02013R0231 — EN — 01.08.2022 — 002.001
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COMMISSION DELEGATED REGULATION (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (OJ L 083 22.3.2013, p. 1) |
Amended by:
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Official Journal |
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No |
page |
date |
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COMMISSION DELEGATED REGULATION (EU) 2018/1618 of 12 July 2018 |
L 271 |
1 |
30.10.2018 |
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COMMISSION DELEGATED REGULATION (EU) 2021/1255 of 21 April 2021 |
L 277 |
11 |
2.8.2021 |
Corrected by:
COMMISSION DELEGATED REGULATION (EU) No 231/2013
of 19 December 2012
supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision
(Text with EEA relevance)
CHAPTER I
DEFINITIONS
Article 1
Definitions
In addition to the definitions laid down in Article 2 of Directive 2011/61/EU, the following definitions apply for the purposes of this Regulation:
‘capital commitment’ means the contractual commitment of an investor to provide the alternative investment fund (AIF) with an agreed amount of investment on request by the AIFM;
‘relevant person’ in relation to an AIFM means any of the following:
a director, partner or equivalent, or manager of the AIFM;
an employee of the AIFM, or any other natural person whose services are placed at the disposal and under the control of the AIFM and who is involved in the provision of collective portfolio management services by the AIFM;
a natural or legal person who is directly involved in the provision of services to the AIFM under a delegation arrangement to third parties for the purpose of the provision of collective portfolio management by the AIFM;
‘senior management’ means the person or persons who effectively conduct the business of an AIFM in accordance with Article 8(1)(c) of Directive 2011/61/EU and, as the case may be, the executive member or members of the governing body;
‘governing body’ means the body with ultimate decision making authority in an AIFM, comprising the supervisory and the managerial functions, or only the managerial function if the two functions are separated;
‘special arrangement’ means an arrangement that arises as a direct consequence of the illiquid nature of the assets of an AIF which impacts the specific redemption rights of investors in a type of units or shares of the AIF and which is a bespoke or separate arrangement from the general redemption rights of investors;
‘sustainability risk’ means sustainability risk as defined in Article 2, point (22), of Regulation (EU) 2019/2088 of the European Parliament and of the Council ( 1 );
‘sustainability factors’ means sustainability factors as defined in Article 2, point (24), of Regulation (EU) 2019/2088.
CHAPTER II
GENERAL PROVISIONS
SECTION 1
Calculation of assets under management
(Article 3(2) of Directive 2011/61/EU)
Article 2
Calculation of the total value of assets under management
In order to qualify for the exemption provided for in Article 3(2) of Directive 2011/61/EU an AIFM shall:
identify all AIFs for which it is appointed as the external AIFM or the AIF for which it is the AIFM, where the legal form of the AIF permits internal management, in accordance with Article 5 of Directive 2011/61/EU;
identify for each managed AIF the portfolio of assets and determine in accordance with the valuation rules laid down in the law of the country where the AIF is established and, as the case may be, or in the AIF rules or instruments of incorporation the corresponding value of assets under management, including all assets acquired through use of leverage;
aggregate the determined values of assets under management for all AIFs managed and compare the resulting total value of assets under management to the relevant threshold laid down in Article 3(2) of Directive 2011/61/EU.
For the purposes of paragraph 1, AIFs managed by the AIFM for which the AIFM has delegated functions in accordance with Article 20 of Directive 2011/61/EU shall be included in the calculation. However, portfolios of AIFs that the AIFM is managing under delegation shall be excluded from the calculation.
Article 3
Ongoing monitoring of assets under management
AIFMs shall establish, implement and apply procedures to monitor on an ongoing basis the total value of assets under management. Monitoring shall reflect an up-to-date overview of the assets under management and shall include the observation of subscription and redemption activity or, where applicable, capital draw downs, capital distributions and the value of the assets invested in for each AIF.
The proximity of the total value of assets under management to the threshold set in Article 3(2) of Directive 2011/61/EU and the anticipated subscription and redemption activity shall be taken into account in order to assess the need for more frequent calculations of the total value of assets under management.
Article 4
Occasional breach of the threshold
Article 5
Information to be provided as part of registration
As part of the requirement in Article 3(3)(c) of Directive 2011/61/EU AIFMs shall provide for each AIF the offering document or a relevant extract from the offering document or a general description of the investment strategy. The relevant extract from the offering document and the description of the investment strategy shall include at least the following information:
the main categories of assets in which the AIF may invest;
any industrial, geographic or other market sectors or specific classes of assets which are the focus of the investment strategy;
a description of the AIF’s borrowing or leverage policy.
SECTION 2
Calculation of leverage
(Article 4(3) of Directive 2011/61/EU)
Article 6
General provisions on the calculation of leverage
The Commission shall review, in the light of market developments and no later than 21 July 2015, the calculation methods referred to in the first subparagraph in order to decide whether these methods are sufficient and appropriate for all types of AIFs, or an additional and optional method for calculating leverage should be developed.
Article 7
Gross method for calculating the exposure of the AIF
The exposure of an AIF calculated in accordance with the gross method shall be the sum of the absolute values of all positions valued in accordance with Article 19 of Directive 2011/61/EU and all delegated acts adopted pursuant to it.
For the calculation of the exposure of an AIF in accordance with the gross method an AIFM shall:
exclude the value of any cash and cash equivalents which are highly liquid investments held in the base currency of the AIF, that are readily convertible to a known amount of cash, are subject to an insignificant risk of change in value and provide a return no greater than the rate of a three-month high quality government bond;
convert derivative instruments into the equivalent position in their underlying assets using the conversion methodologies set out in Article 10 and the methods set out in paragraphs (4) to (9) and (14) of Annex I;
exclude cash borrowings that remain in cash or cash equivalent as referred to in point (a) and where the amounts of that payable are known;
include exposure resulting from the reinvestment of cash borrowings, expressed as the higher of the market value of the investment realised or the total amount of the cash borrowed as referred to in paragraphs (1) and (2) of Annex I;
include positions within repurchase or reverse repurchase agreements and securities lending or borrowing or other arrangements in accordance with paragraphs (3) and (10) to (13) of Annex I.
Article 8
Commitment method for calculating the exposure of an AIF
For the calculation of the exposure of an AIF in accordance with the commitment method an AIFM shall:
convert each derivative instrument position into an equivalent position in the underlying asset of that derivative using the conversion methodologies set out in Article 10 and paragraphs (4) to (9) and (14) of Annex II;
apply netting and hedging arrangements;
calculate the exposure created through the reinvestment of borrowings where such reinvestment increases the exposure of the AIF as defined in paragraphs (1) and (2) of Annex I;
include other arrangements in the calculation in accordance with paragraphs (3) and (10) to (13) of Annex I.
For the purposes of calculating the exposure of an AIF according to the commitment method:
netting arrangements shall include combinations of trades on derivative instruments or security positions which refer to the same underlying asset, irrespective — in the case of derivative instruments — of the maturity date of the derivative instruments and where those trades on derivative instruments or security positions are concluded with the sole aim of eliminating the risks linked to positions taken through the other derivative instruments or security positions;
hedging arrangements shall include combinations of trades on derivative instruments or security positions which do not necessarily refer to the same underlying asset and where those trades on derivative instruments or security positions are concluded with the sole aim of offsetting risks linked to positions taken through the other derivative instruments or security positions.
By way of derogation from paragraph 2, a derivative instrument shall not be converted into an equivalent position in the underlying asset if it has all of the following characteristics:
it swaps the performance of financial assets held in the AIF’s portfolio for the performance of other reference financial assets;
it totally offsets the risks of the swapped assets held in the AIF’s portfolio so that the AIF’s performance does not depend on the performance of the swapped assets;
it includes neither additional optional features, nor leverage clauses nor other additional risks as compared to a direct holding of the reference financial assets.
By way of derogation from paragraph 2, a derivative instrument shall not be converted into an equivalent position in the underlying asset when calculating the exposure according to the commitment method if it meets both of the following conditions:
the combined holding by the AIF of a derivative instrument relating to a financial asset and cash which is invested in cash equivalent as defined in Article 7(a) is equivalent to holding a long position in the given financial asset;
the derivative instrument shall not generate any incremental exposure and leverage or risk.
Hedging arrangements shall be taken into account when calculating the exposure of an AIF only if they comply with all the following conditions:
the positions involved within the hedging relationship do not aim to generate a return and general and specific risks are offset;
there is a verifiable reduction of market risk at the level of the AIF;
the risks linked to derivative instruments, general and specific, if any, are offset;
the hedging arrangements relate to the same asset class;
they are efficient in stressed market conditions.
An AIFM shall net positions in any of the following cases:
between derivative instruments, provided they refer to the same underlying asset, even if the maturity date of the derivative instruments is different;
between a derivative instrument whose underlying asset is a transferable security, money market instrument or units in a collective investment undertaking as referred to in points 1 to 3 of Section C of Annex I to Directive 2004/39/EC, and that same corresponding underlying asset.
Article 9
Methods of increasing the exposure of an AIF
When calculating exposure AIFMs shall use the methods set out in Annex I for the situations referred to therein.
Article 10
Conversion methodologies for derivative instruments
AIFMs shall use the conversion methodologies set out in Annex II for the derivative instruments referred to therein.
Article 11
Duration netting rules
SECTION 3
Additional own funds and professional indemnity insurance
(Article 9(7) and Article 15 of Directive 2011/61/EU)
Article 12
Professional liability risks
Professional liability risks as defined in paragraph 1 shall include, without being limited to, risks of:
loss of documents evidencing title of assets of the AIF;
misrepresentations or misleading statements made to the AIF or its investors;
acts, errors or omissions resulting in a breach of:
legal and regulatory obligations;
duty of skill and care towards the AIF and its investors;
fiduciary duties;
obligations of confidentiality;
AIF rules or instruments of incorporation;
terms of appointment of the AIFM by the AIF;
failure to establish, implement and maintain appropriate procedures to prevent dishonest, fraudulent or malicious acts;
improperly carried out valuation of assets or calculation of unit/share prices;
losses arising from business disruption, system failures, failure of transaction processing or process management.
Article 13
Qualitative requirements addressing professional liability risks
Article 14
Additional own funds
The value of the portfolios of AIFs managed shall be the sum of the absolute value of all assets of all AIFs managed by the AIFM, including assets acquired through use of leverage, whereby derivative instruments shall be valued at their market value.
The AIFM shall establish, implement and apply procedures to monitor on an ongoing basis the value of the portfolios of AIFs managed, calculated in accordance with the second subparagraph of paragraph 2. Where, before the annual recalculation referred to in the first subparagraph, the value of the portfolios of AIFs managed increases significantly, the AIFM shall without undue delay recalculate the additional own funds requirement and shall adjust the additional own funds accordingly.
Article 15
Professional indemnity insurance
The AIFM shall take out and maintain at all times professional indemnity insurance that:
shall have an initial term of no less than one year;
shall have a notice period for cancellation of at least 90 days;
shall cover professional liability risks as defined in Article 12(1) and (2);
is taken out from an EU or non-EU undertaking authorised to provide professional indemnity insurance, in accordance with Union law or national law;
is provided by a third party entity.
Any agreed defined excess shall be fully covered by own funds which are in addition to the own funds to be provided in accordance with Article 9(1) and (3) of Directive 2011/61/EU.
CHAPTER III
OPERATING CONDITIONS FOR AIFMs
SECTION 1
General principles
(Article 12(1) of Directive 2011/61/EU)
Article 16
General obligations for competent authorities
When assessing the AIFM’s compliance with Article 12(1) of Directive 2011/61/EU, the competent authorities shall use at least the criteria laid down in this Section.
Article 17
Duty to act in the best interests of the AIF or the investors in the AIF and the integrity of the market
Article 18
Due diligence
Article 19
Due diligence when investing in assets of limited liquidity
Where AIFMs invest in assets of limited liquidity and where such investment is preceded by a negotiation phase, they shall, in relation to the negotiation phase, in addition to the requirements laid down in Article 18:
set out and regularly update a business plan consistent with the duration of the AIF and market conditions;
seek and select possible transactions consistent with the business plan referred to in point (a);
assess the selected transactions in consideration of opportunities, if any, and overall related risks, all relevant legal, tax-related, financial or other value affecting factors, human and material resources, and strategies, including exit strategies;
perform due diligence activities related to the transactions prior to arranging execution;
monitor the performance of the AIF with respect to the business plan referred to in point (a).
Article 20
Due diligence in the selection and appointment of counterparties and prime brokers
When selecting prime brokers or counterparties of an AIFM or an AIF in an OTC derivatives transaction, in a securities lending or in a repurchase agreement, AIFMs shall ensure that those prime brokers and counterparties fulfil all of the following conditions:
they are subject to ongoing supervision by a public authority;
they are financially sound;
they have the necessary organisational structure and resources for performing the services which are to be provided by them to the AIFM or the AIF.
Article 21
Acting honestly, fairly and with due skills
In order to establish whether an AIFM conducts its activities honestly, fairly and with due skills, competent authorities shall assess, at least, whether the following conditions are met:
the governing body of the AIFM possesses adequate collective knowledge, skills and experience to be able to understand the AIFM’s activities, in particular the main risks involved in those activities and the assets in which the AIF is invested;
the members of the governing body commit sufficient time to properly perform their functions in the AIFM;
each member of the governing body acts with honesty, integrity and independence of mind;
the AIFM devotes adequate resources to the induction and training of members of the governing body.
Article 22
Resources
Article 23
Fair treatment of investors in the AIF
Article 24
Inducements
AIFMs shall not be regarded as acting honestly, fairly and in accordance with the best interests of the AIFs they manage or the investors in these AIFs if, in relation to the activities performed when carrying out the functions referred to in Annex I to Directive 2011/61/EU, they pay or are paid any fee or commission, or provide or are provided with any non-monetary benefit, other than the following:
a fee, commission or non-monetary benefit paid or provided to or by the AIF or a person on behalf of the AIF;
a fee, commission or non-monetary benefit paid or provided to or by a third party or a person acting on behalf of a third party, where the AIFM can demonstrate that the following conditions are satisfied:
the existence, nature and amount of the fee, commission or benefit, or, where the amount cannot be ascertained, the method of calculating that amount, is clearly disclosed to the investors in the AIF in a manner that is comprehensive, accurate and understandable, prior to the provision of the relevant service;
the payment of the fee or commission, or the provision of the non-monetary benefit are designed to enhance the quality of the relevant service and not impair compliance with the AIFM’s duty to act in the best interests of the AIF it manages or the investors in the AIF;
proper fees which enable or are necessary for the provision of the relevant service, including custody costs, settlement and exchange fees, regulatory levies or legal fees, and which, by their nature, do not give rise to conflicts with the AIFM’s duties to act honestly, fairly and in accordance with the best interests of the AIF it manages or the investors of the AIF.
Article 25
Effective employment of resources and procedures — handling of orders
The procedures and arrangements referred to in paragraph 1 shall satisfy the following requirements:
they shall ensure that orders executed on behalf of AIFs are promptly and accurately recorded and allocated;
they shall execute otherwise comparable AIF orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the AIF or of the investors in the AIF require otherwise.
Article 26
Reporting obligations in respect of execution of subscription and redemption orders
AIFMs shall ensure that the third person complies with its obligations.
The essential information referred to in paragraphs 1 and 2 shall include the following information:
the identification of the AIFM;
the identification of the investor;
the date and time of receipt of the order;
the date of execution;
the identification of the AIF;
the gross value of the order including charges for subscription or the net amount after charges for redemptions.
Article 27
Execution of decisions to deal on behalf of the managed AIF
Whenever AIFMs buy or sell financial instruments or other assets for which best execution is relevant, and for the purposes of paragraph 1, they shall take all reasonable steps to obtain the best possible result for the AIFs they manage or the investors in these AIFs, taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order. The relative importance of such factors shall be determined by reference to the following criteria:
the objectives, investment policy and risks specific to the AIF, as indicated in the AIF’s rules or articles of association, prospectus or offering documents of the AIF;
the characteristics of the order;
the characteristics of the financial instruments or other assets that are the subject of that order;
the characteristics of the execution venues to which that order can be directed.
Article 28
Placing orders to deal on behalf of AIFs with other entities for execution
AIFMs shall establish, implement and apply a policy to enable them to comply with the obligation referred to in the first subparagraph. The policy shall identify, in respect of each class of instruments, the entities with which the orders may be placed. The AIFM shall only enter into arrangements for execution where such arrangements are consistent with the obligations laid down in this Article. The AIFM shall make available to investors in the AIFs it manages appropriate information on the policy established in accordance with this paragraph and on any material changes to that policy.
In addition, AIFMs shall review the policy on an annual basis. Such a review shall also be carried out whenever a material change occurs that affects the AIFM’s ability to continue to obtain the best possible result for the managed AIFs.
