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Making Ireland more attractive to Private Equity

The Irish funds industry recently got a breakthrough in its efforts to establish Ireland as a European domicile for private equity funds as the Investment Limited Partnerships Bill 2018 will be published shortly (depending on Brexit developments) following a government approved amendment.

In September 2018 assets under management of Irish AIFs were at €627 bn, the highest in history, but only a small percent of this is allocated to the ILP structure (defined as a transparent alternative investment fund, regulated by the Central Bank of Ireland). Private equity fund managers believe that the current legislation (the Investment Limited Partnerships Act 1994) is not in line with more favourable partnership structures available in other international fund domiciles.

The Irish collective asset management vehicle (ICAV) has up to this point served PE asset managers looking to establish private equity funds in Ireland. A corporate vehicle designed specifically for Irish investment funds, is it used for both retail funds (UCITS) and AIFs. It can also accommodate many PE strategies and PE-centric features due to its flexible structuring and be treated as a tax transparent partnership for U.S. federal tax purposes. However the ICAV is not a partnership, which is the default legal form for PE funds.

With the introduction of AIFMD in 2014,  there has been pressure to establish a fit-for-purpose Irish partnership vehicle from global PE asset managers looking to establish parallel European structures or distribution to European investors via the AIFMD passport. Dialogue between the Irish funds industry, the CBI and the Irish Department of Finance has resulted in the new bill to attract more Private Equity asset managers to Ireland.

It is assumed that there will be key enhancements to the bill to include:

(i) best practice features from other jurisdictions;

(ii) clarifying the rights, obligations and status of investors, thus improving the operation of ILPs

(iii) Fully aligning ILP structure with AIFMD and other Irish fund structures,

(iv) the option to establish umbrella ILPs and

(v) the ability to migrate a partnership into and out of Ireland on a statutory basis.

Due to Brexit, the enacting of the bill may be delayed, but it is hoped that the Bill will come before the Daíl  in Q2/Q3 2019. In the event of a no-deal Brexit, the Irish Government will fast-track emergency legislation to protect Ireland from any potential economic damage, which one assumes will result in the bill becoming a top priority.  


Blog, News, Press

Apex Group Ltd selects AQMetrics to power its regulatory reporting teams

IRELAND, Dublin, March 19, 2019 – award winning RegTech AQMetrics is pleased to announce that Apex Group Ltd. (“Apex”) has selected AQMetrics as its regulatory reporting technology solution.

Apex plans to utilise AQMetrics for its ESMA, CFTC and SEC regulatory reporting requirements, having identified AQMetrics as delivering a scalable robust technology solution best suited to fit the Group’s comprehensive compliance requirements for today and into the future.

Over the past eighteen months, Apex has made a number of strategic acquisitions and is now the fifth largest fund administrator in the world. The integrated AQMetrics platform will deliver a full suite of multi-jurisdictional regulatory reporting solutions to the global Apex Group.

Geraldine Gibson, Founder and Chief Executive Officer of AQMetrics said “AQMetrics is proud to have secured a long-term relationship with Apex. AQMetrics will provide Apex with a robust, scalable and secure regulatory technology platform that can meet Apex’s regulatory reporting technology needs today and provide Apex with access to reporting technology for emerging regulations. In line with Apex’s commitment to customer service, AQMetrics will also provide an exceptional customer experience for the funds servicing teams at Apex and for their clients”.

Commenting on this development, Peter Hughes, Founder and Chief Executive Officer, Apex Group Ltd, said, “The implementation of AQMetrics is part of our ongoing commitment to continually enhancing our robust compliance and governance reporting standards. The advanced technology solutions delivered by AQMetrics further adds to our unique technology offering by leveraging the broadest range of technologies in the industry.”

