Reporting to investors
AIFM must make a number of disclosures to potential investors, along with updates to existing investors.
Information to potential investors
The AIFM must make available to potential investors, in the manner provided for in the AIF's constitution:
- a description of the investment strategy and objectives of the AIF, to include information on: (if the AIF is a fund of fund) where the master AIF and the underlying funds are established; the types of assets in which the AIF may invest in; the techniques it may employ; all associated risks; any applicable investment restrictions; the circumstances in which the AIF may use leverage; the types and sources of leverage permitted and the associated risks; any restrictions to the use of leverage, collateral and asset re-use arrangements; and information on the maximum amount of leverage which the AIFM may employ on behalf of the AIF;
- a description of the procedures by which the AIF may change its investment strategy or investment policy, or both;
- a description of the main legal implications of the contractual relationship entered into for the purpose of investment, including information on jurisdiction, applicable law and on the existence, or not, of any legal instruments providing for the recognition and enforcement of judgments in the territory where the AIF is established;
- the identity of the AIFM, the AIF's depositary, auditor and any other service providers and a description of their duties and the investors' rights;
- a description of how the AIFM is complying with the professional indemnity cover requirements of Article 9(7) (see here);
- a description of any delegated management function and of any safekeeping function delegated by the depositary, the identification of these delegates and any conflicts of interest that may arise from such delegations;
- a description of the AIF's valuation procedures and of the pricing methodology for valuing assets, including the methods used in valuing hard-to-value assets;
- a description of the AIF's liquidity risk management programme, including as a result of the operation of redemption rights both in normal and exceptional circumstances;
- a description of all fees, charges and expenses and of the maximum amounts which are directly or indirectly to be borne by investors;
- how the AIFM ensures a fair treatment of investors and, whenever an investor obtains a preferential treatment or the right to obtain preferential treatment, a description of that preferential treatment, the type of investors who obtain such preferential treatment as well as, where relevant, their legal or economic links with the AIF or AIFM (i.e., descriptions of side letters and similar arrangements);
- the latest annual report for the AIF;
- the procedure and conditions of issue and sale of units or shares;
- the latest net asset value of the AIF or the latest market price of the unit or share of the AIF;
- where available, the historical performance of the AIF;
- the identity of the prime broker and a description of any material arrangement of the AIF with its prime brokers and the way any resulting conflicts of interests are managed and, as the case may be, the provision in the contract with the depositary on the possibility of transfer and reuse of AIF assets, and about any transfer of liability to the prime broker that may exist; and
- how and when the information required by Article 23(4) and (5) (on periodic disclosure of liquidity and leverage) will be disclosed.
Additionally, the AIFM must inform potential investors of any arrangement made by the depositary contractually to discharge itself of liability. Whilst the Directive purports not to regulate funds, but rather only the managers, there are significant requirements imposed on AIF's documentation and reports.
Periodic disclosure on liquidity
In respect of each of its AIF, AIFM must periodically disclose to investors:
- the percentage of the AIF's assets which are subject to special arrangements arising from their illiquid nature;
- any new arrangements for managing the liquidity of the AIF; and
- the current risk profile of the AIF and the risk management systems employed by the AIFM to manage these risks.
Information on leverage
The AIFM must disclose details of any changes to the maximum level of leverage allowed to investors, together with any change to the right to re-use collateral or any guarantee granted under those leveraging arrangements. The total amount of leverage employed must be disclosed on a regular basis.