SOLUTIONS FOR ASSET MANAGERS
Asset managers face increasing pressures to manage regulatory and market risk, while fulfilling the role of fiduciary. The challenge, particularly for asset managers with global reach, is navigating a wide-ranging regulatory environment.
A leader in regulatory compliance, risk reporting and analytics for asset managers, MSCI offers award-winning analytics and tools needed to help manage risk and improve transparency and reporting requirements that, in many cases, vary by jurisdiction and asset class.
The European Union's Alternative Investment Fund Managers Directive (AIFMD) has implications for a wide range of asset managers, including managers that are not based in the EU or focused exclusively on alternative investments.
The directive imposes various liquidity risk and disclosure rules on hedge funds, private equity, real estate funds and other alternative investment managers.
MSCI's AIFMD reporting package is designed to help asset managers analyze and report information related to: market risk profile, collateral exposure, counterparty credit exposure, stress testing and leverage. The AIFMD report also comes with the European Securities and Market Authority (ESMA) Annex IV report for regulatory filing and includes:
- Group Overview (pdf and xls)
- AIFM/AIF ESMA Annex IV (xml and xls)
- AIF Summary (pdf) and diagnostic (xls)
- AIF BackTest (pdf) and (xls)
- AIF Liquidity (pdf) and (xls)
As a result of 2017 EU legislation, banks, insurers and asset managers that are producing or selling “packaged retail investment" and “insurance-based investment" products (PRIIPS) will need to produce key information documents (KIDs) for retail investors to compare products across multiple providers.
MSCI can help asset managers comply by providing calculations for market risk and performance scenarios, and facilitating the end-to-end production of KIDs) through an arrangement with Kneip via ManagedService and WebService delivery channels for:
- Category I (Derivatives)
- Category II (Investment Funds)
- Category III (Structured Products)
Open-ended mutual funds, exchange-traded funds and other registered investment companies are required to disclose certain fund holdings information to the U.S. Securities and Exchange Commission. To comply, asset managers must also classify their investments into one of four liquidity buckets and monitor liquid investment minimums and illiquid assets.
While the requirements of this rule have evolved since its proposal in 2016, MSCI is prepared to provide the advanced liquidity analytics and robust reporting capabilities asset managers need in order to comply. These include:
- Apply a single, transparent liquidity risk model for all funds and across asset classes.
- Classify holdings into one of four prescribed liquidity buckets, ranging from highly liquid to illiquid.
- Calculate time-to-liquidation based on trading size and market impact constraints.
- Determine the percentage of highly liquid investments and illiquid assets.
- Analyze the liquidity profile of their funds in stressed scenarios.
The U.S. Securities and Exchange Commission's (SEC) modernization rule applies to registered investment companies, including open-ended mutual funds and exchange-traded funds. The regulation requires that investment companies disclose detailed fund and holding information to the SEC every month using Form N-PORT, including derivatives, counterparties and certain activities such as securities lending.
MSCI's N-PORT package is built on its award-winning multi-asset class risk platform. It provides market and liquidity risk analytics as well as investment specific data required under Part B and C of the report form. This content can seamlessly feed into regulatory filing services that aggregate additional data to generate and file N-PORT.
The Undertakings for the Collective Investment of Transferable Securities (UCITS) is a regulatory framework governing mutual funds registered in Europe and sold to individual investors worldwide.
MSCI's UCITS package streamlines reporting by aggregating group exposure, issuer concentration risk, counter-party exposure and stress testing. The package monitors global exposure by using relative and absolute value at risk (VaR).
Asset managers can combine UCITS reports with AIFMD reports [link to AIMFD]. The reports can be shared with investors as well as regulators and include the following set of standard regulatory reports:
- UCITS Fund Level Compliance
- Summary (pdf) and Diagnostic (xls)
- UCITS Fund Level Enhanced
- Group Level (xls)
- BackTest (pdf) and Diagnostic (xls)
- Liquidity (pdf) and Diagnostic (xls)
Under Solvency II, European insurers must provide transparency on the cost of capital related to underlying assets and demonstrate that they meet Solvency Capital Requirements (SCR).
Increasingly, asset managers wanting to establish and maintain relationships with European insurers need to consider Solvency II compliance. MSCI's reporting package aims to streamline reporting across a broad spectrum of asset classes, including alternatives.
The reporting package calculates Solvency Capital Ratios (SCR) using the Standardized Approach on position level data. It also includes the following standard reports:
- SCR Dashboard (pdf)
- SCR Diagnostics (xls)
- Tripartite report (xls)