About AQMetrics

AQMetrics, established in Ireland in 2012 is one of the world’s leading regulatory technology (“RegTech”) providers. Since inception AQMetrics has continually improved and evolved its technology offering and offers a full risk management and regulatory reporting platform to its clients: from $bn hedge funds, alternative investment managers, MiFID firms, asset servicing providers, fund administrators to banks. Award winning AQMetrics now provides RegTech solutions to a number of the top global fund administrators and asset servicing providers in addition to directly servicing fund managers who require direct access to multi-jurisdictional regulatory reporting technology.

www.aqmetrics.com

About Apex

The Apex Group, established in Bermuda in 2003 is one of the world’s largest fund solutions providers with $610bn in AuA and over 40 offices worldwide. The Group offers a full service solution to its clients: from fund administration, middle office, custody and depositary to corporate services and fund platforms. Apex administers the investments of some of the largest funds and institutional investors in the world.

www.apexfundservices.com

 


Blog

Central Bank of Ireland: Capital Markets Update, March 2019


Central Bank of Ireland Markets Update

The Central Bank of Ireland has issued the third markets update of 2019 on 7th March this year. The main points are below:

  • The 32nd edition of the Central Bank AIFMD Q&A has been published and clarifies that QIAIFs with UK AIFMS  (after Brexit these will become non-EU AIFMs) will become subject to the AIFMD depositary regime including the AIFMD depositary liability provisions.
  • An updated CBI Brexit FAQ (March 6th, 2019) clarified that the Multilateral Memoranda of Understanding, agreed between European securities regulators and the FCA in February, facilitates delegation or outsourcing arrangements between Irish UCITS Management Companies/AIFMs/MiFID Firms and UK entities.
  • In a notice of intention (March 7th, 2019), the CBI states that in the event of a no-deal Brexit after 30 March, UK UCITS will become UK AIFs (due to the UK becoming a 3rd country). The Central Bank will then consider if these funds fall under the category of investment fund in which UCITS and retail Investor AIFs may invest.  Under the regulation of Irish UCITS, any investment in UK AIFs must fall within the aggregate limit of 30% for investments in all AIFs. Under a no-deal Brexit the Central Bank will also consider if UK investment firms authorised under MiFID should be a category of eligible financial derivative counterparty for UCITS and retail Investors AIFs. Since there is currently no clear course on Brexit, these circumstances may change quickly.
  • CBI has written to counterparties asking for feedback on the main issues observed in the EMIR data quality work carried out by the Central Bank in 2018 (February 20th, 2019). Failure to report details of a derivative contract to a trade repository following the conclusion, modification or termination of the contract by the end of the working day is a regulation violation.
  • The Central Bank has also issued the seventh edition of the Central Bank Investment Firms Q&A  (March 7th, 2019) which states that only EEA MiFID firms can appoint tied agents and that tied agents must be persons who are established in the EEA.

With Brexit on the horizon, no doubt there will continued communications over the coming weeks. Subscribe to the AQMetrics mailing list here to keep up to date with all the new details.  


Blog

Top ten takeaways from the ALFI European Asset Management Conference 2019

By Lorraine Lyons, Business Development 

Last week the ALFI European Asset Management Conference took place in Luxembourg. The two-day event (5-6th March) was packed with keynote speakers, in-depth panel discussions and lunch time fintech presentations. It was attended by Chief Risk Officers and Chief Compliance Officers from Europe’s largest asset management firms.  

The overall theme emerging from the event was the four P’s of asset management: Product,  People, Progress, Prediction. Here are our top ten takeaways from the event.

  1. In the past year, there has been a significant growth in the funds industry with Luxembourg having 40% of all net sales of funds in Europe. Alternative funds had a robust growth period in 2018 and there was a 17% increase in private equity funds.

 

  1. Digitisation will aid emerging generations with investment in funds. This innovation is not structural, it is competitive. There is a push from investors towards Environmental, Social and Governance (ESG) investing. This will attract talent and bring millennials  on-board who are committed to changing things.

 

  1. When we talk about innovation, we must remember that the basics need to be done correctly. Firms are still running multiple systems, which can include manual processes for risk management. The efficiency of the back office, for example, is often times neglected.

