AIFMs are faced by a lot of regulatory changes in respect of risk management.
Lates development was the introduction of ESG criteria as a new risk factor. which leads to significant changes in the whole set-up of an organization and in daily operations.


Both real estate and private equity fund managers are concerned about the burden laid down to them as far as risk management is concerned. This was performed more or less with the help of a portfolio management system but without processes and procedures in place to fulfill regulatory requirements in full.

With the requirement for AIFMs to implement a functionally and hierarchically independent risk management function and setting up a documented risk management process, RE and PE fund managers have to familiarize themselves with a new operating model. In order to be independent of the risk-management function, specific safeguards have to be established. Senior Management must be composed adequately as well as the board, remuneration committee, and conflicts of interest policy. As an example, the oversight of risk management cannot be performed by the conducting officer in charge of portfolio management. Similarly, remuneration for personnel in control functions has to be separated from that of employees in operational units. The precondition for an AIFMD-compliant risk-management function is thus the implementation of an
according to organizational and governance structure.
The result is a huge challenge for current and prospective fund managers because all current processes and structures must be reviewed and – where necessary- replaced by appropriate procedures. Another difficulty is to find well-trained and experienced staff in order to be able to perform all risk management tasks properly because the job specification of a risk manager has changed dramatically during past years and the labor market for these specialists isn`t that big.

Another item in respect of performing risk management according to regulatory requirements is the question of which risk management software to use. This is dependent of the kind of funds an AIFM is administering and the risk management policy as well as measurement and management tools. The key obligations set out in the AIFMD and its delegated regulation (Level 2) are to identify, document, measure and monitor all risks that are relevant for each of its AIFs and the AIFM itself with adequate frequency. Risks that have to be monitored generally include market, credit, liquidity, counterparty, operational and ESG risks.


AIFMs must have a clear idea of the meaning and implications of risks for each AIF they administer. Therefore a stringent risk management framework has to be established allowing to monitor different fund types and associated risks and to set up risk limits. Once breached a predefined escalation process has to be followed. As an
example, market risk for a RE fund may be defined along the lines of investment market and micro-location developments, whereas for a PE fund investing in companies producing goods it may rather relate to developments within target customer groups or competitor movements.

more: https://www.yumpu.com/en/document/read/65724787/the-xolaris-market-news-n01
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