US EAST COAST 2012 - HFMWeek

More documents

Recommendations

Info

US EAS T COAS T 2012 FORM PF: WHERE DO YOU FIT IN NICHOLAS TSAFOS OF EISNERAMPER TALKS TO HFMWEEK ABOUT THE REQUIREMENTS OF FORM PF AND GIVES AN OVERVIEW OF THE REPORTING PROCESS AS WELL AS HOW BEST TO APPROACH IT Nicholas Tsafos is an audit partner at EisnerAmper with more than 20 years of diversified accounting and auditing experience. He works with hedge funds, private equity funds and registered investment advisers. Reporting requirements from the Securities and Exchange Commission (SEC) are mounting for US firms, with fund managers expected to spend a considerable amount of time, energy and resources providing data about their investment portfolios. HFMWeek talks to Nicolas Tsafos, audit partner at EisnerAmper, about Form PF and the best way to approach the new reporting procedures. HFMWeek (HFM): How does an adviser make the determination as to which sections of Form PF apply to its operations Nicholas Tsafos (NT): To make an accurate assessment as to which sections of Form PF apply to the adviser’s operations, the adviser must become familiar with the definitions and terms used in Form PF. To accomplish this, the adviser must determine the following: • Large adviser determination • Qualifying hedge fund determination To make the above determinations, the adviser must be familiar with the definitions of the following terms: • Control • Controlled portfolio company • Dependent parallel managed accounts • Hedge fund • Hedge fund assets under management • Large private fund adviser • Liquidity fund • Parallel managed accounts • Private equity fund assets under management • Private equity fund • Private fund advisor • Qualifying hedge fund • Real estate fund • Regulatory assets under management • Related person • Reporting fund • Separately operated The above terms are defined in Form PF. However, an adviser should consult their outside counsel to verify their understanding of the definitions and get assistance in making the proper determinations. For advisers who are quarterly filers, the determination needs to be made at the end of any month during the preceding fiscal quarter. One of the determinations that should be tested on a monthly basis is the aggregation of parallel funds. Robust policies and procedures should be developed so these tests can be completed accurately and in a timely manner. This determination should be well documented, as the SEC, upon examination, will want to determine if the adviser has fulfilled its filing requirements under Form PF. Proper documentation will provide evidence in the future that an attempt was made to address the requirements of Form PF. HFM: What are the information requirements for each section NT: Once the adviser has determined which sections of Form PF apply to its operations, it must provide information to answer the questions in each section. The adviser level information required by Section 1a is as follows: • Identification and contact information. • Breakdown by type of funds managed and the regulatory and net assets under management. • Assumptions made in regards to the responses on Form PF. The information required for each reporting fund in Section 1b is as follows: • Fund identification and structure information. • Gross asset value and net asset value of the fund. • Value of investments in parallel managed accounts related to the fund and investments in equity of other private funds. • Borrowing information, including a breakdown by percentage of borrowings from foreign and US financial institutions and non-financial institutions. The fund must also provide the identity of creditors whose borrowings exceed the fund’s NAV by 5%. • A breakdown of fund assets and liabilities by fair value price levels and the value of derivative positions. • Investor information for the fund, breakdown of beneficial ownership for the fund by investor type and the percentage of ownership held by the five beneficial owners with the largest ownership. • Monthly or quarterly gross and net performance information for the fund. Section 1c applies to advisers that manage hedge funds. The requirements for Section 1c are as follows: • The fund’s investment strategy or strategies. For a fund that uses multiple strategies, provide the estimated percentage of the fund’s NAV represented by each strategy. 12 HFMWEEK.COM
FINANCIAL SERVICES • If the fund’s strategy uses computer-driven algorithms, give the percentage of NAV that is managed by such computer-driven algorithms. • Counterparty credit exposure information. • Trading and clearing information. This response requires estimates by asset class and whether trades took place on a regulated exchange vs. over the counter. Section 2a applies to large advisers and requires the following aggregate information for the funds managed by the adviser: • The value of investments by type, both long and short. • Duration of fixed income investment types. • Turnover rate of the funds’ investment portfolios • Geographic breakdown of investments by the issuer’s jurisdiction. Large advisers who manage funds that meet the definition of qualifying fund must complete Section 2b. The information required by Section 2b is as follows: • Portfolio positions by investment type