April 11, 2023CORDIUM POWERPOINT MASTER 1

ANNEX IV – THE NEXT CHAPTER IN AIFMD

Thursday 11th September 2014

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o Annex IV, an overview - Bobby Johal, Managing Consultant - Technical, Cordium

o Cloud based reporting solution - Gurvinder Singh, Co-Founder and CEO, Indus Valley Partners

o Helpful tips on Annex IV reporting - Fiona Bisset, Alternative Investment Team Manager, FCA

o Q & A

Agenda

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OVERVIEW OF OBLIGATIONS AND REQUIREMENTS

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Bobby Johal

Managing Consultant, Technical

Cordium

Annex IV – a recap

o What is Annex IV reporting?o Who has to file?o When and how often do I file?o Who do I report to and how?o What information is required?o What are the challenges?o What are your options?

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What is Annex IV?

o Annex IV: periodic systemic risk reporting obligation under Art. 24 of the AIFMD

o AIFMs required to file in respect of themselves and the AIFs they manage or market into the EU/EEA

o Comprehensive report o 38 questions of the AIFMo over 300 questions for each AIF

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Who has to file?

o Any AIFM managing and/or marketing an AIF in the EU/EEA

o Full Scope UK AIFM with EU managed AIFs and EU/non-EU marketed AIFs = Art. 24(1),(2),(4)

o Non EU AIFM without passport for each EU marketed AIF = Art. 24(1),(2),(4)

o Small Authorised AIFM = Art. 3(3)(d), 24(2),(4) o Registered AIFM = Art. 3(3)(d)

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When and how often do I file?

o Annex IV report has to be filed within 30 calendar days of the reporting dateo fund of funds have a further 15 days.

o Reporting dates: 31 March, 30 June, 30 September and 31 December

o Reporting can be quarterly, half yearly or annually o Frequency depends on:

o the size (AuM) of the AIFM and AIFo use of leverage; and o the type of investments made

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Annex IV Reporting - Frequency

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AUM (€)Reporting Frequency(on a calendar basis)

100m / 500m (unleveraged) – 1bn Six-monthly

>1bn Quarterly

Any single AIF with AUM > 500m Quarterly

PE & Venture Capital Firms Annually

Small Authorised & Registered AIFMs Annually

Who do I report to and how?

o EU AIFM will report to its National Competent Authority (“NCA”) e.g. UK – FCA

o Non EU AIFMS marketing AIFs into the EU/EEA file separate reports to NCAs for each jurisdiction they market AIFs into

o The FCA requires Annex IV reporting to be in XML v1.1 from October 2014

o FCA Annex IV reports will be scheduled on GABRIEL

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What information is required? (1)

ESMA template sheet 1 - Art 3(3)(d) / Art 24(1)oAIFM specific information

o 38 questionsoStatic data in respect of the AIFM

o 27 questions can be pre-populatedo11 further questions – cut off dependent

o 5 principal markets and instruments they trade on behalf of the AIFs they manage

o total assets under management

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What information is required? (2)

ESMA template sheet 2 - Art 3(3)(d) / Art 24(1)oAIF specific information

o 120 questions o 47 questions pre-populatedo Approximately 60% cut off dependent

oQuestions that require attention o 5 main instruments AIF trades o 10 principal AIF exposureso 5 most important portfolio concentrations

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What information is required? (3)

ESMA template sheet 3 - Art 24(2)oAdditional AIF specific information

o NOT required for small registered AIFMs or o Non-EEA AIFs not marketed in EEA by auth’d AIFMo Some fields can be pre-populated

oReporting requires significant amounts of data o 175 questions, some optional depending on AIF

o exposures at reporting dateo turnover of each asset classo risk reporting: market, counterparty, liquidity, financingo investor profile

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What information is required? (4)

ESMA template sheet 4 - Art 24(4)oLeveraged AIFs additionally report per ESMA template sheet 4/Art 24(4)

o overall leverage employedo breakdown of leverage arising from borrowing cash or securities

or embedded in derivativeso extent to which the fund assets have been reused

(collateralised) under leveraged arrangementso identity of the 5 largest sources of borrowed cash or

securities for the fund and the leverage attached to them

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Guidance (1)

Key sources:oESMA – Guidelines (08.08.2014 / ESMA/2014/869EN)oESMA AIFMD Q&A July 2014 (ESMA/2014/868)oFCA – AIFMD Reporting

oNon EU AIFM – EU or Non-EU AIF – report to each NCA where AIF is marketed. o Reporting to NCA deemed to be ‘those of the member states where the AIFs are

marketed’. o Multiple AIFs - Reporting under Art. 42, only the AIFs marketed in that Member State

have to be reported to local NCA

o Non-EU AIFMs - Master funds not marketed. Report on feeder funds only?o No. Report on Master also. Tab 24(2)&(4)o Whilst, only the Feeder is being marketed, information is also required to be provided as

per the ESMA opinion and as adopted in FCA rules. o ESMA opinion/2013/1340/paras 11-12. FCA handbook: FUND 3.4.6AR(2)

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Guidance (2)

o Procedures when the AIFM of an AIF changes or an AIF is liquidatedo Change of AIFM – new AIFM should report at the next reporting period

covering the whole period based on information provided by the former AIFM.

o Liquidated or merged AIF - AIFMs should provide the last report of the AIF to their NCA immediately after the AIF has been liquidated or merged.

o Nil return o E.g. New AIFs yet to raise capital should still submit nil return

o New reporting obligation / shift in cycle:o Numerous scenarios detailed in Sec IX of the ESMA Guidelines. – Very much

depends upon timing of change

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Guidance (3)

o AUM methodology – Gross, as per Art.2.3 of the Regulationo Total value of all exposure lists in the Article 24(2) tab – gross values in lines

122-124/ i.e. the total of the individual exposures = AUM

o Does VAR need to be reported?o A. FUND 3.4.6AR(C) – reported only where VAR is already calculated. o -Originally suggested as a requirement in an FCA quarterly CP but new FUND

3.4.6AR provision revised that

Automated Validation checks from October 2014- ‘business validations’ yet to be published.

