The Alternative Investment Fund Managers Directive (AIFMD) that took effect in July 2013 has become one of the hottest regulatory topics in the European fund management industry, introducing a long list of new compliance challenges that must be addressed quickly. Reporting requirements under AIFMD Article 3 and Article 24 are among those challenges.
When adhering to AIFMD reporting requirements, fund managers generally have three approaches:
- Manual data gathering and filing
- Automated filing using third-party tools
- Automated filing using in-house software
While there are pros and cons for every type of filing, many firms prefer to go with an automated solution. There are several reasons to do so, with the most critical outlined below:
- Manual aggregation of external and internal data sources feeding into AIFMD is not efficient, especially over the long term. It is even less so when reporting needs to be done for a number of funds and fund management entities.
- Manual processes do not guarantee an error-free consistent methodology of data aggregation between filings
- In-house approval is needed for the filing process workflows.
AIFMD reporting automation assures reliable filing, and whatever solution is chosen, be it a third-party tool or a custom solution, it typically consists of two parts:
- A front-end application providing fund manager employees with a user interface for viewing, editing, validating, and accepting report data
- A back-end system responsible for data gathering, aggregation, and storage.
The front-end part of the application is largely generic between firms and could be either re-used, especially in parts of the report structure and validation rules definitions, or extended and customized for the bespoke needs of an individual fund manager. The unique part of the system is the back-end data aggregation function, as each company has its own internal and external data sources to be aggregated.
In order to simplify implementation of an automated AIFMD filing solution for its clients, DataArt developed front-end application (for exploratory purposes), which provides the following features:
- The latest ESMA and FCA AIFMD filing requirements and specifications are supported
- An intuitive and easy-to-use application for creating, viewing, and editing the report
- The latest easy-to-use ESMA AIFMD reporting guidelines presented in a relevant context
- Data validation and conditional rules
- Generation of ESMA XML files
- Support for ESMA XML and Excel import and export for AIFMD reports
- Support for both versions 1.1 and 1.2 of ESMA XSD reporting schema
- Report sharing between multiple users
- History of past filings
The front-end application minimizes the cost of and time necessary for implementing an end-to-end automated AIFMD solution, allowing firms to focus on firm-specific data aggregation functionality. The application can also serve as a great basis for developing rich and bespoke functional requirements, particularly around multi-user workflows and notifications.
Support for XML and Excel import and export functionality, made available in release 1.1 in September 2014, enables a variety of additional uses, such as:
- Use of an application as a front-end, making it possible to view and validate XML reports obtained from other AIFMD compatible systems, including custom-built reporting systems
- Export reports to Excel for a print out, email or committee review
- Use an ESMA Excel based template for a manual reporting process, possibly within a team, and then use the DataArt AIFMD application to generate the XML report required by regulatory authorities
The front-end application is built on top of the DataArt Form PF reporting tool released in early 2013 and, as an extra benefit to global fund managers, combines support for both AIFMD and Form PF filings. The software operates on top of the unified data model and requires the single implementation effort of integrating custom data for both AIFMD and Form PF filings.
The application has to be commercially licensed if used as a part of regulatory reporting submission process.