Hedge funds, private equity firms, real estate, and other investment funds have a historical track record of providing clients with significant returns on investment, over an extended period of time. While they have been great investment options, they traditionally did not have the same reporting and compliance regulations as publicly traded companies. However, much of this changed in 2011 with the Alternative Investment Fund Managers Directive (2011), which incorporated a variety of new reporting and other compliance regulations for these funds.
Today, these investment funds are better supervised, have more comprehensible structure, and are more accessible than ever. All this makes it essential that finance officers take AIFMD reporting – especially Annex IV reporting regulations – seriously.
1. Ensuring Transparency
One of the primary objectives of the 2011 directive is to ensure transparency. Transparency is an issue that is becoming increasingly imperative for CFOs around the world. So anything that helps them facilitate that openness, they really should be looking into it.
A major criticism that people have had of investment funds is that the average person and investor does not quite know what they’re investing in. Annex IV reporting standards will require funds to provide more detail about all of their investments, and also furnish additional proof of their investment performance. This offers investors, customers, and regulators greater insight and clarity, enabling more transparent communication.
2. Comforting investors
With greater clarity, comes greater comfort. A larger number of comfortable investors translates directly to increased investments. When trading stocks of major companies on publicly traded world stock markets, investors feel assured with the knowledge that the companies are being regularly vetted and audited. With the reporting requirements under AIFMD, traders now have the same assurance that investment funds are going through similar scrutiny. This can make such funds seem more like conservative investment options, which would help investment firms raise more capital.
But the catch is that with more capital comes more stringent oversight. But that’s where the elegance of Annex IV regulations shines, because the new standards drastically simplify regulatory compliance. Fund managers and accountants that are not compliant with these regulations could face some severe penalties including fines and even investment restrictions; so it’s pretty serious business. But those that stay in compliance maintain a positive reputation with the investment community and build credibility. Transparency makes compliance an exercise in simplicity.
Meeting the Annex IV reporting standards doesn’t have to be a complex process. The very point of it, after all, is to untangle messes. To that end, there are AIFMD software that finance teams can leverage to effect quick, easy, and accurate generation of reports so compliance never has to be a hassle. DataTracks offers an AIFMD solution that is intuitive, secure, and lightning fast. You don’t have to be worried about the security of your data, with your documents hosted on a private cloud. The robust platform helps you work seamlessly with your team to structure financial data in a way that makes sense, while letting you effortlessly comply with regulations.