 

  1. Technology is needed to give clients greater transparency and a holistic view of portfolios.

 

  1. Only 1% of young people move into financial services roles straight out of college. In order to attract the top talent who choose this industry, asset managers and regulators are competing with each other. This is another challenge to firms to preserve their legacy with the best candidates and to question why are there not more students interested in financial services?

 

  1. A pragmatic regulator who is open to constructive dialog is needed rather than a regulator that goes into technical details. If regulatory files are well prepared then filing should be straight forward for firms.  

 

  1. Achieving sustainability will not be done by trying to predict the future, but rather by proactively creating it. We do not have to choose between a thriving economy and a clean environment, we have to achieve both to appease investors and the planet.

 

  1. Climate change is here. The cost of inaction is $4.2 trillion for four degrees temperature  warming. Our planet is safe and will adapt but when we reach six degrees warming, human life is in serious danger. Only 17% of pension funds factor in climate risk in their investment strategies. On March 15 there will be a global strike from schools, organised by 14-15 year-olds who are concerned about inaction on Climate Change.   

 

  1.  ESG investments should have a single approach across the funds industry and be applied to all product not just some products.

 

  1. AI and fintech will not be used to replace humans, rather it will take the robot out of the human and move those repetitive tasks to the digital worker. There is a high amount of repetition in what we do and fintech can build rules based engines to solve for this.  

 

The event’s content showed we have an interesting few years ahead of us between the changing environment, Brexit, AI and changing investors. Success in these times will come down to catering to these risk factors with skillful innovation and a personal roadmap of compliance.


Blog

ESMA Statement : No Deal Brexit guidelines for MiFID II/MiFIR and BMR Provisions

Yesterday, the European Securities and Markets Authority (ESMA)  issued a statement on its approach to MiFID II/MiFIR and Benchmark (BMR) provisions in the event that the United Kingdom leaves the European Union on the 29th March, with no withdrawal agreement in place (no-deal Brexit).

The following aspects are assessed by ESMA under a no-deal Brexit:

  • The MiFID II C(6) carve-out

The conditions under which a derivative contract are considered eligible for exemption and is not be considered a financial instrument. Specifically ESMA assesses the carve-out provisions for wholesale energy products.

  • Trading obligation for derivatives

ESMA confirms that there is currently no evidence to suggest that market participants will not be able to continue meeting their trading obligations for derivatives on regulated markets (“RMs”), multilateral trading facilities (“MTFs”), organised trading facilities (“OTFs”) or third-country venues with equivalence.

  • ESMA opinions on post-trade transparency and position limits

In case of a no-deal Brexit, trading venues established in the UK will, following exit day, no longer be considered EU trading venues. Consequently, transactions concluded on UK trading venues would be considered OTC-transactions and would be subject to the post-trade transparency requirements.

  • Post-trade transparency for OTC transactions between EU investment firms and UK counterparties; and UK counterparties.

Under a no-deal Brexit, UK investment firms will be considered third-county counterparties. Therefore, any OTC transaction concluded with UK counterparties must be made public by EU investment firms. This ensures that all transactions where at least one counterparty is an EU investment firm will be made post-trade transparent in the EU27.

  • BMR: ESMA register of administrators and 3rd country benchmarks.

Finally, UK administrators after a no-deal brexit will be deleted from the ESMA register. However, during the BMR transitional period, EU supervised entities can use 3rd country benchmarks even if they are not included in the ESMA register.

As there is still much uncertainty surrounding the final plans for the withdrawal and with the political situation in daily flux, ESMA warns that any position taken may be subject to further change, with subsequent communications likely to feature in the coming days and weeks.


Blog

Liquidity Stress Test Guidance for Investment Funds

New blog from AQMetrics CEO, Geraldine Gibson-Dautun 

In February 2019 the European Securities and Markets Authority (ESMA) created a draft guidance regarding liquidity stress tests of investment funds – applicable to alternative investment funds (AIFs) and Undertakings for the Collective Investment in Transferable Securities (UCITS). The draft guidance is based on the stress testing requirements set out in Directive 2011/61/EU and on the European Systemic Risk Board (ESRB) 2018 set of recommendations to address liquidity and leverage risk in investment funds (the ESRB recommendations).