Article 29
Aggregation and allocation of trading orders
AIFMs can only carry out an AIF order in aggregate with an order of another AIF, a UCITS or a client or with an order made when investing their own funds where:
it can be reasonably expected that the aggregation of orders will not work overall to the disadvantage of any AIF, UCITS or clients whose order is to be aggregated;
an order allocation policy is established and implemented, providing in sufficiently precise terms for the fair allocation of aggregated orders, including how the volume and price of orders determines allocations and the treatment of partial executions.
However, if the AIFM is able to demonstrate to the AIF or to the client on reasonable grounds that it would not have been able to carry out the order on such advantageous terms without aggregation, or at all, it may allocate the transaction for its own account proportionally, in accordance with the policy referred to in point (b) of paragraph 1.
SECTION 2
Conflicts of interest
(Article 14 of Directive 2011/61/EU)
Article 30
Types of conflicts of interest
For the purpose of identifying the types of conflicts of interest that arise in the course of managing an AIF, AIFMs shall take into account, in particular, whether the AIFM, a relevant person or a person directly or indirectly linked by way of control to the AIFM:
is likely to make a financial gain, or avoid a financial loss, at the expense of the AIF or its investors;
has an interest in the outcome of a service or an activity provided to the AIF or its investors or to a client or of a transaction carried out on behalf of the AIF or a client, which is distinct from the AIF’s interest in that outcome;
has a financial or other incentive to favour:
carries out the same activities for the AIF and for another AIF, a UCITS or client; or
receives or will receive from a person other than the AIF or its investors an inducement in relation to collective portfolio management activities provided to the AIF, in the form of monies, goods or services other than the standard commission or fee for that service.
AIFMs shall ensure that when identifying the types of conflicts of interest, the existence of which may damage the interests of an AIF, they shall include those types of conflicts of interest that may arise as a result of the integration of sustainability risks in their processes, systems and internal controls.
Article 31
Conflicts of interest policy
Where the AIFM is a member of a group, the policy shall also take into account any circumstances of which the AIFM is or should be aware which may give rise to a conflict of interest resulting from the structure and business activities of other members of the group.
The conflicts of interest policy established in accordance with paragraph 1 shall include the following:
with reference to the activities carried out by or on behalf of the AIFM, including activities carried out by a delegate, sub-delegate, external valuer or counterparty, identification of the circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of the AIF or its investors;
procedures to be followed and measures to be adopted in order to prevent, manage and monitor such conflicts.
Article 32
Conflicts of interest related to the redemption of investments
The AIFM that manages an open-ended AIF shall identify, manage and monitor conflicts of interest arising between investors wishing to redeem their investments and investors wishing to maintain their investments in the AIF, and any conflicts between the AIFM’s incentive to invest in illiquid assets and the AIF’s redemption policy in accordance with its obligations under Article 14(1) of Directive 2011/61/EU.
Article 33
Procedures and measures preventing or managing conflicts of interest
Where necessary and appropriate for the AIFM to ensure the requisite degree of independence, the procedures to be followed and measures to be adopted in accordance with point (b) of Article 31(2) shall include the following:
effective procedures to prevent or control the exchange of information between relevant persons engaged in collective portfolio management activities or other activities pursuant to Article 6(2) and (4) of Directive 2011/61/EU involving a risk of conflict of interest where the exchange of information may harm the interest of one or more AIFs or their investors;
the separate supervision of relevant persons, whose principal functions involve carrying out collective portfolio management activities on behalf of, or providing services to, clients or investors, whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the AIFM;
the removal of any direct link between the remuneration of relevant persons principally engaged in one activity and the remuneration of, or revenues generated by, different relevant persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities;
measures to prevent or restrain any person from exercising inappropriate influence over the way in which a relevant person carries out collective portfolio management activities;
measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate collective portfolio management activities or other activities pursuant to Article 6(2) and (4) of Directive 2011/61/EU where such involvement may impair the proper management of conflicts of interest.
Where the adoption or the application of one or more of those measures and procedures does not ensure the requisite degree of independence, the AIFM shall adopt such alternative or additional measures and procedures as are necessary and appropriate for those purposes.
Article 34
Managing conflicts of interest
Where the organisational or administrative arrangements made by the AIFM are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the AIF or investors in the AIF are prevented, the senior management or other competent internal body of the AIFM shall be promptly informed in order to take any necessary decision or action to ensure that the AIFM acts in the best interests of the AIF or the investors in that AIF.
Article 35
Monitoring conflicts of interest
Article 36
Disclosure of conflicts of interest
Where information referred to in paragraph 1 is provided by means of a website and is not addressed personally to the investor, the following conditions shall be satisfied:
the investor has been notified of the address of the website, and the place on the website where the information may be accessed, and has consented to the provision of the information by such means;
the information must be up to date;
the information must be accessible continuously by means of that website for such period of time as the investor may reasonably need to inspect it.
Article 37
Strategies for the exercise of voting rights
The strategy referred to in paragraph 1 shall determine measures and procedures for:
monitoring relevant corporate actions;
ensuring that the exercise of voting rights is in accordance with the investment objectives and policy of the relevant AIF;
preventing or managing any conflicts of interest arising from the exercise of voting rights.
SECTION 3
Risk management
(Article 15 of Directive 2011/61/EU)
Article 38
Risk management systems
For the purposes of this Section, risk management systems shall be understood as systems comprised of relevant elements of the organisational structure of the AIFM, with a central role for a permanent risk management function, policies and procedures related to the management of risk relevant to each AIF’s investment strategy, and arrangements, processes and techniques related to risk measurement and management employed by the AIFM in relation to each AIF it manages.
Article 39
Permanent risk management function
An AIFM shall establish and maintain a permanent risk management function that shall:
implement effective risk management policies and procedures in order to identify, measure, manage and monitor on an ongoing basis all risks relevant to each AIF’s investment strategy to which each AIF is or may be exposed;
ensure that the risk profile of the AIF disclosed to investors in accordance with point (c) of Article 23(4) of Directive 2011/61/EU is consistent with the risk limits that have been set in accordance with Article 44 of this Regulation;
monitor compliance with the risk limits set in accordance with Article 44 and notify the AIFM’s governing body and, where it exists, the AIFM’s supervisory function in a timely manner when it considers the AIF’s risk profile inconsistent with these limits or sees a material risk that the risk profile will become inconsistent with these limits;
provide the following regular updates to the governing body of the AIFM and where it exists the AIFM’s supervisory function at a frequency which is in accordance with the nature, scale and complexity of the AIF or the AIFM’s activities:
the consistency between and compliance with the risk limits set in accordance with Article 44 and the risk profile of the AIF as disclosed to investors in accordance with Article 23(4)(c) of Directive 2011/61/EU;
the adequacy and effectiveness of the risk management process, indicating in particular whether appropriate remedial measures have been or will be taken in the event of any actual or anticipated deficiencies;
provide regular updates to the senior management outlining the current level of risk incurred by each managed AIF and any actual or foreseeable breaches of any risk limits set in accordance with Article 44, so as to ensure that prompt and appropriate action can be taken.
Article 40
Risk management policy
The AIFM shall address at least the following elements in the risk management policy:
the techniques, tools and arrangements that enable it to comply with Article 45;
the techniques, tools and arrangements that enable liquidity risk of the AIF to be assessed and monitored under normal and exceptional liquidity conditions including through the use of regularly conducted stress tests in accordance with Article 48;
the allocation of responsibilities within the AIFM pertaining to risk management;
the limits set in accordance with Article 44 of this Regulation and a justification of how these are aligned with the risk profile of the AIF disclosed to investors in accordance with Article 23(4)(c) of Directive 2011/61/EU;
the terms, contents, frequency and addressees of reporting by the permanent risk management function referred to in Article 39.
The risk management policy shall include a description of the safeguards referred to in Article 43, in particular:
the nature of the potential conflicts of interest;
the remedial measures put in place;
the reasons why these measures should be reasonably expected to result in independent performance of the risk management function;
how the AIFM expects to ensure that the safeguards are consistently effective.
Article 41
Assessment, monitoring and review of the risk management systems
AIFMs shall assess, monitor and periodically, at least once a year, review:
the adequacy and effectiveness of the risk management policy and of the arrangements, processes and techniques referred to in Article 45;
the degree of compliance by the AIFM with the risk management policy and with the arrangements, processes and techniques referred to in Article 45;
the adequacy and effectiveness of measures taken to address any deficiencies in the performance of the risk management process;
the performance of the risk management function;
the adequacy and effectiveness of measures aiming to ensure the functional and hierarchical separation of the risk management function in accordance with Article 42.
The frequency of the periodic review referred to in the first subparagraph shall be decided by the senior management in accordance with the principle of proportionality given the nature, scale and complexity of the AIFM’s business and the AIF it manages.
In addition to the periodic review referred to in paragraph 1, the risk management systems shall be reviewed where:
material changes are made to the risk management policies and procedures and to the arrangements, processes and techniques referred to in Article 45;
internal or external events indicate that an additional review is required;
material changes are made to the investment strategy and objectives of an AIF that the AIFM manages.
Article 42
Functional and hierarchical separation of the risk management function
The risk management function shall be considered as functionally and hierarchically separated from the operating units, including the portfolio management function, only where all the following conditions are satisfied:
persons engaged in the performance of the risk management function are not supervised by those responsible for the performance of the operating units, including the portfolio management function, of the AIFM;
persons engaged in the performance of the risk management function are not engaged in the performance of activities within the operating units, including the portfolio management function;
persons engaged in the performance of the risk management function are compensated in accordance with the achievement of the objectives linked to that function, independently of the performance of the operating units, including the portfolio management function;
the remuneration of senior officers in the risk management function is directly overseen by the remuneration committee, where such a committee has been established.
Article 43
Safeguards against conflicts of interest
The safeguards against conflicts of interest referred to in Article 15(1) of Directive 2011/61/EU shall ensure, at least, that:
decisions taken by the risk management function are based on reliable data, which are subject to an appropriate degree of control by the risk management function;
the remuneration of those engaged in the performance of the risk management function reflects the achievement of the objectives linked to the risk management function, independently of the performance of the business areas in which they are engaged;
the risk management function is subject to an appropriate independent review to ensure that decisions are being arrived at independently;
the risk management function is represented in the governing body or the supervisory function, where it has been established, at least with the same authority as the portfolio management function;
any conflicting duties are properly segregated.
Where proportionate, taking into account the nature, scale and complexity of the AIFM, the safeguards referred to in paragraph 1 shall also ensure that:
the performance of the risk management function is reviewed regularly by the internal audit function, or, if the latter has not been established, by an external party appointed by the governing body;
where a risk committee has been established, it is appropriately resourced and its non-independent members do not have undue influence over the performance of the risk management function.
Article 44
Risk limits
The qualitative and quantitative risk limits for each AIF shall, at least, cover the following risks:
market risks;
credit risks;
liquidity risks;
counterparty risks;
operational risks.
Article 45
Risk measurement and management
AIFMs shall adopt adequate and effective arrangements, processes and techniques in order to:
identify, measure, manage and monitor at any time the risks to which the AIFs under their management are or might be exposed;
ensure compliance with the limits set in accordance with Article 44.
For the purposes of paragraph 1, the AIFM shall take the following actions for each AIF it manages:
put in place such risk measurement arrangements, processes and techniques as are necessary to ensure that the risks of positions taken and their contribution to the overall risk profile are accurately measured on the basis of sound and reliable data and that the risk measurement arrangements, processes and techniques are adequately documented;
conduct periodic back-tests in order to review the validity of risk measurement arrangements which include model-based forecasts and estimates;
conduct, periodic appropriate stress tests and scenario analyses to address risks arising from potential changes in market conditions that might adversely impact the AIF;
ensure that the current level of risk complies with the risk limits set in accordance with Article 44;
establish, implement and maintain adequate procedures that, in the event of actual or anticipated breaches of the risk limits of the AIF, result in timely remedial actions in the best interest of investors;
ensure that there are appropriate liquidity management systems and procedures for each AIF in line with the requirements laid down in Article 46.
SECTION 4
Liquidity management
(Article 16 of Directive 2011/61/EU)
Article 46
Liquidity management system and procedures
AIFMs shall be able to demonstrate to the competent authorities of their home Member State that an appropriate liquidity management system and effective procedures referred to in Article 16(1) of Directive 2011/61/EU are in place taking into account the investment strategy, the liquidity profile and the redemption policy of each AIF.
Article 47
Monitoring and managing liquidity risk
The liquidity management system and procedures referred to in Article 46 shall at least, ensure that:
the AIFM maintains a level of liquidity in the AIF appropriate to its underlying obligations, based on an assessment of the relative liquidity of the AIF’s assets in the market, taking account of the time required for liquidation and the price or value at which those assets can be liquidated, and their sensitivity to other market risks or factors;
the AIFM monitors the liquidity profile of the AIF’s portfolio of assets, having regard to the marginal contribution of individual assets which may have a material impact on liquidity, and the material liabilities and commitments, contingent or otherwise, which the AIF may have in relation to its underlying obligations. For these purposes the AIFM shall take into account the profile of the investor base of the AIF, including the type of investors, the relative size of investments and the redemption terms to which these investments are subject;
the AIFM, where the AIF invests in other collective investment undertakings, monitors the approach adopted by the managers of those other collective investment undertakings to the management of liquidity, including through conducting periodic reviews to monitor changes to the redemption provisions of the underlying collective investment undertakings in which the AIF invests. Subject to Article 16(1) of Directive 2011/61/EU, this obligation shall not apply where the other collective investment undertakings in which the AIF invests are actively traded on a regulated market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC or an equivalent third country market;
the AIFM implements and maintains appropriate liquidity measurement arrangements and procedures to assess the quantitative and qualitative risks of positions and of intended investments which have a material impact on the liquidity profile of the portfolio of the AIF’s assets to enable their effects on the overall liquidity profile to be appropriately measured. The procedures employed shall ensure that the AIFM has the appropriate knowledge and understanding of the liquidity of the assets in which the AIF has invested or intends to invest including, where applicable, the trading volume and sensitivity of prices and, as the case may be, or spreads of individual assets in normal and exceptional liquidity conditions;
the AIFM considers and puts into effect the tools and arrangements, including special arrangements, necessary to manage the liquidity risk of each AIF under its management. The AIFM shall identify the types of circumstances where these tools and arrangements may be used in both normal and exceptional circumstances, taking into account the fair treatment of all AIF investors in relation to each AIF under management. The AIFM may use such tools and arrangements only in these circumstances and if appropriate disclosures have been made in accordance with Article 108.
Article 48
Liquidity management limits and stress tests
AIFMs shall monitor compliance with those limits and where limits are exceeded or likely to be exceeded, they shall determine the required (or necessary) course of action. In determining appropriate action, AIFMs shall consider the adequacy of the liquidity management policies and procedures, the appropriateness of the liquidity profile of the AIF’s assets and the effect of atypical levels of redemption requests.
AIFMs shall regularly conduct stress tests, under normal and exceptional liquidity conditions, which enable them to assess the liquidity risk of each AIF under their management. The stress tests shall:
be conducted on the basis of reliable and up-to-date information in quantitative terms or, where this is not appropriate, in qualitative terms;
where appropriate, simulate a shortage of liquidity of the assets in the AIF and atypical redemption requests;
cover market risks and any resulting impact, including on margin calls, collateral requirements or credit lines;
account for valuation sensitivities under stressed conditions;
be conducted at a frequency which is appropriate to the nature of the AIF, taking in to account the investment strategy, liquidity profile, type of investor and redemption policy of the AIF, and at least once a year.
Article 49
Alignment of investment strategy, liquidity profile and redemption policy
SECTION 5
Investment in securitisation positions
(Article 17 of Directive 2011/61/EU)
Article 50
Definitions
For the purposes of this Section:
‘securitisation’ means a securitisation within the meaning of Article 4(36) of Directive 2006/48/EC;
‘securitisation position’ means a securitisation position within the meaning of Article 4(40) of Directive 2006/48/EC;
‘sponsor’ means a sponsor within the meaning of Article 4(42) of Directive 2006/48/EC;
‘tranche’ means a tranche within the meaning of Article 4(39) of Directive 2006/48/EC.
Article 51
Requirements for retained interest
Only any of the following shall qualify as retention of a material net economic interest of not less than 5 %:
retention of no less than 5 % of the nominal value of each of the tranches sold or transferred to the investors;
in the case of securitisations of revolving exposures, retention of the originator’s interest of no less than 5 % of the nominal value of the securitised exposures;
retention of randomly selected exposures, equivalent to not less than 5 % of the nominal value of the securitised exposures, where such exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;
retention of the first loss tranche and, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5 % of the nominal value of the securitised exposures;
retention of a first loss exposure of not less than 5 % of every securitised exposure in the securitisation.
Net economic interest shall be measured at the origination and shall be maintained on an ongoing basis. The net economic interest, including retained positions, interest or exposures, shall not be subject to any credit risk mitigation or any short positions or any other hedge and shall not be sold. The net economic interest shall be determined by the notional value for off-balance sheet items.
There shall be no multiple applications of the retention requirements for any given securitisation.
