The European Securities and Markets Authority (ESMA) has published an updated version of its Q&A paper on the application of the Alternative Investment Fund Managers Directive (AIFMD). This publication was released on 2 December 2015, with the new Q&As appearing in Section III of the document that deals with reporting to national competent authorities under Articles 3, 24 and 42.
Additional Q&As on reporting cover the following points
- In reporting on the jurisdictions of the three main funding sources, an AIFM should include all liquidity that is made available to an AIF (including the cash received in the context of securities lending transactions and repurchase transactions), unless it originates from the payment of subscriptions related to units or shares of the AIF bought by investors.
- When categorising loans as either leveraged or other loans, all leveraged loans should be classified as leveraged loans, whether syndicated or not.
- ESMA have clarified that information on newly created AIFs should only be included in the total assets under management (AUM) of the AIFM as reported at question 33 of the reporting template for AIFM-specific information but information on the newly created AIFs should not be included in answering questions 26 to 32.
- AIFMs should report cash from repurchase agreements as cash borrowings.
- AIFMs may exclude investments of AIFs in other AIFs they manage for the purpose of calculating the total value of AUM to ensure that there is no duplication of AUM.
- AIFMs should report the investment strategy of an AIF that has been disclosed to investors in the fund rules or other offering documents.
- In terms of how AIFMs should determine the geographical focus of assets in which they invest such as stocks, bonds or financial derivatives, ESMA confirmed that AIFMs should take into account the domicile of the company/entity to which the AIFs have an exposure. They also clarified that, for financial derivative instruments such as options, AIFMs should look at the financial instrument underlying the financial derivative instruments and apply the same approach as for stocks and bonds.
- Disclosure of information on gross and net returns, change in NAV, subscriptions and redemptions is mandatory for Article 24(2) AIF reporting contents but, to enable the necessary functional flexibility, it is classified as optional from a technical standpoint.
- When reporting information on leverage, AIFMs should report a percentage rather than a ratio.
- When reporting the investment strategy of a feeder AIF, ESMA expects that in most instances, feeder AIFs will have the same investment strategy as the master AIF, unless the investments made by the feeder AIF in other assets make the resulting strategy different.
- ESMA have confirmed that the disclosure of information on the liquidity profile of an AIF is a mandatory requirement.