The ESRB’s ‘Recommendation C’ requested that ESMA, “develop guidance on the practice to be followed by managers for the stress testing of liquidity risk for individual AIFs and UCITS”. Furthermore the ESRB recommendations set out: “The guidance issued on liquidity stress testing by ESMA should include, but not be limited to:

  • the design of liquidity stress testing scenarios;
  • the liquidity stress test policy, including internal use of liquidity stress test results;
  • considerations for the asset and liability sides of investment fund balance sheets; and
  • the timing and frequency for individual funds to conduct the liquidity stress tests.”

As a result, the ESMA guidelines reflect that redemptions are not the only potential risk to a fund’s liquidity, and that liquidity may dry up due to risks on either the assets or the liabilities side of the balance sheet, or both.

As a variety of methods can be used to build liquidity stress test models and determine the normal and stressed market conditions employed within them, ESMA recommends that managers determine:

  • which risk factors may impact the fund’s liquidity;
  • which scenarios to utilise;
  • the severity of the stress scenarios to employ;
  • different outputs and indicators to be monitored following the exercise, and how they are reported via management information; and
  • how the result of the liquidity stress test is utilised and acted upon by risk managers, portfolio management and senior management.

According to the ESMA guidelines, liquidity stress tests should be adapted appropriately to each fund, depending on its nature, scale and complexity. The liquidity stress tests should employ hypothetical and historical scenarios, and reverse stress testing. ESMA advises fund managers to not overly rely on historical data, particularly as future stresses may differ from previous ones.

Data availability features in the guidelines as ESMA notes that liquidity stress tests should demonstrate a manager is able to overcome limitations related to the availability of data, by avoiding unjustifiably optimistic assumptions and exercising qualitative judgement where appropriate. According to ESMA, managers should adapt their approach as appropriate where data is limited. This may require validation of the assumptions made, for example by discussing with market-facing agents, such as internal or external trading desks and/or brokers or utilising third party data services. In all cases ESMA notes that it should not be assumed that the portfolio can be liquidated at the full average daily traded volume of an asset unless such an assumption can be justified based on empirical evidence.

ESMA recognises that there is a myriad of different methods of modelling asset liquidation and does not advocate the use of one method over another. The first method examined in the ESMA consultation paper is the liquidation cost method. Liquidation cost depends on the following three factors: asset type, liquidation horizon and size of the trade/order. According to ESMA, managers should consider these three factors when assessing the liquidation cost of their assets, under normal and stressed market conditions:

  1. Asset type. The higher liquidity of some assets versus others (e.g. large-cap equities compared to high yield bonds)
  2. Liquidation horizon. The typically inverse relationship between liquidation cost and liquidation horizon.
  3. Trade size. A convex relationship may exist between trade size and liquidation cost, where liquidation cost decreases as trade size increases before reaching an inflexion point, and it starts increasing as trade size increases.

An alternative method to liquidation cost analysis is the time to liquidity calculation method. Instead of calculating liquidation cost, some managers construct liquidity buckets to estimate the time to liquidity for all the assets in the portfolio. With this approach, the manager can estimate the amount of assets which could be liquidated at an acceptable cost, for a given time horizon.

As financial markets typically exhibit higher volatility and lower liquidity in stressed conditions, liquidity metrics such as bid-ask spreads and price impact measures are likely to increase, in a similar way as a market volatility index (e.g. the VIX). Time to liquidate may also increase, dependent on the asset class. Managers should reflect various market stresses in the estimation of the liquidation cost and time to liquidation under such stressed conditions. In this context, ESMA guides managers to avoid only referring to historical observations of stressed markets.

According to ESMA, managers should employ historical, hypothetical scenarios as well as reverse stress testing.

