ESMA Publishes Amended Final AIFM Directive Reporting Rules

The European Securities and Markets Authority has published on October 1st the final guidelines on the reporting obligations for alternative fund managers under Articles 3 and 24 the European Union's Alternative Investment Fund Managers Directive, which took effect on July 22, after incorporating changes arising from a consultation exercise with market stakeholders in June.

The guidelines set out how managers of alternative investment vehicles including hedge funds, private equity and real estate funds will be required to report certain information regularly to national regulators. They clarify provisions of the AIFM Directive on the information required, which aims to provide supervisors with a more comprehensive and consistent oversight of managers' activities.

At the same time, ESMA has published an opinion on transparency issues in which it proposes introducing additional periodic reporting, including information such as value at risk measures for alternative funds, or the number of transactions carried out using high-frequency algorithmic trading techniques.

ESMA chairman Steven Maijoor says that now the directive has come into force, both alternative fund managers and national supervisors need to prepare for the introduction of regulatory filings that will enable supervisors to monitor the systemic risks engendered by alternative funds.

Majoor says the authority's guidelines and its opinion on future steps will contribute to the standardisation of reporting throughout the EU and facilitate exchange of information between national regulators, ESMA and the European Systemic Risk Board.

The AIFM Directive requires managers to report on their investment strategies, exposure and portfolio concentrations to national regulators. The guidelines specify that key elements of the information that must be provided for each alternative fund include the breakdown of investment strategies followed by the fund, the principal markets and instruments in which it trades, its total value of assets under management of each fund, its turnover, and - most importantly - its principal exposures and portfolio concentration.

In addition, the opinion issued by ESMA proposes that managers be required to report additional information on the risk profile of each fund that they manage, including its risk measures, liquidity profile and leverage.

The guidelines document incorporates ESMA's response to the consultation feedback. For instance, it has taken note of...