Article 52
Qualitative requirements concerning sponsors and originators
Prior to an AIFM assuming exposure to the credit risk of a securitisation on behalf of one or more AIFs, it shall ensure that the sponsor and originator:
grant credit based on sound and well-defined criteria and clearly establish the process for approving, amending, renewing and re-financing loans to exposures to be securitised as they apply to exposures they hold;
have in place and operate effective systems to manage the ongoing administration and monitoring of their credit risk-bearing portfolios and exposures, including for identifying and managing problem loans and for making adequate value adjustments and provisions;
adequately diversify each credit portfolio based on the target market and overall credit strategy;
have a written policy on credit risk that includes their risk tolerance limits and provisioning policy and describes how it measures, monitors and controls that risk;
grant readily available access to all materially relevant data on the credit quality and performance of the individual underlying exposures, cash flows and collateral supporting a securitisation exposure and such information that is necessary to conduct comprehensive and well informed stress tests on the cash flows and collateral values supporting the underlying exposures. For that purpose, materially relevant data shall be determined as at the date of the securitisation and where appropriate due to the nature of the securitisation thereafter;
grant readily available access to all other relevant data necessary for the AIFM to comply with the requirements laid down in Article 53;
disclose the level of their retained net economic interest as referred to in Article 51, as well as any matters that could undermine the maintenance of the minimum required net economic interest as referred to in that Article.
Article 53
Qualitative requirements concerning AIFMs exposed to securitisations
Before becoming exposed to the credit risk of a securitisation on behalf of one or more AIFs, and as appropriate thereafter, AIFMs shall be able to demonstrate to the competent authorities for each of their individual securitisation positions that they have a comprehensive and thorough understanding of those positions and have implemented formal policies and procedures appropriate to the risk profile of the relevant AIF’s investments in securitised positions for analysing and recording:
information disclosed under Article 51, by originators or sponsors to specify the net economic interest that they maintain, on an ongoing basis, in the securitisation;
the risk characteristics of the individual securitisation position;
the risk characteristics of the exposures underlying the securitisation position;
the reputation and loss experience in earlier securitisations of the originators or sponsors in the relevant exposure classes underlying the securitisation position;
the statements and disclosures made by the originators or sponsors, or their agents or advisors, about their due diligence on the securitised exposures and, where applicable, on the quality of the collateral supporting the securitised exposures;
where applicable, the methodologies and concepts on which the valuation of collateral supporting the securitised exposures is based and the policies adopted by the originator or sponsor to ensure the independence of the valuer;
all the structural features of the securitisation that can materially impact the performance of the institution’s securitisation position, such as the contractual waterfall and waterfall related triggers, credit enhancements, liquidity enhancements, market value triggers, and deal-specific definitions of default.
AIFMs shall establish formal monitoring procedures in line with the principles laid down in Article 15 of Directive 2011/61/EU commensurate with the risk profile of the relevant AIF in relation to the credit risk of a securitisation position in order to monitor on an ongoing basis and in a timely manner performance information on the exposures underlying such securitisation positions. Such information shall include (if relevant to the specific type of securitisation and not limited to such types of information further described herein), the exposure type, the percentage of loans more than 30, 60 and 90 days past due, default rates, prepayment rates, loans in foreclosure, collateral type and occupancy, frequency distribution of credit scores or other measures of credit worthiness across underlying exposures, industry and geographical diversification and frequency distribution of loan to value ratios with bandwidths that facilitate adequate sensitivity analysis. Where the underlying exposures are themselves securitisation positions, AIFMs shall have the information set out in this subparagraph not only on the underlying securitisation tranches, such as the issuer name and credit quality, but also on the characteristics and performance of the pools underlying those securitisation tranches.
AIFMs shall apply the same standards of analysis to participations or underwritings in securitisation issues purchased from third parties.
Article 54
Corrective action
Article 55
Grandfathering clause
Articles 51 to 54 shall apply in relation to new securitisations issued on or after 1 January 2011. Articles 51 to 54 shall, after 31 December 2014, apply in relation to existing securitisations where new underlying exposures are added or substituted after that date.
Article 56
Interpretation
In the absence of specific interpretation given by ESMA or by the Joint Committee of the European Supervisory Authorities, the provisions of this Section shall be interpreted in a consistent manner with the corresponding provisions of Directive 2006/48/EC and with the Guidelines to Article 122a of the Capital Requirements Directive of 31 December 2010 ( 2 ) issued by the Committee of European Banking Supervisors and their subsequent amendments.
SECTION 6
Organisational requirements — general principles
(Articles 12 and 18 of Directive 2011/61/EU)
Article 57
General requirements
AIFMs shall:
establish, implement and maintain decision-making procedures and an organisational structure which specifies reporting lines and allocates functions and responsibilities clearly and in a documented manner;
ensure that their relevant persons are aware of the procedures to be followed for the proper discharge of their responsibilities;
establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the AIFM;
establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the AIFM and effective information flows with any third party involved;
maintain adequate and orderly records of their business and internal organisation.
AIFMs shall take into account the nature, scale and complexity of their business and the nature and range of services and activities undertaken in the course of that business.
AIFMs shall take into account sustainability risks when complying with the requirements laid down in the first subparagraph.
Article 58
Electronic data processing
Article 59
Accounting procedures
Article 60
Control by the governing body, senior management and supervisory function
An AIFM shall ensure that its senior management:
is responsible for the implementation of the general investment policy for each managed AIF, as defined, where relevant, in the fund rules, the instruments of incorporation, the prospectus or the offering documents;
oversees the approval of the investment strategies for each managed AIF;
is responsible for ensuring that valuation policies and procedures in accordance with Article 19 of Directive 2011/61/EU are established and implemented;
is responsible for ensuring that the AIFM has a permanent and effective compliance function, even if this function is performed by a third party;
ensures and verifies on a periodic basis that the general investment policy, the investment strategies and the risk limits of each managed AIF are properly and effectively implemented and complied with, even if the risk management function is performed by third parties;
approves and reviews on a periodic basis the adequacy of the internal procedures for undertaking investment decisions for each managed AIF, so as to ensure that such decisions are consistent with the approved investment strategies;
approves and reviews on a periodic basis the risk management policy and the arrangements, processes and techniques for implementing that policy, including the risk limit system for each AIF it manages;
is responsible for establishing and applying a remuneration policy in line with Annex II to Directive 2011/61/EU;
is responsible for the integration of sustainability risks in activities referred to in points (a) to (h).
An AIFM shall also ensure that its senior management and, where appropriate, its governing body or supervisory function:
assess and periodically review the effectiveness of the policies, arrangements and procedures put in place to comply with the obligations laid down in Directive 2011/61/EU;
take appropriate measures to address any deficiencies.
Article 61
Permanent compliance function
The AIFM shall take into account the nature, scale and complexity of its business, and the nature and range of services and activities undertaken in the course of that business.
An AIFM shall establish and maintain a permanent and effective compliance function which operates independently and has the following responsibilities:
monitoring and, on a regular basis, evaluating the adequacy and effectiveness of the measures, policies and procedures put in place in accordance with paragraph 1 and the actions taken to address any deficiencies in the AIFM’s compliance with its obligations;
advising the relevant persons responsible for carrying out services and activities and assisting them in complying with the AIFM’s obligations under Directive 2011/61/EU.
In order to enable the compliance function referred to in paragraph 2 to perform its responsibilities properly and independently, the AIFM shall ensure that:
the compliance function has the necessary authority, resources, expertise and access to all relevant information;
a compliance officer is appointed and is responsible for the compliance function and for reporting on a frequent basis, and at least annually, to the senior management on matters of compliance, indicating in particular whether appropriate remedial measures have been taken in the event of any deficiencies;
persons in the compliance function are not involved in the performance of services or activities they monitor;
the method of determining the remuneration of a compliance officer and other persons in the compliance function do not affect their objectivity and are not likely to do so.
However, the AIFM shall not be required to comply with point (c) or (d) of the first subparagraph where it is able to demonstrate that in view of the nature, scale and complexity of its business, and the nature and range of its services and activities, that the requirement is not proportionate and that its compliance function continues to be effective.
Article 62
Permanent internal audit function
The internal audit function referred to in paragraph 1 shall:
establish, implement and maintain an audit plan to examine and evaluate the adequacy and effectiveness of the AIFM’s systems, internal control mechanisms and arrangements;
issue recommendations based on the results of work carried out in accordance with point (a);
verify compliance with the recommendations referred to in point (b);
report internal audit matters.
Article 63
Personal transactions
For any relevant person who is involved in activities that may give rise to a conflict of interest, or who has access to inside information within the meaning of Article 1(1) of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) ( 3 ) or to other confidential information relating to an AIF or transactions with or for an AIF, an AIFM shall establish, implement and maintain adequate arrangements aimed at preventing such relevant persons from:
entering into a personal transaction in financial instruments or other assets which fulfils one of the following criteria:
the transaction is subject to Article 2(1) of Directive 2003/6/EC;
the transaction involves the misuse or improper disclosure of confidential information;
the transaction conflicts or is likely to conflict with an obligation of the AIFM under Directive 2011/61/EU;
advising or inducing, other than in the proper course of his employment or contract for services, any other person to enter into a personal transaction referred to in point (a)(i) and (ii), or that would otherwise constitute a misuse of information relating to pending orders;
disclosing, other than in the normal course of his employment or contract for services and without prejudice to Article 3(a) of Directive 2003/6/EC, any information or opinion to any other person if the relevant person knows, or reasonably ought to know, that as a result of that disclosure that other person would or would be likely to take either of the following steps:
entering into a personal transaction referred to in point (a)(i) and (ii) in financial instruments or other assets or that would otherwise constitute a misuse of information relating to pending orders;
advising or inducing another person to enter into such a personal transaction.
The arrangements referred to in paragraph 1 shall in particular be designed to ensure that:
each relevant person is aware of the restrictions on personal transactions referred to in paragraph 1, and of the measures established by the AIFM in connection with personal transactions and disclosure, pursuant to paragraph 1;
the AIFM is informed promptly of any personal transaction entered into by a relevant person covered by paragraph 1, either by notification of that transaction or by other procedures enabling the AIFM to identify such transactions;
a record is kept of the personal transaction notified to the AIFM or identified by it, including any authorisation or prohibition in connection with such a transaction.
For the purposes of point (b) of the first subparagraph, where certain activities of the AIFM are performed by third parties, the AIFM shall ensure that the entity performing the activity maintains a record of personal transactions entered into by any relevant person covered by paragraph 1 and provides that information to the AIFM promptly on request.
Paragraphs 1 and 2 shall not apply to personal transactions:
effected under a discretionary portfolio management service where there is no prior communication in connection with the transaction between the portfolio manager and the relevant person or other person for whose account the transaction is executed;
in UCITS or AIFs that are subject to supervision under the law of a Member State which requires an equivalent level of risk spreading in their assets, where the relevant person and any other person for whose account the transactions are effected are not involved in the management of that undertaking.
For the purpose of paragraph 1, a personal transaction shall also include a transaction in a financial instrument or other asset effected on behalf or for the account of:
a relevant person;
any person with whom the relevant person has a family relationship or with whom the relevant person has close links;
a person whose relationship with the relevant person is such that the relevant person has a direct or indirect material interest in the outcome of the trade, other than a fee or commission for the execution of the trade.
Article 64
Recording of portfolio transactions
With regard to portfolio transactions on an execution venue, the record referred to in paragraph 1 shall include the following information:
the name or other designation of the AIF and of the person acting for the account of the AIF;
the asset;
where relevant, the quantity;
the type of the order or transaction;
the price;
for orders, the date and exact time of the transmission of the order and the name or other designation of the person to whom the order was transmitted, or for transactions, the date and exact time of the decision to deal and the execution of the transaction;
where applicable, the name of the person transmitting the order or executing the transaction;
where applicable, the reasons for the revocation of an order;
for executed transactions the counterparty and execution venue identification.
With regard to portfolio transactions by the AIF outside an execution venue, the record referred to in paragraph 1 shall include the following information:
the name or other designation of the AIF;
the legal and other documentation that forms the basis of the portfolio transaction, including in particular the agreement as executed;
the price.
Article 65
Recording of subscription and redemption orders
That record shall include information on the following:
the relevant AIF;
the person giving or transmitting the order;
the person receiving the order;
the date and time of the order;
the terms and means of payment;
the type of the order;
the date of execution of the order;
the number of units or shares or equivalent amounts subscribed or redeemed;
the subscription or, where relevant, redemption price for each unit or share or, where relevant, the amount of capital committed and paid;
the total subscription or redemption value of the units or shares;
the gross value of the order including charges for subscription, or the net amount after charges for redemption.
Information under points (i), (j) and (k) shall be recorded as soon as available.
Article 66
Recordkeeping requirements
However, competent authorities may require AIFMs to ensure that any or all of those records are retained for a longer period, taking into account the nature of the asset or portfolio transaction, where it is necessary to enable the authority to exercise its supervisory functions under Directive 2011/61/EU.
Where the AIFM transfers its responsibilities in relation to the AIF to another AIFM, it shall ensure that the records referred to in paragraph 1 are accessible to that AIFM.
The records shall be retained on a medium that allows the storage of information in a way accessible for future reference by the competent authorities, and in such a form and manner that:
the competent authorities are able to access them readily and to reconstitute each key stage of the processing of each portfolio transaction;
corrections or other amendments, and the contents of the records prior to such corrections or amendments, may be easily ascertained;
no other manipulation or alteration is possible.
SECTION 7
Valuation
(Article 19 of Directive 2011/61/EU)
Article 67
Policies and procedures for the valuation of the assets of the AIF
Without prejudice to requirements under national law and the AIF rules and instruments of incorporation, the AIFM shall ensure that fair, appropriate and transparent valuation methodologies are applied for the AIFs it manages. The valuation policies shall identify and the procedures shall implement the valuation methodologies used for each type of asset in which the AIF may invest in accordance with applicable national law, the AIF rules and the instruments of incorporation. The AIFM shall not invest in a particular type of asset for the first time unless an appropriate valuation methodology or methodologies have been identified for that specific type of asset.
The policies and procedures setting out valuation methodologies shall include inputs, models and the selection criteria for pricing and market data sources. They shall provide that prices shall be obtained from independent sources whenever possible and appropriate. The selection process of a particular methodology shall include an assessment of the available relevant methodologies, taking into account their sensitivity to changes in variables and how specific strategies determine the relative value of the assets in the portfolio.
The valuation policies and procedures shall address at least the following:
the competence and independence of personnel who are effectively carrying out the valuation of assets;
the specific investment strategies of the AIF and the assets the AIF might invest in;
the controls over the selection of valuation inputs, sources and methodologies;
the escalation channels for resolving differences in values for assets;
the valuation of any adjustments related to the size and liquidity of positions, or to changes in the market conditions, as appropriate;
the appropriate time for closing the books for valuation purposes;
the appropriate frequency for valuing assets.
The valuation policies and procedures shall ensure that the AIFM conducts initial and periodic due diligence on third parties that are appointed to perform valuation services.
Article 68
Use of models to value assets
Article 69
Consistent application of valuation policies and procedures
Article 70
Periodic review of valuation policies and procedures
Article 71
Review of individual values of assets
The valuation policies and procedures shall set out a review process for the individual values of assets, where a material risk of an inappropriate valuation exists, such as in the following cases:
the valuation is based on prices only available from a single counterparty or broker source;
the valuation is based on illiquid exchange prices;
the valuation is influenced by parties related to the AIFM;
the valuation is influenced by other entities that may have a financial interest in the AIF’s performance;
the valuation is based on prices supplied by the counterparty who originated an instrument, in particular where the originator is also financing the AIF’s position in the instrument;
the valuation is influenced by one or more individuals within the AIFM.
The valuation policies and procedures shall describe the review process including sufficient and appropriate checks and controls on the reasonableness of individual values. Reasonableness shall be assessed in terms of the existence of an appropriate degree of objectivity. Such checks and controls shall include at least:
verifying values by a comparison amongst counterparty-sourced pricings and over time;
validating values by comparison of realised prices with recent carrying values;
considering the reputation, consistency and quality of the valuation source;
a comparison with values generated by a third party;
an examination and documentation of exemptions;
highlighting and researching any differences that appear unusual or vary by valuation benchmark established for the type of asset;
testing for stale prices and implied parameters;
a comparison with the prices of any related assets or their hedges;
a review of the inputs used in model-based pricing, in particular of those to which the model’s price exhibits significant sensitivity.
Article 72
Calculation of the net asset value per unit or share
Article 73
Professional guarantees
The professional guarantees shall contain evidence of the external valuer’s qualification and capability to perform proper and independent valuation, including, at least, evidence of:
sufficient personnel and technical resources;
adequate procedures safeguarding proper and independent valuation;
adequate knowledge and understanding of the investment strategy of the AIF and of the assets the external valuer is appointed to value;
a sufficiently good reputation and sufficient experience with valuation.
