The attitudes of fund managers in Europe towards the Alternative Investment Fund Managers Directive (AIFMD) are continuing to evolve as managers increasingly get to grip with risk management and reporting, according to the findings of research published recently.
The conclusions of the ‘Changing Structure of Alternative Asset Management’ research, conducted by IFI Global and sponsored by fund and corporate service provider Crestbridge, were launched at a special Forum attended by more than 100 senior industry professionals in London recently. Hosted by Simon Osborn (CEO, IFI Global), the event featured a range of experts from the European funds landscape including Daniela Klasén-Martin (Managing Director, Crestbridge Luxembourg).
Focusing on how the AIFMD has impacted European hedge, private equity, infrastructure and real estate fund structuring, current tax issues for asset managers and views on fund governance, the latest research builds on an analysis last year of its initial impact. It provides an illustration of how attitudes towards the AIFMD have changed over the past twelve months:
Whereas last year managers indicated that the Directive would add significant new costs, this year, whilst 78% of respondents said that AIFMD has had an impact on the industry’s approach to risk management, many of the largest managers reported it had not had any significant effect on them
The majority of managers this year suggested that, although the AIFMD had required them to include extra items in their risk reporting, wholesale changes to their systems had not been required
Just 26% of European managers confirmed that they had employed new systems to cope with the substantial quantity of additional reporting required under the Directive
Nevertheless, the suggestion that the AIFMD would not provide substantial protection to investors persisted in the responses from managers this year, as well as the idea that the AIFMD is a particular challenge for smaller boutique managers. Despite the Directive significantly impacting the quantity of what managers are required to report, the research highlighted that smaller managers are still reluctant to call in outside help for this purpose.
In addition, the research suggested there is a shortage of qualified people to provide risk supervision adequately, with 85% of managers saying they did not believe there are sufficient numbers of people to serve on boards of regulated alternative funds in risk supervisory roles.
The research also analysed the use of Management Company structures (ManCos). Several benefits of the ManCo were mentioned by managers, including the appeal of being able to draw on a ‘one stop shop’ model, avoid one’s own management costs, draw on an established team with AIFMD experience, and it being a good option for small and medium sized managers.
Daniela Klasén-Martin, Managing Director, Crestbridge, commented: “The overall positive response to the role of ManCos is to be welcomed. However, the reasons for selecting a specific platform are not clear cut. A risk management capability remains the most critical factor for managers, together with experience, whilst fee structures are also important, underlining just how important it is for ManCo platforms to strike a good balance between flexibility and control.”
Graeme McArthur, CEO, Crestbridge, added: “Crestbridge aims to be at the forefront of the developments of the Directive and, following IFI Global’s initial impact assessment last year, we wanted to get an up to date picture of how managers are coping with it. The change in attitudes of European managers in certain areas, particularly risk management and reporting, are interesting.
“Overall, the majority of managers are focussing more on risk management as a result of AIFMD, though the impact is perhaps not as severe as they first thought. Nevertheless, despite increases in risk reporting and concerted efforts to formalise policies, there still seems to be little additional strategic thinking on risk management, and there are real questions on just how much, if any, of this additional activity will be of benefit to investors.”