AIFMD and the Need for Enhanced Performance Reporting
AIFMD – What does it mean to private equity?
The onset of the financial crisis revealed the significant downside of having even slight gaps in reporting data which has left many LPs to become increasingly risk averse and focused on enhancing due diligence. While the quality of information has come a long way since the early days of the crisis, many LPs still believe there is room for improvement, particularly in areas such as portfolio performance and new deals.
In Europe, regulators have responded to these and other demands with a set of measures included within the Alternative Investment Fund Managers Directive (AIFMD). Under AIFMD, alternative managers will be required to provide increased disclosure of a fund's investment types and strategies, liquidity levels, risk-management principles, as well as products and techniques utilized by the manager to achieve a fund's objectives.
To comply with AIFMD regulations, private equity and other Alternative Investment managers will be required to make serious operational, strategic and structural modifications to their funds. Along the way, managers will increasingly rely on independent service providers to help them enhance performance reporting.
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