Article 74
Frequency of valuation of assets held by open-ended AIFs
SECTION 8
Delegation of AIFM functions
(Article 20(1), (2), (4) and (5) of Directive 2011/61/EU)
Article 75
General principles
When delegating the task of carrying out one or more functions on their behalf, AIFMs shall comply, in particular, with the following general principles:
the delegation structure does not allow for the circumvention of the AIFM’s responsibilities or liability;
the obligations of the AIFM towards the AIF and its investors are not altered as a result of the delegation;
the conditions with which the AIFM must comply in order to be authorised and carry out activities in accordance with Directive 2011/61/EU are not undermined;
the delegation arrangement takes the form of a written agreement concluded between the AIFM and the delegate;
the AIFM ensures that the delegate carries out the delegated functions effectively and in compliance with applicable law and regulatory requirements and must establish methods and procedures for reviewing on an ongoing basis the services provided by the delegate. The AIFM shall take appropriate action if it appears that the delegate cannot carry out the functions effectively or in compliance with applicable laws and regulatory requirements;
the AIFM supervises effectively the delegated functions and manages the risks associated with the delegation. For this purpose the AIFM shall have at all times the necessary expertise and resources to supervise the delegated functions. The AIFM shall set out in the agreement its right of information, inspection, admittance and access, and its instruction and monitoring rights against the delegate. The AIFM shall also ensure that the delegate properly supervises the performance of the delegated functions, and adequately manages the risks associated with the delegation;
the AIFM ensures that the continuity and quality of the delegated functions or of the delegated task of carrying out functions are maintained also in the event of termination of the delegation either by transferring the delegated functions or the delegated task of carrying out functions to another third party or by performing them itself;
the respective rights and obligations of the AIFM and the delegate are clearly allocated and set out in the agreement. In particular, the AIFM shall contractually ensure its instruction and termination rights, its rights of information, and its right to inspections and access to books and premises. The agreement shall make sure that sub-delegation can take place only with the consent of the AIFM;
where it concerns portfolio management, the delegation is in accordance with the investment policy of the AIF. The delegate shall be instructed by the AIFM how to implement the investment policy and the AIFM shall monitor whether the delegate complies with it on an ongoing basis;
the AIFM ensures that the delegate discloses to the AIFM any development that may have a material impact on the delegate’s ability to carry out the delegated functions effectively and in compliance with applicable laws and regulatory requirements;
the AIFM ensures that the delegate protects any confidential information relating to the AIFM, the AIF affected by the delegation and the investors in that AIF;
the AIFM ensures that the delegate establishes, implements and maintains a contingency plan for disaster recovery and periodic testing of backup facilities while taking into account the types of delegated functions.
Article 76
Objective reasons for delegation
The AIFM shall provide the competent authorities with a detailed description, explanation and evidence of the objective reasons for delegation. When assessing whether the entire delegation structure is based on objective reasons within the meaning of Article 20(1)(a) of Directive 2011/61/EU the following criteria shall be considered:
optimising of business functions and processes;
cost saving;
expertise of the delegate in administration or in specific markets or investments;
access of the delegate to global trading capabilities.
Article 77
Features of the delegate
Where the delegate is regulated in respect of its professional services within the Union, factors referred to in the first subparagraph shall be deemed to be satisfied when the relevant supervisory authority has reviewed the criterion of ‘good repute’ within the authorisation procedure unless there is evidence to the contrary.
Article 78
Delegation of portfolio or risk management
The following entities shall be deemed to be authorised or registered for the purpose of asset management and subject to supervision in accordance with point (c) of Article 20(1) of Directive 2011/61/EU:
management companies authorised under Directive 2009/65/EC;
investment firms authorised under Directive 2004/39/EC to perform portfolio management;
credit institutions authorised under Directive 2006/48/EC having the authorisation to perform portfolio management under Directive 2004/39/EC;
external AIFMs authorised under Directive 2011/61/EU;
third country entities authorised or registered for the purpose of asset management and effectively supervised by a competent authority in those countries.
Where the delegation is conferred on a third-country undertaking the following conditions shall be fulfilled in accordance with point (d) of Article 20(1) of Directive 2011/61/EU:
a written arrangement shall exist between the competent authorities of the home Member State of the AIFM and the supervisory authorities of the undertaking to which delegation is conferred;
with respect to the undertaking to which delegation is conferred, the arrangement referred to in point (a) allows the competent authorities to:
obtain on request the relevant information necessary to carry out their supervisory tasks as provided for in Directive 2011/61/EU;
obtain access to the documents relevant for the performance of their supervisory duties maintained in the third country;
carry out on-site inspections on the premises of the undertaking to which functions were delegated. The practical procedures for on-site inspections shall be detailed in the written arrangement;
receive as soon as possible information from the supervisory authority in the third country for the purpose of investigating apparent breaches of the requirements of Directive 2011/61/EU and its implementing measures;
cooperate in enforcement in accordance with the national and international law applicable to the supervisory authority of the third country and the EU competent authorities in cases of breach of the requirements of Directive 2011/61/EU and its implementing measures and relevant national law.
Article 79
Effective supervision
A delegation shall be deemed to prevent the effective supervision of the AIFM where:
the AIFM, its auditors and the competent authorities do not have effective access to data related to the delegated functions and to the business premises of the delegate, or the competent authorities are not able to exercise those rights of access;
the delegate does not cooperate with the competent authorities of the AIFM in connection with the delegated functions;
the AIFM does not make available on request to the competent authorities all information necessary to enable authorities to supervise the compliance of the performance of the delegated functions with the requirements of Directive 2011/61/EU and its implementing measures.
Article 80
Conflicts of interest
In accordance with point (b) of Article 20(2) of Directive 2011/61/EU, the criteria to assess whether a delegation conflicts with the interests of the AIFM or the investor in the AIF shall at least include:
where the AIFM and the delegate are members of the same group or have any other contractual relationship, the extent to which the delegate controls the AIFM or has the ability to influence its actions;
where the delegate and an investor in the relevant AIF are members of the same group or have any other contractual relationship, the extent to which this investor controls the delegate or has the ability to influence its actions;
the likelihood that the delegate makes a financial gain, or avoids a financial loss, at the expense of the AIF or the investors in the AIF;
the likelihood that the delegate has an interest in the outcome of a service or an activity provided to the AIFM or the AIF;
the likelihood that the delegate has a financial or other incentive to favour the interest of another client over the interests of the AIF or the investors in the AIF;
the likelihood that the delegate receives or will receive from a person other than the AIFM an inducement in relation to the collective portfolio management activities provided to the AIFM and the AIFs it manages in the form of monies, goods or services other than the standard commission or fee for that service.
The portfolio or risk management function may be considered to be functionally and hierarchically separated from other potentially conflicting tasks only where the following conditions are satisfied:
persons engaged in portfolio management tasks are not engaged in the performance of potentially conflicting tasks such as controlling tasks;
persons engaged in risk management tasks are not engaged in the performance of potentially conflicting tasks such as operating tasks;
persons engaged in risk management functions are not supervised by those responsible for the performance of operating tasks;
the separation is ensured throughout the whole hierarchical structure of the delegate up to its governing body and is reviewed by the governing body and, where it exists, the supervisory function of the delegate.
Potential conflicts of interest shall be deemed properly identified, managed, monitored and disclosed to the investors of the AIF only if:
the AIFM ensures that the delegate takes all reasonable steps to identify, manage and monitor potential conflicts of interest that may arise between itself and the AIFM, the AIF or the investors in the AIF. The AIFM shall ensure that the delegate has procedures in place corresponding to those required under Articles 31 to 34;
the AIFM ensures that the delegate discloses potential conflicts of interest as well as the procedures and measures to be adopted by it in order to manage such conflicts of interest to the AIFM which shall disclose them to the AIF and the investors in the AIF in accordance with Article 36.
Article 81
Consent and notification of sub-delegation
A general consent given in advance by the AIFM shall not be deemed consent in accordance with point (a) of Article 20(4) of Directive 2011/61/EU.
Article 82
Letter-box entity and AIFM no longer considered to be managing an AIF
An AIFM shall be deemed a letter-box entity and shall no longer be considered to be the manager of the AIF at least in any of the following situations:
the AIFM no longer retains the necessary expertise and resources to supervise the delegated tasks effectively and manage the risks associated with the delegation;
the AIFM no longer has the power to take decisions in key areas which fall under the responsibility of the senior management or no longer has the power to perform senior management functions in particular in relation to the implementation of the general investment policy and investment strategies;
the AIFM loses its contractual rights to inquire, inspect, have access or give instructions to its delegates or the exercise of such rights becomes impossible in practice;
the AIFM delegates the performance of investment management functions to an extent that exceeds by a substantial margin the investment management functions performed by the AIFM itself. When assessing the extent of delegation, competent authorities shall assess the entire delegation structure taking into account not only the assets managed under delegation but also the following qualitative criteria:
the types of assets the AIF or the AIFM acting on behalf of the AIF is invested in, and the importance of the assets managed under delegation for the risk and return profile of the AIF;
the importance of the assets under delegation for the achievement of the investment goals of the AIF;
the geographical and sectoral spread of the AIF’s investments;
the risk profile of the AIF;
the type of investment strategies pursued by the AIF or the AIFM acting on behalf of the AIF;
the types of tasks delegated in relation to those retained; and
the configuration of delegates and their sub-delegates, their geographical sphere of operation and their corporate structure, including whether the delegation is conferred on an entity belonging to the same corporate group as the AIFM.
CHAPTER IV
DEPOSITARY
SECTION 1
Particulars of the written contract
(Article 21(2) of Directive 2011/61/EU)
Article 83
Contractual particulars
A contract by which the depositary is appointed in accordance with Article 21(2) of Directive 2011/61/EU shall be drawn up between the depositary on the one hand and the AIFM and, as the case may be, or the AIF on the other hand and shall include at least the following elements:
a description of the services to be provided by the depositary and the procedures to be adopted for each type of asset in which the AIF may invest and which shall then be entrusted to the depositary;
a description of the way in which the safe-keeping and oversight function is to be performed depending on the types of assets and the geographical regions in which the AIF plans to invest. With respect to the custody duties this description shall include country lists and procedures for adding and, as the case may be, or withdrawing countries from that list. This shall be consistent with the information provided in the AIF rules, instruments of incorporation and offering documents regarding the assets in which the AIF may invest;
a statement that the depositary’s liability shall not be affected by any delegation of its custody functions unless it has discharged itself of its liability in accordance with Article 21(13) or (14) of Directive 2011/61/EU;
the period of validity and the conditions for amendment and termination of the contract including the situations which could lead to the termination of the contract and details regarding the termination procedure and, if applicable, the procedures by which the depositary should send all relevant information to its successor;
the confidentiality obligations applicable to the parties in accordance with relevant laws and regulations. These obligations shall not impair the ability of competent authorities to have access to the relevant documents and information;
the means and procedures by which the depositary transmits to the AIFM or the AIF all relevant information that it needs to perform its duties including the exercise of any rights attached to assets, and in order to allow the AIFM and the AIF to have a timely and accurate overview of the accounts of the AIF;
the means and procedures by which the AIFM or the AIF transmits all relevant information or ensures the depositary has access to all the information it needs to fulfil its duties, including the procedures ensuring that the depositary will receive information from other parties appointed by the AIF or the AIFM;
information on whether or not the depositary, or a third party to whom safe-keeping functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU may re-use the assets it has been entrusted with and, if any, the conditions attached to any such re-use;
the procedures to be followed when an amendment to the AIF rules, instruments of incorporation or offering documents is being considered, detailing the situations in which the depositary is to be informed, or where the prior agreement of the depositary is needed to proceed with the amendment;
all necessary information that needs to be exchanged between the AIF, the AIFM, a third party acting on behalf of the AIF or the AIFM, on the one hand, and the depositary, on the other hand, related to the sale, subscription, redemption, issue, cancellation and re-purchase of units or shares of the AIF;
all necessary information that needs to be exchanged between the AIF, the AIFM, a third party acting on behalf of the AIF or the AIFM and the depositary related to the performance of the depositary’s oversight and control function;
where the parties to the contract envisage appointing third parties to carry out parts of their respective duties, a commitment to provide, on a regular basis, details of any third party appointed and, upon request, information on the criteria used to select the third party and the steps envisaged to monitor the activities carried out by the selected third party;
information on the tasks and responsibilities of the parties to the contract in respect of obligations relating to the prevention of money laundering and the financing of terrorism;
information on all cash accounts opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF and the procedures ensuring that the depositary will be informed when any new account is opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF;
details regarding the depositary’s escalation procedures, including the identification of the persons to be contacted within the AIF and, as the case may be, or the AIFM by the depositary when it launches such a procedure;
a commitment by the depositary to notify the AIFM when it becomes aware that the segregation of assets is not, or is no longer sufficient to ensure protection from insolvency of a third party, to whom safe-keeping functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU in a specific jurisdiction;
the procedures ensuring that the depositary, in respect of its duties, has the ability to enquire into the conduct of the AIFM and, as the case may be, or the AIF and to assess the quality of information transmitted including by way of having access to the books of the AIF and, as the case may be, or AIFM or by way of on-site visits;
the procedures ensuring that the AIFM and, as the case may be, or the AIF can review the performance of the depositary in respect of the depositary’s contractual obligations.
SECTION 2
General criteria for assessing the prudential regulation and supervision applicable to depositaries in third countries
(Article 21(6)(b) of Directive 2011/61/EU)
Article 84
Criteria for assessing prudential regulation and supervision applicable to a depositary in a third country
For the purposes of point (b) of Article 21(6) of Directive 2011/61/EU, the effectiveness of prudential regulation and supervision applicable to a depositary in a third country whether it has the same effect as that provided for under Union law and its effective enforcement shall be assessed against the following criteria:
the depositary is subject to authorisation and ongoing supervision by a public competent authority with adequate resources to fulfil its tasks;
the law of the third country lay down criteria for authorisation as a depositary that have the same effect as those laid down for access to the business of credit institutions or investment firms within the Union;
the capital requirements imposed on the depositary in the third country have the same effect as those applicable in the Union depending on whether the depositary is of the same nature as an Union credit institution or investment firm;
the operating conditions applicable to a depositary in the third country have the same effect as those laid down for credit institutions or investment firms within the Union depending on the nature of the depositary;
the requirements regarding the performance of the specific duties as AIF depositary established in the law of the third country have the same effect as those provided for in Article 21(7) to (15) of Directive 2011/61/EU and its implementing measures and the relevant national law;
the law of the third country provides for the application of sufficiently dissuasive enforcement actions in the event of breach by the depositary of the requirements and conditions referred to points (a) to (e).
SECTION 3
Depositary functions, due diligence duties and segregation obligation
(Articles 21(7)-(9) and 21(11)(c) and (d)(iii) of Directive 2011/61/EU)
Article 85
Cash monitoring — general requirements
In order to have access to all information regarding the AIF’s cash accounts and have a clear overview of all the AIF’s cash flows, a depositary shall at least:
be informed, upon its appointment, of all existing cash accounts opened in the name of the AIF, or in the name of the AIFM acting on behalf of the AIF;
be informed at the opening of any new cash account by the AIF or by the AIFM acting on behalf of the AIF;
be provided with all information related to the cash accounts opened at a third party entity, directly by those third parties.
Article 86
Monitoring of the AIF’s cash flows
A depositary shall ensure effective and proper monitoring of the AIF’s cash flows and in particular it shall at least:
ensure that all cash of the AIF is booked in accounts opened with entities referred to in points (a), (b) and (c) of Article 18(1) of Directive 2006/73/EC in the relevant markets where cash accounts are required for the purposes of the AIF’s operations and which are subject to prudential regulation and supervision that has the same effect as Union law, is effectively enforced and is in accordance with the principles laid down in Article 16 of Directive 2006/73/EC;
implement effective and proper procedures to reconcile all cash flow movements and perform such reconciliations on a daily basis or, in case of infrequent cash movements, when such cash flow movements occur;
implement appropriate procedures to identify at the close of business day significant cash flows and in particular those which could be inconsistent with the AIF’s operations;
review periodically the adequacy of those procedures including through a full review of the reconciliation process at least once a year and ensuring that the cash accounts opened in the name of the AIF, in the name of the AIFM acting on behalf of the AIF or in the name of the depositary acting on behalf of the AIF are included in the reconciliation process;
monitor on an ongoing basis the outcomes of the reconciliations and actions taken as a result of any discrepancies identified by the reconciliation procedures and notify the AIFM if an irregularity has not been rectified without undue delay and also the competent authorities if the situation cannot be clarified and, as the case may be, or corrected;
check the consistency of its own records of cash positions with those of the AIFM. The AIFM shall ensure that all instructions and information related to a cash account opened with a third party are sent to the depositary, so that the depositary is able to perform its own reconciliation procedure.
