From a regulatory perspective, there is little specific or different as regards AIFMD Annex IV reporting. However, there are a number of differences that can be identified in practice.
A number of these are summarised below:
FREQUENCY OF REPORTING
Whilst the standard decision trees apply for determining the scope and frequency of reporting, many private equity AIFMs and AIFs will be required to report only on an annual basis.
This is the case, regardless of AUM, where an AIFM only has funds which are not leveraged and they do not invest into listed securities. The AIFs will report under 24(1) and (2).
Where an AIFM has some but not all funds which are not leveraged and do not invest into listed securities, then those AIFs will still report annually under 24(1) and (2). However, the reporting of the AIFM and the other AIFs will vary both in terms of scope and frequency.
UNLEVERAGED AND NOT HOLDING LISTED SECURITIES
Both of these points are considered further below:
HOLDING LISTED SECURITIES
One method by which a Private Equity AIF may seek to exit its private equity investment is for there to be an IPO. This could involve the AIF having small or short-term holdings of listed securities. The question is whether this would trigger quarterly reporting.
The AIFMD Level 2 Regulations state that an AIFM is only required to submit annual reports for the AIF if it is unleveraged and the AIF’s core investment policy is to invest in non-listed companies and issuers in order to acquire control.
Consequently, if the AIF’s formation documents clearly state that its core investment policy does not include investment in listed securities, then holding such securities from time-to-time will not trigger quarterly reporting and the AIF can report annually.
LEVERAGE
Many Private Equity Managers would argue they are unleveraged, although AIFMD refers to firms with revolving credit facilities as being leveraged. This is not market interpretation but it forces managers to complete additional sections of the Annex IV report.
THE AIF REPORT
The AIF Report templates contain over 300 data items and 600 data points. It involves complex calculations and is based on detailed data taxonomies.
That said, for Private Equity and Real Estate, the challenge is in practice greatly reduced and hence the bulk of the heavy-duty work has been completed for the first round of filing, as:
Many of the sections of the Annex IV Report are not applicable;
As above, 24(4) Reporting will not be required by AIFs which are not leveraged and do not invest into listed securities
Much of the AIFM, AIF and shareclass data for Annex IV is static;
The portfolio holdings tend to be smaller in number and longer-term
The relevant data taxonomies are much simpler in practice (considered in the appendix and below).
Some notes on the individual fields are considered below.
| FIELDS / SECTIONS | MANDATORY / OPTIONAL | NOTES |
|---|---|---|
| General | With no Prime Brokers, master AIFs, or financial instruments with counterparties held by most PE Funds, much of the reporting is a nil return. This includes simple classification of assets sub asset types, market codes, market types and turnover types. | |
| Share class identification codes | Mandatory | It is mandatory to report whether there is more than one shareclass. Reporting of shareclass information is conditional on this answer. The reporting of share class will not apply for many PE Funds that are organised in partnership rather than corporate form. |
| Breakdown of investment strategies | Mandatory | The Strategies section is by alternative strategy by AIF. For many PE managers, this will be a straightforward 100% PE response. |
| Typical deal/position size | Conditional | This section is specifically applicable to Private Equity. If the predominant AIF type of PEQF is selected, this becomes a mandatory field. |
| Historical risk profile | Optional | Gross and net IRRs on a monthly basis may present a challenge given quarterly accounts and semi-annual valuations by most Private Equity Managers |
| Investor Liquidity Profile | Optional | Investor liquidity – not applicable to closed end funds |
| Investor Concentration | Mandatory | Professional and retail investor split as a % of NAV – for private equity, all retail |
| Geographical focus | Mandatory | Geography – where unleveraged, then the NAV and AUM based calculations should produce the same result |
| Dominant Influence | Mandatory | This information is mandatory for AIFs with a predominant AIF type of “Private Equity funds”. The following needs reported at a minimum:
|
| Investor redemptions; special arrangements and preferential treatment | Optional | More likely impact for private equity |
| Financing liquidity | Optional | More likely impact for private equity |
| Results of stress tests | Mandatory | Difficulty to define given illiquid nature of investments |
| Gross exposure of financial and/or legal structures controlled by the AIF | Optional | Of specific impact for Private Equity entities acquiring control |
APPENDIX
General comments:
Market code likely to be OTC throughout rather than MIC
“Code Type” likely to be “None” throughout rather than “ISIN” or “AII” (for standard futures contracts)
Sub asset types and turnover types likely to be unlisted equity
| TABLE | CONTENT | COMMENT |
|---|---|---|
| 1 | Asset Types | There are 72 sub-asset types in total, but for private equity these are likely to be limited to:
For real estate, it is likely to be limited to:
Other than real estate:
|
| 2 | Asset Types (Turnover) | There are 28 asset types for turnover. For private equity, this is likely to be limited to:
For real estate, it is likely to be limited to:
|
| 3 | Strategy | There are 35 strategies. As above, the Strategies section is by alternative strategy by AIF. For many PE managers, this will be a straightforward 100% PE response |
| 4 | Typical Position Size | This section is specifically applicable to Private Equity. Options are:
|
| 5 | Transaction Type | Options available are:
|
| 6 | Redemption Frequency | This will not apply to closed end funds |
| 7 | Investor Group | This will be a Professional group |
| 8 | AIFM Reporting Codes (plus codes for reporting changes in frequency and content) | As above, noting that where an AIFM has some but not all funds which are not leveraged and do not invest into listed securities, then those AIFs will still report annually under 24(1) and (2). However, the reporting of the AIFM and the other AIFs will vary both in terms of scope and frequency. |
