms, including hedge funds and private equity firms, is Annex IV reporting, something Shrimpton explained as being a data gathering exercise. The idea, he said, is that the new reporting requirements will help central banks spot a bubble and deflate it before it blows up.
Firms who fall under the remit of Annex IV will have to fill in some very detailed spreadsheets, and it’s not just one spreadsheet per firm. Managers report on themselves, but also on each and every fund they have, explained Shrimpton.
So what should private equity and hedge funds do? “You need to start thinking about this now,” urged Shrimpton, saying firms need to find out how they are going to gather all the data needed for Annex IV and establish new processes with adequate control functions.