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Form PF has several different exposure concepts

These are:

  • Regulatory assets under management

  • Net Assets under Management

  • Gross Asset Value

  • Net Asset Value

  • Value

  • Fair Value

  • Gross Notional Value / Exposure

These are summarised below:

CONCEPTSUMMARYUSED IN
Regulatory assets under management (RAUM)Gross asset value, excluding any indebtedness.

Includes other assets, not just the funds covered by Form PF.		Question 3 – breakdown of assets by fund type
Net assets under managementYour regulatory assets under management minus any outstanding indebtedness or other accrued but unpaid liabilities.

Includes other assets, not just the funds covered by Form PF		Question 3 – breakdown of assets by fund type
Gross Asset ValueGross Asset Value

Same as RAUM, but for the specific PF.		Question 8 – Gross Asset Value

Also, as per Instruction 15:

Question 20 - Strategies
Question 21 - Percentage in high frequency trading
Question 25 -
Question 28 - Geographic exposures
Question 35 - Gross Asset Value.
Net Asset Value (NAV)The standard measurement of AUM – market value (including any indebtedness) minus any outstanding indebtedness or other accrued but unpaid liabilities.Question 9 – Net Asset Value
ValueNotional exposure of exposuresQuestions 26 & 30 - Fund Exposures
Question 27 - Turnover
Fair ValueThe fair valueQuestion 15 – assets and liabilities by valuation category
Gross Notional Value / ExposureUsed for defining a hedge fund.

Note:

  1. It follows from the above that:
    a. RAUM will be higher that Net Assets Under Management
    b. BRAUM will be higher than Gross Assets Value
    c. RAUM and Gross Value can be more that the NAV
    d. “Value” can be higher than all of the other concepts.

  2. The key differences in the above calculations is how you treat liabilities or how you include derivatives. Therefore, for a range of fields in the Form PF (e.g. value in cash etc.), these differences are not important as each concept will lead to the same calculation.

How each of these are used in the different Form PF sections, can be seen in more detail by clicking here.

Further detail on the definition of each of these terms is set out below:

DEFINITIONS

The Form PF Instructions provide the following definitions:

  • Regulated Assets Under Management – Regulatory assets under management, calculated in accordance with Part 1A, Instruction 5.b of Form ADV;

  • Gross Asset Value – “Value of gross assets, calculated in accordance with Part 1A, Instruction 6.e(3) of Form ADV”;

  • Net assets under management – Net assets under management are your regulatory assets under management minus any outstanding indebtedness or other accrued but unpaid liabilities;

  • Net asset value or NAV – With respect to any reporting fund, the gross assets reported … minus any outstanding indebtedness or other accrued but unpaid liabilities; and

  • Gross Notional Value – The gross nominal or notional value of all transactions that have been entered into but not yet settled as of the data reporting date. For contracts with variable nominal or notional principal amounts, the basis for reporting is the nominal or notional principal amounts as of the data reporting date.

The Form ADV Instructions can then be found by clicking here.

In summary, the Form ADV Instructions provide as follows where RAUM is based on market value and gross assets following the same approach:

  • Part 1A, Instruction 5.b Regulatory Assets Under Management
    o (2) Do not deduct any outstanding indebtedness or other accrued but unpaid liabilities.
    o Determine your regulatory assets under management based on the current market value of the assets.

  • Part 1A, Instruction 6.e(3) Question 11: Gross Assets. Report the assets of the private fund that you would include in calculating your regulatory assets under management according to Instruction 5.b. above.

REGULATORY ASSETS UNDER MANAGEMENT (RAUM)

As above, Form PF utilizes the same definition of “regulatory assets under management” (RAUM) as is used for SEC Form ADV, introduced in 2012.

RAUM is the gross assets under management. This is without the subtraction of borrowings, short sales or other forms of leverage.

The RAUM of the Manager also needs to include:

  • Assets held in family accounts

  • Proprietary accounts of the manager

  • Accounts for which the manager receives no compensation

  • Accounts of non-U.S. persons

  • The value of certain private funds that hold significant assets that are not securities

As regards Private Equity:

  • All advisers are required to use the current market value (or fair value of private fund assets) rather than their cost in determining regulatory assets under management; and

  • RAUM includes investors’ uncalled capital commitments

As regards the calculations for RAUM and gross asset value, Q G.2 of the SEC FAQs provides clarification on how to include:

  • Short positions

  • Derivatives

  • Repurchase agreements,

  • Total return swaps, and other financial information.

The key points are:

  • You can utilise the same method as used in the balance sheet, as you can for Form ADV and IARD;

  • Physical Short positions will typically as these are liabilities on the balance sheet not assets;

  • The proceeds received from a physical short sale would be included in the gross asset value;

  • Where short positions through derivatives have a positive fair value, they would be included as an asset in the gross asset value.

For derivative instruments, this will be market value, not notional value (depending on the instrument).

This is a key difference of approach to the AIFMD Reporting Form.

GROSS ASSET UNDER MANAGEMENT

This is the same definition as for RAUM, but for the specific Private Fund.

NET ASSETS UNDER MANAGEMENT

As per the definition, Net assets under management are your regulatory assets under management minus any outstanding indebtedness or other accrued but unpaid liabilities.

NAV

As per the definition, the NAV, with respect to any reporting fund, the gross assets reported in response to Question 8 minus any outstanding indebtedness or other accrued but unpaid liabilities.

Note, this definition brings further confirmation that gross assets and RAUM use market value for derivatives.

VALUE

As regards the term “value”, Instruction 15 provides that:

“for derivatives (other than options), “value” means gross notional value; for options, “value” means delta adjusted notional value; for all other investments and for all borrowings where the reporting fund is the creditor, “value” means market value or, where there is not a readily available market value, fair value; for borrowings where the reporting fund is the debtor, “value” means the value you report internally and to current and prospective investors..”

GROSS NOTIONAL EXPOSURE / VALUE

For purposes of Form PF (and Form ADV), a hedge fund is defined to include any private fund that may have “gross notional exposure” in excess of twice its net asset value.

“Gross notional exposure,” is undefined, but the SEC in the SEC Form PF FAQs at Q. B.3 confirm that this has the same meaning as the defined term “gross notional value.” https://www.sec.gov/divisions/investment/pfrd/pfrdfaq.shtml

“Gross Notional Value” is defined in the Paper Form as:

“The gross nominal or notional value of all transactions that have been entered into but not yet settled as of the data reporting date. For contracts with variable nominal or notional principal amounts, the basis for reporting is the nominal or notional principal amounts as of the data reporting date.”

As above, the definition of “value” is also referenced to this.”

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