Article 87
Duties regarding subscriptions
An AIFM shall ensure that the depositary is provided with information about payments made by or on behalf of investors upon the subscription of units or shares of an AIF at the close of each business day when the AIFM, the AIF or a party acting on behalf of it, such as a transfer agent receives such payments or an order from the investor. The AIFM shall ensure that the depositary receives all other relevant information it needs to make sure that the payments are then booked in cash accounts opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF or in the name of the depositary in accordance with the provisions of Article 21(7) of Directive 2011/61/EU.
Article 88
Financial instruments to be held in custody
Financial instruments belonging to the AIF or to the AIFM acting on behalf of the AIF which are not able to be physically delivered to the depositary shall be included in the scope of the custody duties of the depositary where all of the following requirements are met:
they are transferable securities including those which embed derivatives as referred to in the last subparagraph of Article 51(3) of Directive 2009/65/EC and Article 10 of Commission Directive 2007/16/EC ( 4 ), money market instruments or units of collective investment undertakings;
they are capable of being registered or held in an account directly or indirectly in the name of the depositary.
Article 89
Safekeeping duties with regard to assets held in custody
In order to comply with the obligations laid down in point (a) of Article 21(8) of Directive 2011/61/EU with respect to financial instruments to be held in custody, a depositary shall ensure at least that:
the financial instruments are properly registered in accordance with Article 21(8)(a)(ii) of Directive 2011/61/EU;
records and segregated accounts are maintained in a way that ensures their accuracy, and in particular record the correspondence with the financial instruments and cash held for AIFs;
reconciliations are conducted as often as necessary between the depositary's internal accounts and records and those of any third party to whom custody functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU;
due care is exercised in relation to the financial instruments held in custody in order to ensure a high standard of investor protection;
all relevant custody risks throughout the custody chain are assessed and monitored and the AIFM is informed of any material risk identified;
adequate organisational arrangements are introduced to minimise the risk of loss or diminution of the financial instruments, or of rights in connection with those financial instruments as a result of fraud, poor administration, inadequate registering or negligence;
the AIF’s ownership right or the ownership right of the AIFM acting on behalf of the AIF over the assets is verified.
In relation to point (c) of the first subparagraph, the frequency of the reconciliations shall be determined on the basis of the following:
the normal trading activity of the AIF;
any trade occurring outside the normal trading activity;
any trade occurring on behalf of any other client whose assets are held by the third party in the same financial instruments account as the assets of the AIF.
The requirement referred to in the first subparagraph shall not apply to fund of funds structures or master-feeder structures where the underlying funds have a depositary which keeps in custody the assets of these funds.
Article 90
Safekeeping duties regarding ownership verification and record keeping
In order to comply with the obligations referred to in point (b) of Article 21(8) of Directive 2011/61/EU, a depositary shall at least:
have access without undue delay to all relevant information it needs in order to perform its ownership verification and record-keeping duties, including relevant information to be provided to the depositary by third parties;
possess sufficient and reliable information for it to be satisfied of the AIF’s ownership right or of the ownership right of the AIFM acting on behalf of the AIF over the assets;
maintain a record of those assets for which it is satisfied that the AIF or the AIFM acting on behalf of the AIF holds the ownership. In order to comply with this obligation, the depositary shall:
register in its record, in the name of the AIF, assets, including their respective notional amounts, for which it is satisfied that the AIF or the AIFM acting on behalf of the AIF holds the ownership;
be able to provide at any time a comprehensive and up-to-date inventory of the AIF’s assets, including their respective notional amounts.
For the purpose of point (c)(ii) of paragraph 2, the depositary shall ensure that there are procedures in place so that registered assets cannot be assigned, transferred, exchanged or delivered without the depositary or its delegate having been informed of such transactions and the depositary shall have access without undue delay to documentary evidence of each transaction and position from the relevant third party. The AIFM shall ensure that the relevant third party provides the depositary without undue delay with certificates or other documentary evidence every time there is a sale or acquisition of assets or a corporate action resulting in the issue of financial instruments and at least once a year.
The requirement referred to in the first subparagraph shall not apply to fund of funds structures and master-feeder structures where the underlying funds have a depositary which provides ownership verification and record-keeping functions for this fund’s assets.
Article 91
Reporting obligations for prime brokers
Where a prime broker has been appointed, the AIFM shall ensure that from the date of that appointment an agreement is in place pursuant to which the prime broker is required to make available to the depositary in particular a statement in a durable medium which contains the following information:
the values of the items listed in paragraph 3 at the close of each business day;
details of any other matters necessary to ensure that the depositary of the AIF has up-to-date and accurate information about the value of assets the safekeeping of which has been delegated in accordance with Article 21(11) of Directive 2011/61/EU.
The items referred to in point (a) of paragraph 1 shall include:
the total value of assets held by the prime broker for the AIF, where safe-keeping functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU. The value of each of the following:
cash loans made to the AIF and accrued interest;
securities to be redelivered by the AIF under open short positions entered into on behalf of the AIF;
current settlement amounts to be paid by the AIF under any futures contracts;
short sale cash proceeds held by the prime broker in respect of short positions entered into on behalf of the AIF;
cash margins held by the prime broker in respect of open futures contracts entered into on behalf of the AIF. This obligation is in addition to the obligations under Articles 87 and 88;
mark-to-market close-out exposures of any OTC transaction entered into on behalf of the AIF;
total secured obligations of the AIF against the prime broker; and
all other assets relating to the AIF;
the value of other assets referred to in point (b) of Article 21(8) of Directive 2011/61/EU held as collateral by the prime broker in respect of secured transactions entered into under a prime brokerage agreement;
the value of the assets where the prime broker has exercised a right of use in respect of the AIF’s assets;
a list of all the institutions at which the prime broker holds or may hold cash of the AIF in an account opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF in accordance with Article 21(7) of Directive 2011/61/EU.
Article 92
Oversight duties — general requirements
Article 93
Duties regarding subscription and redemptions
In order to comply with point (a) of Article 21(9) of Directive 2011/61/EU the depositary shall meet the following requirements:
The depositary shall ensure that the AIF, the AIFM or the designated entity has established, implements and applies an appropriate and consistent procedure to:
reconcile the subscription orders with the subscription proceeds, and the number of units or shares issued with the subscription proceeds received by the AIF;
reconcile the redemption orders with the redemptions paid, and the number of units or shares cancelled with the redemptions paid by the AIF;
verify on a regular basis that the reconciliation procedure is appropriate.
For the purpose of points (i), (ii) and (iii), the depositary shall in particular regularly check the consistency between the total number of units or shares in the AIF’s accounts and the total number of outstanding shares or units that appear in the AIF’s register.
A depositary shall ensure and regularly check that the procedures regarding the sale, issue, repurchase, redemption and cancellation of shares or units of the AIF comply with the applicable national law and with the AIF rules or instruments of incorporation and verify that these procedures are effectively implemented.
The frequency of the depositary’s checks shall be consistent with the frequency of subscriptions and redemptions.
Article 94
Duties regarding the valuation of shares/units
In order to comply with point (b) of Article 21(9) of Directive 2011/61/EU the depositary shall:
verify on an ongoing basis that appropriate and consistent procedures are established and applied for the valuation of the assets of the AIF in compliance with Article 19 of Directive 2011/61/EU and its implementing measures and with the AIF rules and instruments of incorporation; and
ensure that the valuation policies and procedures are effectively implemented and periodically reviewed.
Article 95
Duties regarding the carrying out of the AIFM’s instructions
In order to comply with point (c) of Article 21(9) of Directive 2011/61/EU the depositary shall at least:
set up and implement appropriate procedures to verify that the AIF and AIFM comply with applicable laws and regulations and with the AIF’s rules and instruments of incorporation. In particular, the depositary shall monitor the AIF’s compliance with investment restrictions and leverage limits set in the AIF’s offering documents. Those procedures shall be proportionate to the nature, scale and complexity of the AIF;
set up and implement an escalation procedure where the AIF has breached one of the limits or restrictions referred to in point (a).
Article 96
Duties regarding the timely settlement of transactions
Article 97
Duties related to the AIF’s income distribution
In order to comply with point (e) of Article 21(9)(of Directive 2011/61/EU the depositary shall:
ensure that the net income calculation, once declared by the AIFM, is applied in accordance with the AIF rules, instruments of incorporation and applicable national law;
ensure that appropriate measures are taken where the AIF’s auditors have expressed reserves on the annual financial statements. The AIF or the AIFM acting on behalf of the AIF shall provide the depositary with all information on reserves expressed on the financial statements; and
check the completeness and accuracy of dividend payments, once they are declared by the AIFM, and, where relevant, of the carried interest.
Article 98
Due diligence
When selecting and appointing a third party, to whom safekeeping functions are delegated in accordance with Article 21(11) of Directive 2011/61/EU, a depositary shall exercise all due skill, care and diligence to ensure that entrusting financial instruments to this third party provides an adequate standard of protection. It shall at least:
assess the regulatory and legal framework, including country risk, custody risk and the enforceability of the third party’s contracts. That assessment shall in particular enable the depositary to determine the potential implication of an insolvency of the third party for the assets and rights of the AIF. If a depositary becomes aware that the segregation of assets is not sufficient to ensure protection from insolvency because of the law of the country where the third party is located, it shall immediately inform the AIFM;
assess whether the third party’s practice, procedures and internal controls are adequate to ensure that the financial instruments of the AIF or of the AIFM acting on behalf of the AIF are subject to a high standard of care and protection;
assess whether the third party’s financial strength and reputation are consistent with the tasks delegated. That assessment shall be based on information provided by the potential third party as well as other data and information, where available;
ensure that the third party has the operational and technological capabilities to perform the delegated custody tasks with a satisfactory degree of protection and security.
A contract, by which the depositary appoints a third party to hold assets of that depositary's AIF clients in custody, shall contain at least the following provisions:
a guarantee of the depositary's right to information, inspection, and access to the relevant records and accounts of the third party holding assets in custody to enable the depositary to fulfil its oversight and due diligence obligations and in particular allow the depositary to:
identify all entities within the custody chain;
verify that the quantity of the identified financial instruments recorded in the financial instruments accounts opened in the depositary's books in the name of the AIF or in the name of the AIFM, acting on behalf of the AIF, matches the quantity of the identified financial instruments held in custody by the third party for that AIF as recorded in the financial instruments account opened in the third party's books;
verify that the quantity of the identified financial instruments, which are registered and held in a financial instruments account opened at the issuer's Central Securities Depository (CSD) or its agent, in the name of the third party on behalf of its clients, matches the quantity of the identified financial instruments recorded in the financial instruments accounts opened in the depositary's books in the name of each of its AIF clients or in the name of the AIFM acting on behalf of the AIF;
details of equivalent rights and obligations agreed between the third party and another third party, in the event of a further delegation of custody functions.
A depositary shall exercise all due skill, care and diligence in the periodic review and ongoing monitoring to ensure that the third party continues to comply with the criteria provided for in paragraph 1 of this Article and the conditions set out in point (d) of Article 21(11) of Directive 2011/61/EU. To this end the depositary shall at least:
monitor the third party’s performance and its compliance with the depositary’s standards;
ensure that the third party exercises a high standard of care, prudence and diligence in the performance of its custody tasks and in particular that it effectively segregates the financial instruments in line with the requirements of Article 99;
review the custody risks associated with the decision to entrust the assets to the third party and without undue delay notify the AIF or AIFM of any change in those risks. That assessment shall be based on information provided by the third party and other data and information where available. During market turmoil or when a risk has been identified, the frequency and the scope of the review shall be increased. If the depositary becomes aware that the segregation of assets is no longer sufficient to ensure protection from insolvency because of the law of the country where the third party is located, it shall immediately inform the AIFM.
Article 99
Segregation obligation
Where safekeeping functions have been delegated wholly or partly to a third party, a depositary shall ensure that the third party, to whom safe-keeping functions are delegated pursuant to Article 21(11) of Directive 2011/61/EU, acts in accordance with the segregation obligation laid down in point (iii) of Article 21(11)(d) of that Directive by ensuring and verifying that the third party:
correctly records all identified financial instruments in the financial instruments account, which is opened in the third party's books, in order to hold in custody the financial instruments for the depositary's clients, which excludes proprietary financial instruments of the depositary and of the third party and of the third party's other clients, to enable the depositary to match the quantity of the identified financial instruments recorded in the accounts opened in the depositary's books in the name of each of its AIF clients or in the name of the AIFM acting on behalf of the AIF;
keeps all necessary records and financial instruments accounts to enable the depositary at any time and without delay to distinguish assets of the depositary's clients from the third party own assets, assets of the third party's other clients and assets held for the depositary for its own account;
maintains records and financial instruments accounts in a way that ensures their accuracy, and in particular their correspondence to the assets kept safe for the depositary's AIF clients and on the basis of which the depositary can at any time establish the precise nature, location and ownership status of those assets;
provides the depositary with a statement, on a regular basis and in any case whenever a change in circumstances occurs, detailing the assets of the depositary's AIF clients;
conducts reconciliations, as often as necessary, between its financial instruments accounts and internal records and those of the third party to whom it has delegated safe-keeping functions in accordance with Article 21(11) of Directive 2011/61/EU.
The frequency of the reconciliation shall be determined in accordance with Article 89(1);
introduces adequate organisational arrangements to minimise the risk of loss or diminution of financial instruments or of rights in connection with those financial instruments as a result of misuse of the financial instruments, fraud poor administration, inadequate record-keeping or negligence;
where the third party is an entity referred to in points (a), (b) and (c) of Article 18(1) of Directive 2006/73/EC, which is subject to effective prudential regulation and supervision that has the same effect as Union law and is effectively enforced, the depositary shall take the necessary steps to ensure that the AIF's cash is held in an account or accounts in accordance with Article 21(7) of Directive 2011/61/EU.
Where a depositary delegates its custody functions to a third party located in a third country in accordance with Article 21(11) of Directive 2011/61/EU, in addition to the requirements of paragraph 1 of this Article, the depositary shall ensure the following:
the depositary receives legal advice from an independent natural or legal person confirming that the applicable insolvency law recognises the following:
the segregation of the assets of the depositary's clients from the third party's own assets, from the assets of the third party's other clients and from the assets held by the third party for the depositary's own account;
the assets of the depositary's AIF clients do not form part of the third party's estate in case of insolvency;
the assets of the depositary's AIF clients are unavailable for distribution among, or realisation for the benefit of, creditors of the third party to whom custody functions have been delegated in accordance with Article 21(11) of Directive 2011/61/EU;
the third party takes the following steps:
it ensures that the conditions laid down in point (a) are met when concluding the delegation agreement with the depositary and on an ongoing basis for the entire duration of the delegation;
it immediately informs the depositary whenever any of the conditions referred to in point (i) are no longer met;
it informs the depositary about any changes to applicable insolvency law and its effective application.
SECTION 4
Loss of financial instruments, liability discharge and objective reasons
(Article 21(12) and (13) of Directive 2011/61/EU)
Article 100
Loss of a financial instrument held in custody
A loss of a financial instrument held in custody within the meaning of Article 21(12) of Directive 2011/61/EU shall be deemed to have taken place when, in relation to a financial instrument held in custody by the depositary or by a third party to whom the custody of financial instruments held in custody has been delegated, any of the following conditions is met:
a stated right of ownership of the AIF is demonstrated not to be valid because it either ceased to exist or never existed;
the AIF has been definitively deprived of its right of ownership over the financial instrument;
the AIF is definitively unable to directly or indirectly dispose of the financial instrument.
There shall be certainty as to whether any of the conditions set out in paragraph 1 is fulfilled at the latest at the end of the insolvency proceedings. The AIFM and the depositary shall monitor closely the insolvency proceedings to determine whether all or some of the financial instruments entrusted to the third party to whom the custody of financial instruments has been delegated are effectively lost.
Article 101
Liability discharge under Article 21(12) of Directive 2011/61/EU
A depositary’s liability under the second subparagraph of Article 21(12) of Directive 2011/61/EU shall not be triggered provided the depositary can prove that all the following conditions are met:
the event which led to the loss is not the result of any act or omission of the depositary or of a third party to whom the custody of financial instruments held in custody in accordance with point (a) of Article 21(8) of Directive 2011/61/EU has been delegated;
the depositary could not have reasonably prevented the occurrence of the event which led to the loss despite adopting all precautions incumbent on a diligent depositary as reflected in common industry practice;
despite rigorous and comprehensive due diligence, the depositary could not have prevented the loss.
This condition may be deemed to be fulfilled when the depositary has ensured that the depositary and the third party to whom the custody of financial instruments held in custody in accordance with point (a) of Article 21(8) of Directive 2011/61/EU has been delegated have taken all of the following actions:
establishing, implementing, applying and maintaining structures and procedures and insuring expertise that are adequate and proportionate to the nature and complexity of the assets of the AIF in order to identify in a timely manner and monitor on an ongoing basis external events which may result in loss of a financial instrument held in custody;
assessing on an ongoing basis whether any of the events identified under point (i) presents a significant risk of loss of a financial instrument held in custody;
informing the AIFM of the significant risks identified and taking appropriate actions, if any, to prevent or mitigate the loss of financial instruments held in custody, where actual or potential external events have been identified which are believed to present a significant risk of loss of a financial instrument held in custody.
