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Annex IV impact will be substantial

Ahead of the 31 January 2015 deadline for Annex IV reporting, Peter Cripwell (pictured), CEO of RiskSystem, gives his views on the issues it’s having on the industry…

With the implementation of Annex IV fast approaching, there are worries that the new mountain of paperwork will significantly impact the ability of alternative investment funds (AIFs) and alternative investment fund managers (AIFMs) to function properly. AIFMD brought in new compulsory reporting requirements that are being rolled out across the European Economic Area (EEA). As the directive creates rifts in the alternative investment sector, the impact on firms will be substantial.

External administrators are overwhelmed by requests to complete the Annex IV reporting requirements, and are having to turn away potential clients due to system overloads and capacity. In addition many administrators also struggle due to the fact that approximately two-thirds of Annex IV’s requirements consist of risk calculations, something which is not usually within their remit or expertise. Hence specialist risk providers such as RiskSystem are ideally placed particularly where they have an integrated Annex IV solution to offer clients.

Additionally, the need for timely and accurate reporting will increase fixed costs for AIFs across the EEA, by taking up valuable time to report the correct data for every non UCITS fund. This will put smaller funds, which are more common in Britain, at a significant disadvantage due to rising administration costs disproportionately impacting those with a limited budget.

Due to the difficulties in meeting the Annex IV reporting obligations it is possible that the potential rate of failure is so high that regulatory penalties will not be imposed immediately. Any regulatory forbearance would give AIFM’s time to work out a strategy on how to tackle this new regulation. However, firms should be prepared ahead of the 31 January 2015 deadline in case regulators do decide to impose fines immediately.

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