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

Annex 1
November 2012
CP12/32
Implementation of the Alternative Investment Fund Managers Directive
• setting a maximum level of leverage for each AIF under its management;
• disclosing the maximum leverage levels to potential investors in a given AIF
and keeping investors informed on the levels of leverage used 18 ; and
• demonstrating to the regulator that leverage levels set for each AIF are reasonable
and that the AIFM complies with limits at all times.
47. Evidence from the FSA firm survey suggests that firms are likely to incur incremental
compliance costs, though most respondents did not expect to make material changes
to their current risk management oversight and monitoring processes and procedures
(Table 8). Firms noted, however, that the impacts will depend on how prescriptive the
requirements will be, and the definition of leverage.
Table 8: Incremental costs to firms from leverage requirements
Requirement Incremental costs
One-off Ongoing (annual)
Leverage policy £0 – £8,000 £0 – £36,000
Calculating leverage levels of each AIF £0 – £51,000 £0 – £20,000
Setting a maximum level of leverage £0 – £12,000 £0 – £70,000
Disclosure to investors £0 – £104,000 £0 – £34,000
Disclosure to the FCA £0 – £11,000 £0 – £35,000
Total £0 – £186,000 £0 – £195,000
Securitisation requirements
48. The Directive will require AIFMs investing in securitisation positions on behalf of AIFs
under management to only assume exposure to tradable securities and other financial
instruments based on repackaged loans if the originator, sponsor or original lender has
explicitly disclosed that it will retain, on an ongoing basis, a net economic interest of not
less than 5%. 19
49. 32% of survey respondents indicated that they currently invest in securitisation positions,
but were uncertain about the possible impacts on their business models.
50. The same requirement has been rolled out to banks as part of the Capital Requirements
Directive, and to insurers and reinsurers under the Solvency II legislation. Therefore the
new securities issued are likely to meet the AIFMD requirements, and the impacts on
business models are likely to be low.
18 Article 23.1(a) AIFMD.
19 Article 17 AIFMD.
Financial Services Authority A1:13