ESMA lists the following historical scenarios by way of example:

  • internet/dotcom crisis 2000/2001
  • terrorist attacks of 2001(9/11)
  • global financial crisis 2008/10
  • European debt crisis 2010/12

The following hypothetical scenarios are also listed:

  • material increase of interest rates
  • widening of credit spreads
  • increased market volatility
  • significant political events
  • sector or firm specific events
  • natural disasters

On reverse stress testing ESMA notes that it consists of a fund-level stress test which starts from the identification of the pre-defined outcome with regards to fund liquidity and then explores scenarios and circumstances that might cause this to occur. As part of reverse stress testing ESMA guides that due regard should be given to how assets would be liquidated during market stress, including the role of transaction costs and whether or not material discounts (fire sale prices) would be accepted.

The above concerns the asset side of the balance sheet, ESMA further explores the liabilities side and pays particular attention to redemptions under stressed conditions. To build up a picture of what is normal for the fund over time ESMA guides that managers could monitor the historical outflows (average and trends across times), average redemptions of peer funds and information from any distribution network regarding forecast redemptions and recommends that managers should ensure that the time series is long enough to fairly reflect ‘normal’ conditions.

In stressed conditions ESMA provides the following example scenarios:

  • Historical trends – scenarios based on historical redemptions trends (specific to the fund). A period of redemptions which is stressed compared to historical data.
  • Historical events – redemptions during a stressed scenario, such as the Global Financial Crisis or the 9/11 terrorist attacks.  
  • Contemporary market trends in peer funds – during stressed market conditions peer funds may be experiencing high net redemptions. Equivalent stressed outflows could be simulated in the manager’s fund.
  • Hypothetical/Event-driven scenarios (such as political risk, change of portfolio manager, largest investor redemption etc) – potential effect on fund liquidity caused by an event which may cause enhanced redemptions e.g. a referendum or election result leading to changing economic conditions.
  • Reverse stress testing of redemptions – managers should start from the identification of a pre-defined outcome (e.g. the point at which the fund would no longer be able to honour redemption requests) and then explore scenarios and circumstances that might cause this to occur.

ESMA further provides guidance on factors that impact liquidity types not related to redemptions, as follows:

  • Derivatives – changes in the value of the underlying may lead to derivative margin calls, affecting the available liquidity of the fund. To stress test this a manager could simulate a large margin call due to an increase in the exposure to the underlying.
  • Committed capital – funds investing in real or immovable assets are often required to commit capital to service the investment, such as maintenance or refurbishment costs. An event causing further outlay of capital to a real estate investment could be simulated to stress test this scenario.
  • Securities Financing Transactions (SFT) – funds lending out assets are exposed to counterparty risk of the borrower and the associated liquidity risk arising from potential default. Whilst this can be mitigated by the collateral posted, liquidity risk is not eliminated (bearing in mind the liquidity of the collateral). A counterparty default scenario could be simulated to stress test this scenario.
  • Interest payments – funds which incorporate leverage into their investment strategy are subject to liquidity risk arising from factors such as interest rate sensitivity. An increased interest rate scenario could be used to stress test this.

Aggregation of liquidity stress tests across the funds under management is advised by ESMA. Using the same liquidity stress test on more than one fund with similar strategies or exposure may be useful when considering the ability of a less liquid market to absorb asset sales were they to occur concurrently in funds operated by the manager. This may be particularly pertinent when funds operated by the manager own a material level of assets in a given market. Aggregation of stress tests may allow the manager to better ascertain the liquidation cost or time to liquidity of each security, by considering the trade size, stressed market conditions and counterparty risk.

ESMA recommends quarterly stress testing, unless the size and nature of the fund requires more frequent stress testing. ESMA recommends that managers incorporate risk scoring into their stress test programmes. The impact of investor behaviour on liquidity stress tests is somewhat questioned by ESMA. However, investor behaviour could form part of the risk scoring where applicable.

Lastly, the importance of independent stress testing is highlighted by ESMA.  ESMA cautions that particular attention should be paid to the independence requirement when the manager delegates portfolio management tasks to a third party,  in order to avoid reliance on or influence of the portfolio manager / investment adviser’s own stress tests. Independent stress testing ensures strong compliance as opposed to assumed compliance by third parties. 