as well as bond duration, weighted average life or 10-year bond equivalent for fixed income investments. • Liquidity of portfolio investments, based on the estimated shortest period in which such positions can be liquidated without fire sale discounts. • Disclose information regarding collateral such as the types, counterparties and the percentage of collateral that can be rehypothecated. • Risk information (provide detailed information in regards to risk assumptions, methodologies and calculations). • Information regarding financing (include types of financing, collateral posted, creditors and liquidity terms). • Derivatives values including collateral and central clearing counterparties. • Information regarding investor liquidity (the adviser must provide the funds redemption terms, side pockets and gates). Section 4 applies to large advisers who manage private equity funds. The information required by Section 4 is as follows: • Fund level obligations or guarantees to satisfy portfolio company obligations. • For investee companies that are controlled by the fund (companies where that fund owns more than 25% of the voting securities) provide financial information, including debt-to-equity ratios and the nature and maturity of debt. • Group investments in portfolio companies by industry. • Provide geographic information of portfolio companies. • If related persons have invested in portfolio companies, provide aggregate value of co-investments. • If the fund has made investments in controlled portfolio companies in the financial services industry, the PROPER DOCUMENTATION WILL PROVIDE EVIDENCE IN THE FUTURE THAT AN ATTEMPT WAS MADE TO ADDRESS THE REQUIREMENTS OF FORM PF ” adviser must provide the legal name of the portfolio companies, addresses, percentage of the fund’s gross assets invested in each portfolio company, gross asset value of each portfolio company, and percentage of each portfolio company beneficially owned by the fund. HFM: How should an adviser prepare to meet the requirements of Form PF NT: By assessing which sections of Form PF an adviser needs to complete, the adviser can determine the policies, procedures, processes, people and technology required to meet requirements of Form PF. The adviser should take an inventory of its current processes, information provided by its service providers and the expertise of its employees to provide information to complete Form PF. The adviser should then complete a mock Form PF to determine the information that it does not have, or is difficult to obtain. The adviser should then prepare a list of processes and procedures that need to be implemented to obtain the information in a timely manner. The adviser should also develop policies and procedures to verify that information disclosed in Form PF is accurate and does not contradict information provided to investors and other third parties. The biggest concern in the Form PF process may not be the process itself; the concern is in budgeting enough time to correctly and effectively complete Form PF. This is not a weekend project. HFM: When are the rules for Form PF effective and when does the fund adviser have to file Form PF NT: The effective date for the new rules is 31 March 2012, with compliance dates of 15 June 2012 for some large advisers and 15 December 2012 for others. If an adviser has a fiscal year that ends on 31 December, its filing deadlines would be as follows: • Large advisers to hedge funds with at least $5bn in assets under management are required to make an initial filing within 60 days after the 30 June 2012 quarter end (29 August 2012). • Large advisers to private equity funds with at least $5bn in assets under management are required to make an initial filing within 120 days after the 31 December 2012 year end (30 April 2013). • Large advisers to liquidity funds and registered money market funds with at least $5bn under management are required to make an initial filing within 15 days after the 30 June 2012 quarter end (16 July 2012). n Still have questions Join HFMWeek and EisnerAmper in New York City on 11 October 2012 for a panel discussion on Form PF. Look for the details in your email alerts or contact Shona Lynch, publishing account manager, HFMWeek (T: +44 (0) 207 029 4047, M: +44 (0) 7879774805, email: s.lynch@hfmweek.com) for more information. HFMWEEK.COM 13
Page 1 and 2: HFMWEEK S P E C I A L R E P O R T U
Page 3 and 4: US EAST COAST 2012 I t is no wonder
Page 5 and 6: Outstanding Global Fund Administrat
Page 7 and 8: COMPLIANCE system allows it, you ca
Page 9 and 10: US EAS T COAS T 2012 ADMINISTRATION
Page 11: Leading-edge technology and unparal
Page 16 and 17: US EAST COAST 2012 ACCOUNTANCY UK t
Page 18 and 19: US EAST COAST 2012 THE REAL RISK OF
Page 20 and 21: What penalty are you prepared to pa
Page 22 and 23: US EAS T COAS T 2012 FUND SERVICES
Page 24 and 25: US EAS T COAS T 2012 JOBS ACT: HOW
Page 26 and 27: Risk. It’s no longer a 4-letter w
Page 28 and 29: US EAS T COAS T 2012 ADMINISTRATION
Page 30 and 31: Discover the Difference www.marcuml
Page 34 and 35: THE FIRST RULE OF SUCCESS SURROUND
Page 36: US EAS T COAS T 2012 ADMINISTRATION
Page 39: F UND SERVICES DM: It is important

US EAST COAST 2012 - HFMWeek

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?