CP12/32: Implementation of the Alternative ... - BVCA admin

CP12/32
Implementation of the Alternative Investment Fund Managers Directive
Liquidity management requirements
Annex 1
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44. AIFMD and the Level 2 Regulation, once adopted, include requirements on liquidity
management for all open-ended AIFs and those AIFs which use leverage, for example, funds
implementing global macro or commodity trading adviser (CTA) strategies. 15 Additionally,
there is a general requirement that AIFMs ensure consistency of the investment strategy,
liquidity profile and redemption policy of each AIF. 16 The requirements include:
• Implementing and maintaining systems and procedures to manage and monitor
liquidity risk within the AIF and ensure that the liquidity profile of investments of the
AIF complies with its underlying obligations.
• Regularly (at least annually) conducting stress tests, under both normal and exceptional
liquidity conditions.
• Identifying and disclosing to investors the types of circumstances where liquidity
management tools and arrangements (e.g. gates, suspensions, side pockets) will be used
in both normal and exceptional circumstances.
45. 57% of survey respondents suggested that they will incur more than minimal costs
because of this requirement (Table 7). Those firms that will not incur additional significant
costs either already have compliant systems in place or were not affected due to their
investment strategies.
Table 7: Incremental costs to firms from liquidity management requirements
Requirement Incremental costs
One-off Ongoing (annual)
Systems and procedures £0 – £84,000 £0 – £125,000
Stress testing £0 – £16,000 £0 – £24,000
Disclosure to investors £0 – £67,000 £0 – £36,000
Total £0 – £167,000 £0 – £185,000
Leverage requirements
46. AIFMD and the Level 2 Regulation, once adopted, include requirements on the use of
leverage, particularly:
• setting out and maintaining a leverage policy;
• calculating leverage levels of each AIF in accordance with methods set out in the
Directive and implementing measures 17 ;
15 Article 16 AIFMD.
16 Article 16(2) AIFMD.
17 These proposed calculation methods are the gross and commitment methods to be set out in the Level 2 Regulation. The AIFM will
be required to carry out its calculation using both methods.
A1:12 Financial Services Authority November 2012