Blog, Buzz

Meet the Team -Lorraine Lyons

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds. Today, we introduce you to Lorraine Lyons, Business Development.

 

 

 

Name:

Lorraine Lyons, Business Development

Describe your job in three words:

Motivating, Collaborative, Engaging.

What is the most exciting thing you are working on?

The most exciting part about my job is working with new customers. I am currently working with several large clients who will use AQMetrics platform to aid their customers to scale using our risk and regulatory reporting solutions.

How has your background helped with your role in AQMetrics?

My BA in English and Sociology and Masters in IT from Maynooth University and more recently my H. Dip Financial Technology from Dublin Business School, all contributes to my core values of lifelong learning and working in partnership. The opportunity to undertake group work with peers is invaluable learning.

Best thing about working in AQMetrics?

Everyone shares the same vision and is dedicated to the mission.

Who would you most like to swap places with for the day and why?

Janet Guthrie – retired professional race car driver. As she once said, racing is a matter of spirit not strength.

Last book you read?

I’ve just finished my H. Dip in DBS, so the last year was spent reading academic journals. However, the last book I read for fun was ‘I am Pilgrim’ by Terry Hayes – I love a good thriller.

Website you visit the most?

Travel websites – all of them! I spend a lot of time planning my next trip.

Tell us something we don’t know about you.

I am a qualified women’s artistic gymnastics (WAG) coach and national judge. I got to spend time training with an Irish squad in Russia and coached in Ireland and Australia. As I wanted to stay involved in gymnastics, I volunteer with Special Olympics Ireland to help organising their regional and national competitions.


Blog

Applying artificial intelligence to hedge funds- Special report in HFM

In a special report for HFM, Geraldine Gibson-Dautun, CEO, AQMetrics, considers the future of artificial intelligence for hedge funds.

Download the report by filling in the below.

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Blog, Press

AQMetrics recognised for MiFID II Transaction reporting excellence


AQMetrics is delighted to have been nominated for the 2019 HFM European Hedge Fund Services Awards in the following categories:

  • Best MiFID II solution – trade and transaction reporting
  • Best Regtech solution
  • Best use of cloud technology

HFM European Hedge Fund Services Awards are annual recognition for hedge fund service providers that have exceptional customer service and innovative product development over the past 12 months. AQMetrics is the previous winner of HFM European Hedge Fund Services award for Best Regtech Solution in 2018  and Best Compliance Product for Small and Start Up Firms in 2016.

The 2019 nominations are testament to AQMetrics’ growth and  product innovation for MiFID II over the last two years. AQMetrics is authorised as an ARM (Approved Reporting Mechanism) by the Central Bank of Ireland, and passports its MiFID II transaction reporting services throughout the EEA. AQMetrics is also seeking authorisation with the FCA to ensure our customers with UK branches have continuous reporting in the EEA and the UK following Brexit.

By leveraging AQMetrics advanced technology and extensive understanding of the regional and global regulatory landscape, financial firms throughout Europe can be better prepared for regulatory changes as and when they happen. AQMetrics delivers a consolidated platform for risk and compliance, with seamless data management and cross-regulatory data insights.

Commenting on the award nominations, Geraldine Gibson-Dautun, CEO of  AQMetrics stated, “We are proud to once again be recognised as a global leader in the RegTech space. The decision to become a regulated RegTech and our subsequent 2018 authorisation as a Data Reporting Service Provider under MiFID II has firmly placed AQMetrics integrated platform as a ‘One Stop’ for our global client base. Our customers speak for themselves when they identify AQMetrics as their chosen solution across the myriad of cross jurisdictional regulations that they have to comply with.”

Claire Savage, COO of AQMetrics added, “AQMetrics demonstrates excellence and differentiates itself from competitors not only with its comprehensive MiFID II functionality, but also through its experienced staff, its collaborative approach, its dedicated customer success team, its robust technology, and its deep legacy system integration skills. This serves as proof of our MiFID II innovation and recognition of our positive client experience, we are honoured to be recognised by HFM again”.   