The requirements referred to in points (a) and (b) of paragraph 1 may be deemed to be fulfilled in the following circumstances:
natural events beyond human control or influence;
the adoption of any law, decree, regulation, decision or order by any government or governmental body, including any court or tribunal, which impacts the financial instruments held in custody;
war, riots or other major upheavals.
Article 102
Objective reasons for the depositary to contract a discharge of liability
The objective reasons for contracting a discharge pursuant to Article 21(13) of Directive 2011/61/EU shall be:
limited to precise and concrete circumstances characterising a given activity;
consistent with the depositary’s policies and decisions.
The depositary shall be deemed to have objective reasons for contracting the discharge of its liability in accordance with Article 21(13) of Directive 2011/61/EU when the depositary can demonstrate that it had no other option but to delegate its custody duties to a third party. In particular, this shall be the case where:
the law of a third country requires that certain financial instruments be held in custody by a local entity and local entities exist that satisfy the delegation criteria laid down in Article 21(11) of Directive 2011/61/EU; or
the AIFM insists on maintaining an investment in a particular jurisdiction despite warnings by the depositary as to the increased risk this presents.
CHAPTER V
TRANSPARENCY REQUIREMENTS, LEVERAGE, RULES RELATING TO THIRD COUNTRIES AND EXCHANGE OF INFORMATION ON THE POTENTIAL CONSEQUENCES OF AIFM ACTIVITY
SECTION 1
Annual report, disclosure to investors and reporting to competent authorities
(Article 22(2)(a) to (e) and Articles 23(4) and 24(1)of Directive 2011/61/EU)
Article 103
General principles for the annual report
All information provided in the annual report, including the information specified in this Section, shall be presented in a manner that provides materially relevant, reliable, comparable and clear information. The annual report shall contain the information investors need in relation to particular AIF structures.
Article 104
Content and format of the balance sheet or statement of assets and liabilities and of the income and expenditure account
The balance sheet or statement of assets and liabilities shall contain at least the following elements and underlying line items in accordance with point (a) of Article 22(2) of Directive 2011/61/EU:
‘assets’ comprising the resources controlled by the AIF as a result of past events and from which future economic benefits are expected to flow to the AIF. Assets shall be sub-classified according to the following line items:
‘investments’, including, but not limited to, debt and equity securities, real estate and property and derivatives;
‘cash and cash equivalents’, including, but not limited to, cash-in-hand, demand deposits and qualifying short-term liquid investments;
‘receivables’, including, but not limited to, amounts receivable in relation to dividends and interest, investments sold, amounts due from brokers and ‘prepayments’, including, but not limited to, amounts paid in advance in relation to expenses of the AIF;
‘liabilities’, comprising present obligations of the AIF arising from past events, the settlement of which is expected to result in an outflow from the AIF of resources embodying economic benefits. Liabilities shall be sub-classified according to the following line items:
‘payables’, including, but not limited to, amounts payable in relation to the purchase of investments or redemption of units or shares in the AIF and amounts due to brokers and ‘accrued expenses’, including, but not limited to, liabilities for management fees, advisory fees, performance fees, interest and other expenses incurred in the course of operations of the AIF;
‘borrowings’, including, but not limited to, amounts payable to banks and other counterparties;
‘other liabilities’, including, but not limited to, amounts due to counterparties for collateral on return of securities loaned, deferred income and dividends and distributions payable;
‘net assets’, representing the residual interest in the assets of the AIF after deducting all its liabilities.
The income and expenditure account shall contain at least the following elements and underlying line items:
‘income’, representing any increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in net assets other than those relating to contributions from investors. Income shall be sub-classified according to the following line items:
‘investment income’, which can be further sub-classified as follows:
‘realised gains on investments’, representing gains on the disposal of investments;
‘unrealised gains on investments’, representing gains on the revaluation of investments; and
‘other income’ including, but not limited to, fee income from securities loaned and from miscellaneous sources.
‘expenses’, representing decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in net assets, other than those relating to distributions to investors. Expenses shall, be sub-classified according to the following line items:
‘net income or expenditure’, representing the excess of income over expenditure or expenditure over income, as applicable.
Article 105
Report on the activities of the financial year
The report on activities of the financial year shall include at least:
an overview of investment activities during the year or period, and an overview of the AIF’s portfolio at year-end or period end;
an overview of AIF performance over the year or period;
material changes as defined below in the information listed in Article 23 of Directive 2011/61/EU not already present in the financial statements.
Article 106
Material changes
Article 107
Remuneration disclosure
When information required by point (e) of Article 22(2) of Directive 2011/61/EU is given, it shall be specified whether or not the total remuneration relates to any of the following:
the total remuneration of the entire staff of the AIFM, indicating the number of beneficiaries;
the total remuneration of those staff of the AIFM who are fully or partly involved in the activities of the AIF, indicating the number of beneficiaries;
the proportion of the total remuneration of the staff of the AIFM attributable to the AIF, indicating the number of beneficiaries.
Article 108
Periodic disclosure to investors
When disclosing the percentage of the AIF’s assets which are subject to special arrangements arising from their illiquid nature in accordance with Article 23(4)(a) of Directive 2011/61/EU the AIFM shall:
provide an overview of any special arrangements in place including whether they relate to side pockets, gates or other similar arrangements, the valuation methodology applied to assets which are subject to such arrangements and how management and performance fees apply to these assets;
disclose this information as part of the AIF’s periodic reporting to investors, as required by the AIF’s rules or instruments of incorporation, or at the same time as the prospectus and offering document and — as a minimum — at the same time as the annual report is made available in accordance with Article 22(1) of Directive 2011/61/EU.
The percentage of the AIF’s assets which are subject to special arrangements as defined in Article 1(5) shall be calculated as the net value of those assets subject to special arrangements divided by the net asset value of the AIF concerned.
For any new arrangements for managing the liquidity of the AIF in accordance with point (b) of Article 23(4) of Directive 2011/61/EU AIFMs shall:
for each AIF that they manage which is not an unleveraged closed-ended AIF, notify to investors whenever they make changes to the liquidity management systems and procedures referred to in Article 16(1) of Directive 2011/61/EU which are material in accordance with Article 106(1);
immediately notify investors where they activate gates, side pockets or similar special arrangements or where they decide to suspend redemptions;
provide an overview of the changes to arrangements concerning liquidity, whether or not these are special arrangements. Where relevant, the terms under which redemption is permitted and circumstances determining when management discretion applies shall be included. Also any voting or other restrictions exercisable, the length of any lock-up or any provision concerning ‘first in line’ or ‘pro-rating’ on gates and suspensions shall be included.
The disclosure of the risk profile of the AIF in accordance with point (c) of Article 23(4) of Directive 2011/61/EU shall outline:
measures to assess the sensitivity of the AIF’s portfolio to the most relevant risks to which the AIF is or could be exposed;
if risk limits set by the AIFM have been or are likely to be exceeded and where these risk limits have been exceeded a description of the circumstances and, the remedial measures taken.
The information shall be disclosed as part of the AIF’s periodic reporting to investors, as required by the AIF’s rules or instruments of incorporation or at the same time as the prospectus and offering document and — at a minimum — at the same time as the annual report is made available in accordance with Article 22(1) of Directive 2011/61/EU.
The information shall be disclosed as part of the AIF’s periodic reporting to investors, as required by the AIF’s rules or instruments of incorporation or at the same time as the prospectus and offering document and — as a minimum — at the same time as the annual report is made available or made public in accordance with Article 22(1) of Directive 2011/61/EU.
Article 109
Regular disclosure to investors
Information on changes to the maximum level of leverage calculated in accordance with the gross and commitment methods and any right of re-use of collateral or any guarantee under the leveraging arrangements shall be provided without undue delay and shall include:
the original and revised maximum level of leverage calculated in accordance with Articles 7 and 8, whereby the level of leverage shall be calculated as the relevant exposure divided by the net asset value of the AIF;
the nature of the rights granted for the reuse of collateral;
the nature of guarantees granted; and
details of changes in any service providers which relating to one of the items above.
Article 110
Reporting to competent authorities
In order to comply with the requirements of the second subparagraph of Article 24(1) and of point (d) of Article 3(3) of Directive 2011/61/EU, an AIFM shall provide the following information when reporting to competent authorities:
the main instruments in which it is trading, including a break-down of financial instruments and other assets, including the AIF’s investment strategies and their geographical and sectoral investment focus;
the markets of which it is a member or where it actively trades;
the diversification of the AIF’s portfolio, including, but not limited to, its principal exposures and most important concentrations.
The information shall be provided as soon as possible and not later than one month after the end of the period referred to in paragraph 3. Where the AIF is a fund of funds this period may be extended by the AIFM by 15 days.
For each of the EU AIFs they manage and for each of the AIFs they market in the Union, AIFMs shall provide to the competent authorities of their home Member State the following information in accordance with Article 24(2) of Directive 2011/61/EU:
the percentage of the AIF’s assets which are subject to special arrangements as defined in Article 1(5) of this Regulation arising from their illiquid nature as referred to in point (a) of Article 23(4) of Directive 2011/61/EU;
any new arrangements for managing the liquidity of the AIF;
the risk management systems employed by the AIFM to manage the market risk, liquidity risk, counterparty risk and other risks including operational risk;
the current risk profile of the AIF, including:
the market risk profile of the investments of the AIF, including the expected return and volatility of the AIF in normal market conditions;
the liquidity profile of the investments of the AIF, including the liquidity profile of the AIF’s assets, the profile of redemption terms and the terms of financing provided by counterparties to the AIF;
information on the main categories of assets in which the AIF invested including the corresponding short market value and long market value, the turnover and performance during the reporting period; and
the results of periodic stress tests, under normal and exceptional circumstances, performed in accordance with point (b) of Article 15(3) and the second subparagraph of Article 16(1) of Directive 2011/61/EU.
The information referred to in paragraphs 1 and 2 shall be reported as follows:
on a half-yearly basis by AIFMs managing portfolios of AIFs whose assets under management calculated in accordance with Article 2 in total exceed the threshold of either EUR 100 million or EUR 500 million laid down in points (a) and (b) respectively of Article 3(2) of Directive 2011/61/EU but do not exceed EUR 1 billion, for each of the EU AIFs they manage and for each of the AIFs they market in the Union;
on a quarterly basis by AIFMs managing portfolios of AIFs whose assets under management calculated in accordance with Article 2 in total exceed EUR 1 billion, for each of the EU AIFs they manage, and for each of the AIFs they market in the Union;
on a quarterly basis by AIFMs which are subject to the requirements referred to in point (a) of this paragraph, for each AIF whose assets under management, including any assets acquired through use of leverage, in total exceed EUR 500 million, in respect of that AIF;
on an annual basis by AIFMs in respect of each unleveraged AIF under their management which, in accordance with its core investment policy, invests in non-listed companies and issuers in order to acquire control.
Article 111
Use of leverage on a ‘substantial basis’
SECTION 2
AIFMs managing leveraged AIFs
(Article 25(3) of Directive 2011/61/EU)
Article 112
Restrictions on the management of AIFs
Competent authorities shall take into account at least the following aspects in their assessment:
the circumstances in which the exposure of an AIF or several AIFs including those exposures resulting from financing or investment positions entered into by the AIFM for its own account or on behalf of the AIFs could constitute an important source of market, liquidity or counterparty risk to a financial institution;
the circumstances in which the activities of an AIFM or its interaction with, for example, a group of AIFMs or other financial institutions, in particular with respect to the types of assets in which the AIF invests and the techniques employed by the AIFM through the use of leverage, contribute or could contribute to a downward spiral in the prices of financial instruments or other assets in a manner that threatens the viability of such financial instruments or other assets;
criteria such as the type of AIF, the investment strategy of the AIFM with respect to the AIFs concerned, the market conditions in which the AIFM and the AIF operate and any likely pro-cyclical effects that could result from the imposition by the competent authorities of limits or other restrictions on the use of leverage by the AIFM concerned;
criteria, such as the size of an AIF or several AIFs and any related impact in a particular market sector, concentrations of risks in particular markets in which the AIF or several AIFs are investing, any contagion risk to other markets from a market where risks have been identified, liquidity issues in particular markets at a given time, the scale of asset/liability mismatch in a particular AIFM investment strategy or irregular movements in the prices of assets in which an AIF may invest.
SECTION 3
Specific rules relating to third countries
(Articles 34(1), 35(2) 36(1), Articles 37(7)(d), 40(2)(a) and Article 42(1) of Directive 2011/61/EU)
Article 113
General requirements
Article 114
Mechanisms, instruments and procedures
Article 115
Data protection
Cooperation arrangements shall ensure that the transfer to third countries of data and the analysis of data takes place only in accordance with Article 52 of Directive 2011/61/EU.
SECTION 4
Exchange of information on the potential systemic consequences of AIFM activity
(Article 53(1) of Directive 2011/61/EU)
Article 116
Exchange of information on the potential systemic consequences of AIFM activity
For the purposes of Article 53 of Directive 2011/61/EU, the competent authorities of the Member States responsible for the authorisation or supervision of AIFMs under that Directive shall exchange with the competent authorities of other Member States, and with ESMA and the ESRB at least:
the information received pursuant to Article 110, whenever such information may be relevant for monitoring and responding to the potential implications of the activities of individual AIFMs or several AIFMs collectively for the stability of systemically relevant financial institutions and the orderly functioning of markets on which the AIFMs are active;
the information received from third country authorities whenever this is necessary for the monitoring of systemic risks;
the analysis of the information referred to in points (a) and (b) and the assessment of any situation in which the activities of one or more supervised AIFMs or of one or more AIFs under their management are considered to contribute to the build-up of systemic risk in the financial system, to the risk of disorderly markets or to risks for the long-term growth of the economy;
the measures taken, when the activity of one or more supervised AIFMs or of one or more AIFs under their management present systemic risk or jeopardise the orderly functioning of the markets on which they are active.
CHAPTER VI
FINAL PROVISIONS
Article 117
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
It shall apply from 22 July 2013.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
ANNEX I
Methods of increasing the exposure of an AIF
1. Unsecured cash borrowings: When cash borrowings are invested they have the propensity to increase the exposure of the AIF by the total amount of those borrowings. Therefore, the minimum exposure is always the amount of the borrowing. It might be higher if the value of the investment realised with the borrowing is greater than the borrowed amount. To avoid double counting, cash borrowings that are used to finance the exposure shall not be included within the calculation. If the cash borrowings are not invested but remain in cash or cash equivalent as defined in Article 7(a) they will not increase the exposure of the AIF.
2. Secured cash borrowings: Secured cash borrowings are similar to unsecured cash borrowings but the loan may be secured by a pool of assets or a single asset. If the cash borrowings are not invested but remain in cash or cash equivalent as defined in Article 7(a) they will not increase the exposure of the AIF.
3. Convertible borrowings: Convertible borrowings are purchased debt which has the ability, under certain circumstances, to enable the holder or issuer to convert that debt into another asset. The exposure of the AIF is the market value of such borrowings.
4. Interest rate swaps: An interest rate swap is an agreement to exchange interest rate cash flows, calculated on a notional principal amount, at specified intervals (payment dates) during the life of the agreement. Each party’s payment obligation is computed using a different interest rate based on the notional exposures.
5. Contracts for differences: A contract for differences (CFD) is an agreement between two parties — the investor and the CFD provider — to pay the other the change in the price of an underlying asset. Depending on which way the price moves, one party pays the other the difference from the time the contract was agreed to the point in time where it ends. Exposure is the market value of the underlying asset. The same treatment must be applied to financial spread bets.
6. Futures contracts: A futures contract is an agreement to buy or sell a stated amount of a security, currency, commodity, index or other asset at a specific future date and at a pre-agreed price. The exposure is the market value of the equivalent underlying asset.
7. Total return swaps: A total return swap is an agreement in which one party (total return payer) transfers the total economic performance of a reference obligation to the other party (total return receiver). Total economic performance includes income from interest and fees, gains or losses from market movements, and credit losses. The exposure of the AIF is the market value of the equivalent reference assets which have a bearing on the economic performance of the swap.
8. Forward agreements: A forward agreement is a customised, bilateral agreement to exchange an asset or cash flows at a specified future settlement date at a forward price agreed on the trade date. One party to the forward is the buyer (long), who agrees to pay the forward price on the settlement date; the other is the seller (short), who agrees to receive the forward price. Entering into a forward contract typically does not require the payment of a fee. The exposure of the AIF is the market value of the equivalent underlying asset. This may be replaced by the notional value of the contract where this is more conservative.