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What are the challenges?

o Marshalling the datao identifying the sources of datao extracting the data requiredo collecting and normalising o validation and converting it into a reporting format

o Represents a significant operational challengeo this has to become part of the AIFMs BAUo time constraints

o Problems exacerbated if the AIFM has multiple service providerso Consistency across

o period to period reportso all forms of regulatory reporting

o Ability to demonstrate a clear audit trail and rationale

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What are your options?

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Annex IV reporting roadmap

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Confirm reporting obligation

Understand your data and how it will be reported

Choose reporting solution

Establish reporting team. Internal/external parties

Map data to reporting solution and determine how to fill any gaps

Complete return – ensuring all data is properly reported

Formally sign-off reporting

File with FCA via Gabriel

IVP RAPTOR - Your platform for Global Regulatory Reporting

Who we are?

• IVP is a boutique services and solutions firm focused exclusively on Alternative Investment Managers– Founded in 2000 and currently 380+ employees– Offices in New York, Salt Lake City, London, New Delhi, Mumbai– Blue-chip, global client base encompassing all major trading strategies

• Proven understanding of Hedge Fund technology and operational infrastructures

• 20 of the top 50 hedge funds globally are/have been IVP clients

• 80+ funds manage $725Bn+ of Global Hedge Fund AuM using IVP Technology

• IVP Solutions division (140+ engineers) focused on innovative post-trade solutions

• IVP RAPTOR last quarter RAuM filed: $375Bn+

• IVP Clients already using Raptor to do Form PF, CPO/PQR/NFA, 13F/D/G, Annex IV, EU SSR, EMIR, OPERA.. more coming

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Current Regulatory Environment

Data challenges

• Clients and regulators around the world all want data

• Data specifications vary and are inconsistent

• You will need to understand the differences

• You need to be able to explain your data

• You need to be in control – ultimately you are responsible

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Core Data Sets – Automate to reduce your operational burden

Data Set Possible Source(s) Automation Possible?

Exposure Portfolio Management System/Risk Datawarehouse

Yes

Borrowing/Cash/Collateral/AUM

Inhouse Accounting/Fund Admin Partial

Security Reference Data Portfolio Management System/Risk Datawarehouse

Yes

Performance Data Portfolio Management System Yes

Investor Data Fund Administrator Partial

Risk Data Risk Datawarehouse/Service Yes

Transaction Data Portfolio Management System Yes

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Your Roadmap to Annex IV reporting α

Lessons from our Form PF experiences

• IVP had 10 first filers as clients in the first wave of filings in August, 2012

• It takes time!!– To figure out roles / responsibilities

/ divide the questions– Interpretation issues due to asset

mix– Identifying “golden” data sources

for key data sets– Conducting a mock– Implementing controls to “keep”

supporting backup

• Key derivations from our Form PF experiences– Average IVP client took 4-10

weeks for first filing depending on the asset complexity

– Relied on advisory from either a counsel or compliance consulting firm for at least 3-5 questions

– Spent fair amount of time identifying clean data sources for the 7 core datasets

– Outsourcing to fund admins does not shift responsibility… some realized later and switched back

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Benefits of an integrated compliance solution

• Confidence that the solution can evolve with your needs

• Ability to provide data to ad-hoc regulatory requests

• Basis for data used for marketing

• Full audit trails and sign offs

• Lower risk consistent quality

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Challenges we see in Annex IV

• Challenges– Large amount of data at AIF

and AIFM level that multiplies exponentially as funds increase

– Reporting formats for each jurisdiction are evolving to be different

– Commitment vs. Gross method for derivative exposure calculations

– Region wise split of NAVs– Risk reporting open– Hedging/Netting rules flexible

• Our Recommendations– Start early– Identify all core areas of

ambiguity and seek advise– Identify golden data sources

for your key data sets– Define controls / procedures /

ownerships for data flows– Automate as much as possible

(if not right away but over next 12 months)

– Conduct a mock– Use systematic way of

approaching the problem set to enable consistency

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Spreadsheet vs. Integrated Compliance Platform

• Manual (“spreadsheet”) approach– Voluminous amount of data

• single master + 2 feeders will require answering 940 questions!!!

– No Audit trail of changes

– Need to devise a mechanism to store “supporting/backup documents” for any possible regulatory scrutiny

– Data quality/consistency issue• if you change one extract.. You

need to recheck all questions

• Integrated compliance platform– Automation eases the data

collection, normalization and population process

– Workflow and audit trail ensure checks and balances are in place

– All backup stored/preserved with each filing for any regulatory scrutiny

– Platform evolves as your needs do

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Tips on AIFMD Annex IV reporting

Fiona Bisset, Manager, Financial Conduct Authority

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Annex IV Reporting - Overview

• Annex IV Reporting – scope

• The role of the FCA

• The role of the firm – understanding

• What to report

• When to report

• How to report

• Why they have to report

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GABRIEL Reporting

• GABRIEL updated with new reporting functionality

• Go live date and access for firms

• Testing facilities

• What firms need to do

• XML V1.1

• Data validation rules

• Where to go for more information

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Reporting timelines

• GABRIEL reporting window

• Missed reporting deadlines

• Transparency data - quality assurance

• Disclosure to ESMA

• Transparency data - analysis

• Using data to inform supervision strategy and discharge

responsibility as the UK competent authority

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Q & A

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