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Meet the Team- Colm Mathews

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds. Today, we introduce you to our Graduate Software Engineer, Colm Mathews.

 

 

Name:

Colm Mathews, Graduate Software Engineer.

Describe your job in three words:

Extract, Transform, Load.

What is the most exciting thing you are working on?

Abstract representation and optimization of business rules.

How has your background helped with your role in AQMetrics?

My background in theoretical physics and mathematics helps me approach problems in a quantitative and structured way.

Best thing about working in AQMetrics?

The friendly and helpful colleagues.

Who would you most like to swap places with for the day and why?

Jeff Bezos. I’d like to transfer a fair amount of his money into my bank account before the day ends :)

Last book you read?

Cosmos by Carl Sagan.

Website you visit the most?

Youtube – lots of informative topics and videos created by passionate people.

Tell us something we don’t know about you.

I took part in a Strictly Come Dancing fundraiser for my local football club.


Blog, Buzz

AQMetrics attends annual Funds Congress

AQMetrics’ CEO Geraldine Gibson-Dautun will be attending the 8th annual Funds Congress on Thursday, the biggest central London-based asset management conference , on 7 February 2019 at the QEII Conference Centre, Westminster in London.

Lorraine Lyons, Business Development, will also be in attendance. If you would like to meet with AQMetrics to discuss how we can assist your firm, please email sales@aqmetrics.com.

To register for the event and learn more click here.


Blog

FCA publishes MiFID II guidelines for hard Brexit


The FCA has published their expectations for firms, trading venues and ARMs under the MiFID II Transaction Reporting regime, in the event of a hard Brexit.

Four points to take note of:

  1. FCA FIRDS will replace ESMA FIRDS, this will be fed with live production data from early March, with the goal of being fully operational by the end of March. Test access will be available to connected firms and authorised ARMs from 21 February 2019. Interestingly, FCA FIRDS will use Amazon’s elastic search engine, which should yield better results than the existing ESMA form-based search capability.
  2. Should a hard-Brexit occur on Friday 29 March 2019, there will be an immediate switch-over to UK FIRDS on the subsequent weekend, with the aim of being live on 1 April 2019. Should an implementation period be agreed, then it is more likely that a phased migration to UK FIRDS will occur.
  3. UK trading venues will need to prepare to transaction report for transactions on their venues by their EEA members (who are not operating through a UK branch), who report to their home state within the EEA and who will become 3rd country firms as regards the UK after 29 March 2019.
  4. EEA firms, who operate through a UK branch, will now need to prepare to submit transaction reports to the UK, either by directly authorising with the FCA MDP, or by contracting with an ARM that is authorised to do so. This may involve changing ARM, if the ARM has not elected to participate in the FCA’s temporary authorisation regime.

While the prospect of a hard Brexit is daunting for EEA firms operating a UK branch, the FCA has stated that no enforcement will be taken against firms who are not immediately compliant with the new requirements. Naturally, all impacted firms must demonstrate that reasonable steps have been taken to prepare to meet the new obligations by 29 March 2019.


Blog, Buzz

Meet the Team – Cathal Connolly

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds. Today, we introduce you to our Head of Global Regulatory Reporting, Cathal Connolly.

 

 

Name:

Cathal Connolly, Head of Global Regulatory Reporting 

Describe your job in three words:

Challenging, Changing, Interesting

What is the most exciting thing you are working on?

Currently, I am working on the live AIFMD filings for our customers.  We are constantly investigating new regulations to keep up to date with the needs of customers and the demands of regulators. As we provide a consolidated platform for risk and regulatory compliance, I am working with customers to onboard automated risk services.

How has your background helped with your role in AQMetrics?

My background in accounting and fund administration has provided me with the knowledge needed for my role here in AQMetrics as Head of Global Regulatory Reporting. I have worked on numerous different fund types from completion of NAVs to pricing verification of portfolios. This experience has helped me understand our client’s models and their portfolio for regulatory compliance.