9. Options: An option is an agreement that gives the buyer, who pays a fee (premium), the right — but not the obligation — to buy or sell a specified amount of an underlying asset at an agreed price (strike or exercise price) on or until the expiration of the contract (expiry). A call option is an option to buy, and a put option an option to sell. The bounds of the exposure of the fund will be on the one side a potential unlimited exposure and on the other side an exposure that is limited to the higher of the premium paid or the market value of that option. The exposure between these two bounds is determined as the delta (an options delta measures the sensitivity of an option’s price solely to a change in the price of the underlying asset) adjusted equivalent of the underlying position. The same approach must be adopted for embedded derivatives, e.g. in structured products. The structure should be broken down into its component parts and the effect of layers of derivative exposures must be adequately captured.
10. Repurchase agreements: The repurchase agreement normally occurs where an AIF ‘sells’ securities to a reverse-repo counterparty and agrees to buy them back at an agreed price in the future. The AIF will incur a financing cost from engaging in this transaction and will therefore need to re-invest the cash proceeds (effectively cash collateral) in order to generate a return greater than the financing cost incurred. This reinvestment of ‘cash collateral’ means that incremental market risk will be carried by the AIF and consequently must be taken into account in the global exposure calculation. The economic risks and rewards of the ‘sold’ securities remain with the AIF. Also, a repo transaction will almost always give rise to leverage as the cash collateral will be reinvested. In the event that non-cash collateral is received as part of the transaction and this collateral is further used as part of another repo, or stock-loan agreement, the full market value of the collateral must be included in the global exposure amount. The exposure of the AIF is increased by the reinvested part of the cash collateral.
11. Reverse repurchase agreements: This transaction occurs where an AIF ‘purchases’ securities from a repo counterparty and agrees to sell them back at an agreed price in the future. AIFs normally engage in these transactions to generate a low-risk money-market type return, and the ‘purchased’ securities act as collateral. Therefore no global exposure is generated; nor does the AIF take on the risks and rewards of the ‘purchased’ securities, i.e. there is no incremental market risk. However, it is possible for the ‘purchased’ securities to be further used as part of a repo or security-loan transaction, as described above, and in that case the full market value of the securities must be included in the global exposure amount. The economic risks and rewards of the purchased securities remain with the counterparty and therefore this does not increase the exposure of the AIF.
12. Securities lending arrangements: An AIF engaging in a securities lending transaction will lend a security to a security-borrowing counterparty (who will normally borrow the security to cover a physical short sale transaction) for an agreed fee. The security borrower will deliver either cash or non-cash collateral to the AIF. Only where cash collateral is reinvested in instruments other than those defined in Article 7 point (a) will global exposure be created. If the non-cash collateral is further used as part of a repo or another security lending transaction, the full market value of the securities must be included in the global exposure amount as described above. Exposure is created to the extent that the cash collateral has been reinvested.
13. Securities borrowing arrangements: An AIF engaging in the borrowing of securities will borrow a security from a security-lending counterparty for an agreed fee. The AIF will then sell the security in the market. The AIF is now short that security. To the extent that the cash proceeds from the sale are reinvested this will also increase the exposure of the AIF. Exposure is the market value of the shorted securities; additional exposure is created to the extent that the cash received is reinvested.
14. Credit default swaps: A credit default swap (CDS) is a credit derivative agreement that gives the buyer protection, usually the full recovery, in case the reference entity defaults or suffers a credit event. In return the seller of the CDS receives from the buyer a regular fee, called the spread. For the protection seller, the exposure is the higher of the market value of the underlying reference assets or the notional value of the credit default swap. For the protection buyer, the exposure is the market value of the underlying reference asset.
ANNEX II
Conversion methodologies for derivative instruments
1. The following conversion methods shall be applied to the non-exhaustive list below of standard derivatives:
Futures
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Bond future : Number of contracts * notional contract size * market price of the cheapest-to-deliver reference bond |
— |
Interest rate future : Number of contracts * notional contract size |
— |
Currency future : Number of contracts * notional contract size |
— |
Equity future : Number of contracts * notional contract size * market price of underlying equity share |
— |
Index futures : Number of contracts * notional contract size * index level |
Plain vanilla options (bought/sold puts and calls)
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Plain vanilla bond option : Notional contract value * market value of underlying reference bond * delta |
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Plain vanilla equity option : Number of contracts * notional contract size* market value of underlying equity share * delta |
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Plain vanilla interest rate option : Notional contract value * delta |
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Plain vanilla currency option : Notional contract value of currency leg(s) * delta |
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Plain vanilla index options : Number of contracts * notional contract size * index level * delta |
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Plain vanilla options on futures : Number of contracts * notional contract size * market value of underlying asset * delta |
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Plain vanilla swaptions : Reference swap commitment conversion amount * delta |
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Warrants and rights : Number of shares/bonds * market value of underlying referenced instrument * delta |
Swaps
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Plain vanilla fixed/floating rate interest rate and inflation swaps : notional contract value |
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Currency swaps : Notional value of currency leg(s) |
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Cross currency interest rate swaps : Notional value of currency leg(s) |
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Basic total return swap : Underlying market value of reference asset(s) |
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Non-basic total return swap : Cumulative underlying market value of both legs of the TRS |
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Single name credit default swap : Protection seller — The higher of the market value of the underlying reference asset or the notional value of the Credit Default Swap. Protection buyer — Market value of the underlying reference asset |
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Contract for differences : Number of shares/bonds * market value of underlying referenced instrument |
Forwards
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FX forward : notional value of currency leg(s) |
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Forward rate agreement : notional value |
Leveraged exposure to indices with embedded leverage
A derivative providing leveraged exposure to an underlying index, or indices that embed leveraged exposure to their portfolio, must apply the standard applicable commitment approach to the assets in question.
2. The following conversion methods shall be applied to the non-exhaustive list below of financial instruments which embed derivatives:
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Convertible bonds : Number of referenced shares * market value of underlying referenced shares * delta |
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Credit linked notes : Market value of underlying reference asset(s) |
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Partly paid securities : Number of shares/bonds * market value of underlying referenced instruments |
— |
Warrants and rights : Number of shares/bonds * market value of underlying referenced instrument * delta |
3. List of examples of non-standard derivatives with the related commitment methodology being used:
4. Barrier (knock-in knock-out) options
Number of contracts * notional contract size * market value of underlying equity share * delta
ANNEX III
Duration netting rules
1. An interest rate derivative shall be converted into its equivalent underlying asset position in accordance with the following methodology:
The equivalent underlying asset position of each interest rate derivative instrument shall be calculated as its duration divided by the target duration of the AIF and multiplied by the equivalent underlying asset position:
where:
2. The equivalent underlying asset positions calculated in accordance with to paragraph 1 shall be netted as follows:
Each interest rate derivative instrument shall be allocated to the appropriate maturity range of the following maturity-based ladder:
Maturities ranges
0-2 years
2-7 years
7-15 years
> 15 years
The long and short equivalent underlying asset positions shall be netted within each maturity range. The amount of the former which is netted with the latter is the netted amount for that maturity range.
Starting with the shortest maturity range, the netted amounts between two adjoining maturity ranges shall be calculated by netting the amount of the remaining unnetted long (or short) position in the maturity range (i) with the amount of the remaining unnetted short (long) position in the maturity range (i + 1).
Starting with the shortest maturity range, the netted amounts between two remote maturity ranges separated by another one shall be calculated by netting the amount of the remaining unnetted long (or short) position in the maturity range (i) with the amount of the remaining unnetted short (long) position in the maturity range (i + 2).
The netted amount shall be calculated between the remaining unnetted long and short positions of the two most remote maturity ranges.
3. The AIF shall calculate its exposures as the sum of absolute values:
ANNEX IV
Reporting Templates: AIFM
(Articles 3(3)(d) and 24 of Directive 2011/61/EU)
AIFM-specific information to be reported
(Articles 3(3)(d) and 24(1) of Directive 2011/61/EU)
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Most important market/instrument |
Second most important market/instrument |
Third most important market/instrument |
Fourth most important market/instrument |
Fifth most important market/instrument |
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Principal markets in which it trades on behalf of the AIFs it manages |
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Principal instruments in which it trades on behalf of the AIFs it manages |
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Values of assets under management for all AIFs managed, calculated as set out in Article 2 |
In base currency (if the same for all AIFs) |
In EUR |
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Please provide official name, location and jurisdiction of markets |
Detailed list of all AIFs which the AIFM manages
to be provided on request for the end of each quarter
(Article 24(3) of Directive 2011/61/EU)
Name of the AIF |
Fund identification code |
Inception date |
AIF type (Hedge Fund, Private Equity, Real Estate, Fund of Funds, Other (*1)) |
NAV |
EU AIF: Yes/No |
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If Other please indicate the strategy that best describes the AIF type. |
Monetary values should be reported in the base currency of the AIF.
Reporting Templates: AIF
(Articles 3(3)(d) and 24 of Directive 2011/61/EU)
AIF-specific information to be provided
(Articles 3(3)(d) and 24(1) of Directive 2011/61/EU)
Data Type |
Reported Data |
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Identification of the AIF |
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AIF name |
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EU AIF: yes/no |
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Fund manager (Legal name and standard code, where available) |
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EU AIFM: yes/no |
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Fund identification codes, as applicable |
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Inception date of the AIF |
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Domicile of the AIF |
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Identification of prime broker(s) of the AIF (Legal name and standard code, where available) |
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Base currency of the AIF according to ISO 4217 and assets under management calculated as set out in Article 2 |
Currency |
Total AuM |
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Jurisdictions of the three main funding sources (excluding units or shares of the AIF bought by investors) |
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Predominant AIF type (select one) |
Hedge Fund Private Equity Fund Real Estate Fund Fund of Funds Other None |
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10 |
Breakdown of investment strategies (Provide a breakdown of the investment strategies of the AIF depending on the predominant AIF type selected in question 1. See guidance notes for further information on how to complete this question.) |
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|
Indicate the strategy that best describe the AIF’s strategy |
Share in NAV (%) |
|||||||||
a) Hedge Fund Strategies (Complete this question if you selected ‘Hedge Fund’ as the predominant AIF type in question 1.) |
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|
Indicate the hedge fund strategies that best describe the AIFs strategies Equity: Long Bias Equity: Long/Short Equity: Market Neutral Equity: Short Bias Relative Value: Fixed Income Arbitrage Relative Value: Convertible Bond Arbitrage Relative Value: Volatility Arbitrage Event Driven: Distressed/Restructuring Event Driven: Risk Arbitrage/Merger Arbitrage Event Driven: Equity Special Situations Credit Long/Short Credit Asset Based Lending Macro Managed Futures/CTA: Fundamental Managed Futures/CTA: Quantitative Multi-strategy hedge fund Other hedge fund strategy |
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b) Private Equity Strategies (Complete this question if you selected ‘Private Equity’ as the predominant AIF type in question 1.) |
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|
Indicate the private equity strategies that best describe the AIFs strategies Venture Capital Growth Capital Mezzanine Capital Multi-strategy private equity fund Other private equity fund strategy |
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c) Real Estate Strategies (Complete this question if you selected ‘Real Estate’ as the predominant AIF type in question 1.) |
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|
Indicate the real estate strategies that best describe the AIFs strategies Residential real estate Commercial real estate Industrial real estate Multi-strategy real estate fund Other real estate strategy |
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|||||||||
d) Fund of Fund Strategies (Complete this question if you selected ‘Fund of Funds’ as the predominant AIF type in question 1.) |
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|
Indicate the ‘fund of fund’ strategy that best describe the AIFs strategies Fund of hedge funds Fund of private equity Other fund of funds |
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|||||||||
e) Other Strategies (Complete this question if you selected ‘Other’ as the predominant AIF type in question 1.) |
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|
Indicate the ‘other’ strategy that best describe the AIFs’ strategies Commodity fund Equity fund Fixed income fund Infrastructure fund Other fund |
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Principal exposures and most important concentration |
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11 |
Main instruments in which the AIF is trading |
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Type of instrument/instrument code |
Value (as calculated under Article 3 AIFMD) |
Long/short position |
||||||||
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Most important instrument |
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2nd most important instrument |
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3rd most important instrument |
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4th most important instrument |
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5th most important instrument |
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||||||||
12 |
Geographical focus |
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|||||||||
|
Provide a geographical breakdown of the investments held by the AIF by percentage of the total net asset value of the AIF |
% of NAV |
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|||||||||
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Africa |
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Asia and Pacific (other than Middle East) |
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Europe (EEA) |
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Europe (other than EEA) |
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Middle East |
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North America |
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South America |
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Supranational/multiple region |
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13 |
10 principal exposures of the AIF at the reporting date (most valuable in absolute terms): |
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|
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Type of asset/liability |
Name/description of the asset/liability |
Value (as calculated under Article 3) |
% of gross market value |
Long/short position |
Counterparty (where relevant) |
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1st |
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2nd |
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3rd |
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4th |
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5th |
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6th |
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7th |
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8th |
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9th |
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10th |
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|||||
14 |
5 most important portfolio concentrations: |
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|
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Type of asset/liability |
Name/description of the market |
Value of aggregate exposure (as calculated under Article 3) |
% of gross market value |
Long/short position |
Counterparty (where relevant) |
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1st |
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2nd |
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3rd |
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4th |
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5th |
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|||||
15 |
Typical deal/position size (Complete this question if you selected as your predominant AIF type ‘private equity fund’ in question 1) |
[Select one] Very small Small Lower mid market Upper mid market Large cap Mega cap |
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|||||||||
16 |
Principal markets in which AIF trades |
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|||||||||
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Please enter name and identifier (e.g. MIC code) where available, of market with greatest exposure |
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Please enter name and identifier (e.g. MIC code) where available, of market with second greatest exposure |
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Please enter name and identifier (e.g. MIC code) where available, of market with third greatest exposure |
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|||||||||
17 |
Investor Concentration |
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|||||||||
|
Specify the approximate percentage of the AIF’s equity that is beneficially owned by the five beneficial owners that have the largest equity interest in the AIF (as a percentage of outstanding units/shares of the AIF; look-through to the beneficial owners where known or possible) |
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|||||||||
|
Breakdown of investor concentration by status of investors (estimate if no precise information available): |
% |
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|||||||||
|
— Professional clients (as defined in Directive 2004/39/EC (MiFID): — Retail investors: |
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|
Monetary values should be reported in the base currency of the AIF.
