With regard to the EU Alternative Investment Fund Managers Directive, the European Securities and Markets Authority has submitted technical standards to the European Commission. The AIFMD requires hedge fund managers and private equity fund managers to report significant amounts of information to their home competent authorities on such matters as the main instruments in which they trade, their principal exposures and the risk profiles of the funds they manage. ESMA developed a template to be used by fund managers in order to have as much consistency in the disclosures as possible. The interesting point from the ESMA perspective is that all of the information provided by fund managers to their home authorities must also be made available to ESMA and the European Systemic Risk Board. While aware of the challenges involved in gathering such vast amounts of data and analyzing it in a way that adds value from a regulatory perspective, ESMA is confident that this additional transparency will be a key tool in helping both the EU and national authorities better understand the functioning of the hedge fund sector, as well as in identifying possible systemic impacts.
But ESMA’s work on the AIFMD does not stop there. ESMA is also working on guidelines on remuneration under Article 13 of the Directive and plan to publish a consultation paper with its proposals in the second quarter of this year. There is already a broad set of material from which ESMA can draw inspiration when developing these guidelines, such as the Commission Recommendation of 2009 and the CEBS guidelines of 2010, while bearing in mind the need to adapt that material to the alternative investment fund sector.
ESMA recently published a discussion paper on key concepts of the hedge fund Directive and types of alternative investment fund AIFM. This is the first stage of ESMA's work on the regulatory technical standards required under Article 4(4) of the Directive. ESMA will clarify some areas of potential uncertainty arising from the Directive and ensure that there is a common understanding of the text across the EU. The discussion paper addresses such issues as the delegation of portfolio and risk management functions, the definition of the term ‘alternative investment fund’ and the interaction of the AIFMD with other pieces of EU legislation such as UCITS and MiFID. These latter points are unlikely to be included in the technical standards themselves and will probably take the form of ESMA guidelines or a Q&A at a later stage. To some extent the precise legal form here is less important than the overall objective, reasoned ESMA, namely the consistent application of the Directive throughout Europe.