AIF-specific information to be provided to competent authorities
(Article 24(2) of Directive 2011/61/EU)
|
Data Type |
Reported Data |
||||||||
Identification of the AIF |
||||||||||
1 |
AIF name |
|
EU AIF: yes/no |
|||||||
2 |
Fund manager |
|
EU AIFM: yes/no |
|||||||
1 |
AIF name |
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||||||
2 |
Fund manager |
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||||||
3 |
Fund identification codes, as applicable |
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||||||
4 |
Inception date of the AIF |
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||||||
5 |
Base currency of the AIF according to ISO 4217 and assets under management calculated as set out in Article 2 |
Currency |
Total AuM |
|||||||
6 |
Identification of prime broker(s) of the AIF |
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||||||
7 |
Jurisdictions of the three main funding sources |
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||||||
Instruments Traded and Individual Exposures |
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8 |
Individual Exposures in which it is trading and the main categories of assets in which the AIF invested as at the reporting date: |
|||||||||
|
a) Securities |
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Long Value |
Short Value |
||||||
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Cash and cash equivalents |
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|||||||
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Of which are: |
Certificates of deposit |
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||||||
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Commercial papers |
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||||||
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Other deposits |
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||||||
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Other cash and cash equivalents (excluding government securities) |
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||||||
|
Listed equities |
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|||||||
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Of which are: |
Issued by financial institutions |
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||||||
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Other listed equity |
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||||||
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Unlisted equities |
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|||||||
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Corporate bonds not issued by financial institutions |
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|||||||
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Of which are: |
Investment grade |
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||||||
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Non-investment grade |
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||||||
|
Corporate bonds issued by financial institutions |
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|||||||
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Of which are: |
Investment grade |
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||||||
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Non-investment grade |
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||||||
|
Sovereign bonds |
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|||||||
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Of which are: |
EU bonds with a 0-1 year term to maturity |
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||||||
|
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EU bonds with a 1 + year term to maturity |
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||||||
|
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Non-G10 bonds with a 0-1 year term to maturity |
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||||||
|
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Non-G10 bonds with a 1 + year term to maturity |
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||||||
|
Convertible bonds not issued by financial institutions |
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|||||||
|
Of which are: |
Investment grade |
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||||||
|
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Non-investment grade |
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||||||
|
Convertible bonds issued by financial institutions |
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|||||||
|
Of which are: |
Investment grade |
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||||||
|
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Non-investment grade |
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||||||
|
Loans |
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|||||||
|
Of which are: |
Leveraged loans |
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||||||
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Other loans |
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||||||
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Structured/securitised products |
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|||||||
|
Of which are: |
ABS |
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||||||
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RMBS |
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||||||
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CMBS |
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||||||
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Agency MBS |
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||||||
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ABCP |
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||||||
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CDO/CLO |
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||||||
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Structured certificates |
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||||||
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ETP |
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||||||
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Other |
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||||||
|
b) Derivatives |
Long Value |
Short Value |
|||||||
|
Equity derivatives |
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|||||||
|
Of which are: |
Related to financial institutions |
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||||||
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Other equity derivatives |
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||||||
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Fixed income derivatives |
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|||||||
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CDS |
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|||||||
|
Of which are: |
Single name financial CDS |
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||||||
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Single name sovereign CDS |
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||||||
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Single name other CDS |
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||||||
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Index CDS |
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||||||
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Exotic (incl. credit default tranche) |
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||||||
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Gross Value |
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|||||||
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Foreign exchange (for investment purposes) |
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|||||||
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Interest rate derivatives |
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|||||||
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Long Value |
Short Value |
|||||||
|
Commodity derivatives |
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|||||||
|
Of which are: |
Energy |
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||||||
|
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Of which: |
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||||||
|
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— Crude oil |
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||||||
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— Natural gas |
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||||||
|
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— Power |
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||||||
|
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Precious metals |
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||||||
|
|
Of which: Gold |
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||||||
|
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Other commodities |
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||||||
|
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Of which: |
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||||||
|
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— Industrial metals |
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||||||
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— Livestock |
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||||||
|
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— Agricultural products |
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||||||
|
Other derivatives |
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|||||||
|
c) Physical (Real/Tangible) Assets |
Long Value |
|
|||||||
|
Physical: Real estate |
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|||||||
|
Of which are: |
Residential real estate |
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||||||
|
|
Commercial real estate |
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|
||||||
|
Physical: Commodities |
|
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|||||||
|
Physical: Timber |
|
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|||||||
|
Physical: Art and collectables |
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|||||||
|
Physical: Transportation assets |
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|||||||
|
Physical: Other |
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|||||||
|
d) Collective Investment Undertakings |
Long Value |
|
|||||||
|
Investments in CIU operated/managed by the AIFM |
|
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|||||||
|
Of which are: |
Money Market Funds and Cash management CIU |
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||||||
|
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ETF |
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||||||
|
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Other CIU |
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||||||
|
Investments in CIU not operated/managed by the AIFM |
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|||||||
|
Of which are: |
Money Market Funds and Cash management CIU |
|
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||||||
|
|
ETF |
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||||||
|
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Other CIU |
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||||||
|
e) Investments in other asset classes |
|
Long Value |
Short Value |
||||||
|
Total Other |
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|
||||||
9 |
Value of turnover in each asset class over the reporting months |
|
|
|
||||||
|
a) Securities |
|
Market Value |
|
||||||
|
Cash and cash equivalents |
|
|
|
||||||
|
Listed equities |
|
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||||||
|
Unlisted equities |
|
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||||||
|
Corporate bonds not issued by financial institutions |
|
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||||||
|
Of which are: |
Investment grade |
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||||||
|
|
Non-investment grade |
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||||||
|
Corporate bonds issued by financial institutions |
|
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||||||
|
Sovereign bonds |
|
|
|
||||||
|
Of which are: |
EU Member State bonds |
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||||||
|
|
Non-EU Member State bonds |
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||||||
|
Convertible bonds |
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||||||
|
Loans |
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||||||
|
Structured/securitised products |
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||||||
|
b) Derivatives |
|
Notional Value |
Market Value |
||||||
|
Equity derivatives |
|
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|
||||||
|
Fixed income derivatives |
|
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|
||||||
|
CDS |
|
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|
||||||
|
Foreign exchange (for investment purposes) |
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|
||||||
|
Interest rate derivatives |
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||||||
|
Commodity derivatives |
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||||||
|
Other derivatives |
|
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|
||||||
|
c) Physical (Real/Tangible) Assets |
|
Market Value |
|
||||||
|
Physical: Commodities |
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||||||
|
Physical: Real estate |
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||||||
|
Physical: Timber |
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||||||
|
Physical: Art and collectables |
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||||||
|
Physical: Transportation assets |
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||||||
|
Physical: Other |
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||||||
|
d) Collective investment undertakings |
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||||||
|
e) Other asset classes |
|
|
|
||||||
|
Currency of Exposures |
|
|
|
||||||
10 |
Total long and short value of exposures (before currency hedging) by the following currency groups: |
Long Value |
Short Value |
|||||||
|
AUD |
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||||||
|
CAD |
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||||||
|
CHF |
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||||||
|
EUR |
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||||||
|
GBP |
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||||||
|
HKD |
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||||||
|
JPY |
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||||||
|
USD |
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||||||
|
Other |
|
|
|
||||||
11 |
Typical deal/position size (Complete this question if you selected as your predominant AIF type ‘private equity fund’ above) |
[Select one] Very small (< EUR 5 m) Small (EUR 5 m to < EUR 25 m) Low/mid market (EUR 25 m to < EUR 150 m) Upper mid market (EUR 150 m to EUR 500 m) Large cap (EUR 500 m to EUR 1 bn) Mega cap (EUR 1 bn and greater) |
|
|||||||
12 |
Dominant Influence (see Article 1 of Council Directive 83/349/EEC (OJ L 193, 18.7.1983, p. 1)) (Complete this question if you selected as your predominant AIF type ‘private equity fund’ above; please complete for each company over which the AIF has a dominant influence (leave blank if none) as defined in Article 1 of Directive 83/349/EEC) |
Name |
% Voting Rights |
Transaction Type |
||||||
|
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|
||||||
|
|
|
|
|
||||||
Risk Profile of the AIF |
||||||||||
1. Market Risk Profile |
||||||||||
13 |
Expected annual investment return/IRR in normal market conditions (in %) |
|
|
|||||||
|
Net Equity Delta |
|
|
|
||||||
|
Net DV01: |
|
|
|
||||||
|
Net CS01: |
|
|
|
||||||
2. Counterparty Risk Profile |
||||||||||
14 |
Trading and clearing mechanisms |
|
|
|
||||||
|
a) Estimated % (in terms of market value) of securities traded: (leave blank if no securities traded) |
% |
|
|||||||
|
On a regulated exchange |
|
|
|
||||||
|
OTC |
|
|
|
||||||
|
b) Estimated % (in terms of trade volumes) of derivatives that are traded: (leave blank if no derivatives traded) |
% |
|
|||||||
|
On a regulated exchange |
|
|
|
||||||
|
OTC |
|
|
|
||||||
|
c) Estimated % (in terms of trade volumes) of derivatives transactions cleared: (leave blank if no derivatives traded) |
% |
|
|||||||
|
By a CCP |
|
|
|
||||||
|
Bilaterally |
|
|
|
||||||
|
d) Estimated % (in terms of market value) of repo trades cleared: (leave blank if no repos traded) |
% |
|
|||||||
|
By a CCP |
|
|
|
||||||
|
Bilaterally |
|
|
|
||||||
|
Tri-party |
|
|
|
||||||
15 |
Value of collateral and other credit support that the AIF has posted to all counterparties |
|
|
|||||||
|
a) Value of collateral posited in the form of cash and cash equivalents |
|
|
|||||||
|
b) Value of collateral posited in the form of other securities (excluding cash and cash equivalents) |
|
|
|||||||
|
c) Value of other collateral and credit support posted (including face amount of letters of credit and similar third party credit support) |
|
|
|||||||
16 |
Of the amount of collateral and other credit support that the reporting fund has posted to counterparties: what percentage has been re-hypothecated by counterparties? |
|
|
|||||||
17 |
Top Five Counterparty Exposures (excluding CCPs) |
|
|
|||||||
|
a) Identify the top five counterparties to which the AIF has the greatest mark-to-market net counterparty credit exposure, measured as a % of the NAV of the AIF |
Name |
Total Exposure |
|||||||
|
Counterparty 1 |
|
|
|
||||||
|
Counterparty 2 |
|
|
|
||||||
|
Counterparty 3 |
|
|
|
||||||
|
Counterparty 4 |
|
|
|
||||||
|
Counterparty 5 |
|
|
|
||||||
|
b) Identify the top five counterparties that have the greatest mark-to-market net counterparty credit exposure to the AIF, measured as a percentage of the NAV of the AIF. |
Name |
Total Exposure |
|||||||
|
Counterparty 1 |
|
|
|
||||||
|
Counterparty 2 |
|
|
|
||||||
|
Counterparty 3 |
|
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|
||||||
|
Counterparty 4 |
|
|
|
||||||
|
Counterparty 5 |
|
|
|
||||||
18 |
Direct clearing through central clearing counterparties (CCPs) |
|
|
|||||||
|
a) During the reporting period, did the AIF clear any transactions directly through a CCP? |
Yes No (if no, skip remainder of the question and go to question 21) |
|
|||||||
|
b) If you answered ‘yes’ in 18(a), identify the top three central clearing counterparties (CCPs) in terms of net credit exposure |
Name |
Value held |
|||||||
|
CCP 1 (leave blank if not applicable) |
|
|
|
||||||
|
CCP 2 (leave blank if not applicable) |
|
|
|
||||||
|
CCP 3 (leave blank if not applicable) |
|
|
|
||||||
3. Liquidity Profile |
||||||||||
Portfolio Liquidity Profile |
||||||||||
19 |
Investor Liquidity Profile Percentage of portfolio capable of being liquidated within: |
|||||||||
|
1 day or less |
2-7 days |
8-30 days |
31-90 days |
91-180 days |
181-365 days |
more than 365 days |
|||
|
|
|
|
|
|
|
|
|||
20 |
Value of unencumbered cash |
|
|
|||||||
Investor Liquidity Profile |
||||||||||
21 |
Investor Liquidity Profile Percentage of investor equity that can be redeemed within (as % of AIF’s NAV) |
|
|
|||||||
|
1 day or less |
2-7 days |
8-30 days |
31-90 days |
91-180 days |
181-365 days |
more than 365 days |
|||
|
|
|
|
|
|
|
|
|||
22 |
Investor redemptions |
|
|
|
||||||
|
a) Does the AIF provide investors with withdrawal/redemption rights in the ordinary course? |
Yes |
No |
|||||||
|
|
|
|
|||||||
|
b) What is the frequency of investor redemptions (if multiple classes of shares or units, report for the largest share class by NAV) |
[Select one] Daily Weekly Fortnightly Monthly Quarterly Half-yearly Annual Other N/A |
|
|||||||
|
c) What is the notice period required by investors for redemptions in days (report asset weighted notice period if multiple classes or shares or units) |
|
|
|||||||
|
d) What is the investor ‘lock-up’ period in days (report asset weighted notice period if multiple classes or shares or units) |
|
|
|||||||
23 |
Special arrangements and preferential treatment |
|
|
|||||||
|
a) As at the reporting date, what percentage of the AIFs NAV is subject to the following arrangements: |
% of NAV |
|
|||||||
|
Side pockets |
|
|
|
||||||
|
Gates |
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Suspension of dealing |
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Other arrangements for managing illiquid assets (please specify) |
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[Type] |
[%] |
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b) Indicate the percentage of net asset value of AIF’s assets that are currently subject to the special arrangements arising from their illiquid nature under Article 23(4)(a) of the AIFMD including those in question 25(a)? |
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Special arrangements as a % of NAV |
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c) Are there any investors who obtain preferential treatment or the right to preferential treatment (e.g. through a side letter) and therefore are subject to disclosure to the investors in the AIF in accordance with Article 23(1)(j) of the AIFMD? |
(Yes or no) |
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d) If ‘yes’ to letter c) then please indicate all relevant preferential treatment: |
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Concerning different disclosure/reporting to investors |
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Concerning different investor liquidity terms |
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Concerning different fee terms for investors |
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Preferential treatment other than that specified above |
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24 |
Provide the breakdown of the ownership of units in the AIF by investor group (as % of NAV of AIF assets; look-through to the beneficial owners where known or possible) |
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25 |
Financing liquidity |
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a) Provide the aggregate amount of borrowing by and cash financing available to the AIF (including all drawn and undrawn, committed and uncommitted lines of credit as well as any term financing) |
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b) Divide the amount reported in letter a) among the periods specified below depending on the longest period for which the creditor is contractually committed to provide such financing: |
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1 day or less |
2-7 days |
8-30 days |
31-90 days |
91-180 days |
181-365 days |
longer than 365 days |
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4. Borrowing and Exposure Risk |
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26 |
Value of borrowings of cash or securities represented by: |
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Unsecured cash borrowing: |
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Collateralised/secured cash borrowing — Via Prime Broker: |
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Collateralised/secured cash borrowing — Via (reverse) repo: |
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Collateralised/secured cash borrowing — Via Other: |
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27 |
Value of borrowing embedded in financial instruments |
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Exchange-traded Derivatives: Gross Exposure less margin posted |
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OTC Derivatives: Gross Exposure less margin posted |
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28 |
Value of securities borrowed for short positions |
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29 |
Gross exposure of financial and, as the case may be, or legal structures controlled by the AIF as defined in Recital 78 of the AIFMD |
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Financial and, as the case may be, or legal structure |
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Financial and, as the case may be, or legal structure |
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Financial and, as the case may be, or legal structure |
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… |
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30 |
Leverage of the AIF |
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a) as calculated under the Gross Method |
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b) as calculated under the Commitment Method |
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5. Operational and Other Risk Aspects |
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31 |
Total number of open positions |
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32 |
Historical risk profile |
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a) Gross Investment returns or IRR of the AIF over the reporting period (in %, gross of management and performance fees) |
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1st Month of Reporting Period |
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2nd Month of Reporting Period |
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… |
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… |
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Last Month of Reporting Period |
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b) Net Investment returns or IRR of the AIF over the reporting period (in %, net of management and performance fees) |
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1st Month of Reporting Period |
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2nd Month of Reporting Period |
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… |
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… |
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Last Month of Reporting Period |
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c) Change in Net Asset Value of the AIF over the reporting period (in %, including the impact of subscriptions and redemptions) |
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1st Month of Reporting Period |
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2nd Month of Reporting Period |
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… |
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… |
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Last Month of Reporting Period |
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d) Subscriptions over the reporting period |
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1st Month of Reporting Period |
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2nd Month of Reporting Period |
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… |
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… |
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Last Month of Reporting Period |
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e) Redemptions over the reported period |
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1st Month of Reporting Period |
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2nd Month of Reporting Period |
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… |
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… |
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Last Month of Reporting Period |
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Monetary values should be reported in the base currency of the AIF.
Results of stress tests
Please provide the results of the stress tests performed in accordance with point (b) of Article 15(3) of Directive 2011/61/EU [risks associated with each investment position of the AIF and their overall effect on the AIF’s portfolio can be properly identified, measured, managed and monitored on an ongoing basis, including through the use of appropriate stress testing procedures;] (free text)
Monetary values should be reported in the base currency of the AIF.
Please provide the results of the stress tests performed in accordance with the second subparagraph of Article 16(1) of Directive 2011/61/EU. [AIFMs shall regularly conduct stress tests, under normal and exceptional liquidity conditions, which enable them to assess the liquidity risk of the AIFs and monitor the liquidity risk of the AIFs accordingly.] (free text)
Monetary values should be reported in the base currency of the AIF.
AIF-specific information to be made available to the competent authorities
(Article 24(4) of Directive 2011/61/EU)
|
Data Type |
Reported Data |
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1 |
Of the amount of collateral and other credit support that the reporting AIF has posted to counterparties: what percentage has been re-hypothecated by counterparties? |
|
|
Borrowing and Exposure Risk |
|||
2 |
Value of borrowings of cash or securities represented by: |
|
|
|
Unsecured cash borrowing: |
|
|
|
Collateralised/secured cash borrowing — Via Prime Broker: |
|
|
|
Collateralised/secured cash borrowing — Via (reverse) repo: |
|
|
|
Collateralised/secured cash borrowing — Via Other: |
|
|
3 |
Value of borrowing embedded in financial instruments |
|
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Exchange-traded Derivatives: Gross Exposure less margin posted |
|
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OTC Derivatives: Gross Exposure less margin posted |
|
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4 |
Five largest sources of borrowed cash or securities (short positions): |
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Largest: |
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2nd largest: |
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3rd largest: |
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4th largest: |
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5th largest: |
|
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5 |
Value of securities borrowed for short positions |
|
|
6 |
Gross exposure of financial and, as the case may be, or legal structures controlled by the AIF as defined in Recital 78 of the AIFMD |
|
|
|
Financial and, as the case may be, or legal structure |
|
|
|
Financial and, as the case may be, or legal structure |
|
|
|
Financial and, as the case may be, or legal structure |
|
|
|
… |
|
|
7 |
Leverage of the AIF: |
|
|
|
a) Gross Method |
|
|
|
b) Commitment Method |
|
|
Monetary values should be reported in the base currency of the AIF.
( 1 ) Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (OJ L 317, 9.12.2019, p. 1).
( 2 ) Committee of European Banking Supervisors, Guidelines to Article 122a of the Capital Requirements Directive of 31 December 2010, http://www.eba.europa.eu/cebs/media/Publications/Standards%20and%20Guidelines/2010/Application%20of%20Art.%20122a%20of%20the%20CRD/Guidelines.pdf
( 3 ) OJ L 96, 12.4.2003, p. 16.
( 4 ) OJ L 79, 20.3.2007, p. 11.