I have worked in some of the world’s largest administrators, setting up their regulatory reporting function and ensuring their regulatory knowledge was compliant. My team has a similar background to myself, and together we embed the funds knowledge into AQMetrics’ automated platform. The firms we work with are assured that the team here truly understand their requirements.

Best thing about working in AQMetrics?

The ability to build and deliver an amazing product and application to our customers and industry. Working so closely with our engineering team means I can see the deep domain knowledge of the customer success’ team being automated into the platform.

Who would you most like to swap places with for the day and why?

Joe Schmidt – he is a genius, and somehow manages to stay humble and down to earth.

Last book you read?

The Test – Brian O’Driscoll autobiography, with a young family I don’t have much time to read.

Website you visit the most?

Sky Sports – I like to keep up to speed with the sports news.

Tell us something we don’t know about you.

I have been very fortunate to have travelled the world playing rugby, and have visited some countries that I would have never had the opportunity to visit otherwise.


Blog

UCITS after Brexit

How will law in the UK affect UCITS funds after the 29th March 2019? This is the big question that none of us currently have the answer to.  

It is interesting to see however, that larger UCITS managers are taking pragmatic steps to ensure that they have contingencies in place that allow for all eventualities. The larger managers are doing all in their power to ensure that they continue to provide a gold standard service to their customers after Brexit.

As we face into a period of high volatility and likely market declines in specific regions, UCITS fund managers are thinking of how best to protect their customers’ interest. It is for this reason that we are seeing an onslaught in the creation of mirror funds.

As it is unclear at this stage as to whether UCITS funds registered in the UK will be able to market in Europe once the Article 50 deadline is reached, it is important for UK fund managers to consider the worst case scenario and how best to continue to serve their customers with minimal disruption. 

UK UCITS fund managers know that in a worst case scenario they will lose their UCITS status upon the UK leaving the EU, thus becoming a ‘non-EU Alternative Investment Fund (AIF)’. With this new status the funds will immediately lose their EU passporting authority and cannot be distributed across the twenty seven EU countries. Losing EU investors is something that the current UK UCITS fund managers can ill afford to do.

One contingency approach adopted by Barings, Crux, and Schroders is the use of EU based mirror funds. These mirror funds have the same investment guidelines as existing unit trusts to ensure that UCITS fund managers can give their customers contingency options in the event of issues with the European marketing of UK funds.

But what about the EEA UCITS funds that want to continue marketing in the UK after the 29th March 2019? The FCA has published two draft directives relating to Brexit that will establish a Temporary Permissions Regime (TPR). These directives allow EEA funds that currently market in the U.K. under an EEA passport to continue to do business for three years after the 29th March 2019. Neither of the draft directives are, as of yet, in force.

Under the draft AIFM (EU Exit) Regulations 2019, EEA AIFs, EU VC Funds (EuVECAs) and EU Social Entrepreneurship Funds (EuSEFs) will be able to be marketed in the U.K. post-March 2019.

Under the draft CIS (EU Exit) Regulations 2019, EEA UCITS that currently market in the U.K. under an EEA passport can  continue to access the U.K. market post-March 2019. An operator of an EEA UCITS within the TPR will be able to market new sub-funds in the U.K. post-Brexit, subject to certain conditions. The FCA has yet to publish directions in this regard.

Whatever the fate of UCITS funds under UK law will be, the reality is that UCITS managers must remain vigilant regarding excellent service to their customers while remaining compliant to their governing body, be that EU or UK, or risk losing investors.


Blog

Harmonising regulatory reporting with your firm’s business operating model.

Harmonising regulatory reporting with your firm’s business operating model.

Q and A with Cathal Connolly, Head of Global Regulatory Reporting, AQMetrics

What can firms do to ensure regulatory reporting accurately reflects the firm’s business operating model?  We sat down with our head of global regulatory reporting, Cathal Connolly, to learn more.

How has regulatory reporting evolved over the last 5 years?

When regulatory reporting was launched, investment managers’ sole focus was on meeting their reporting obligations, without necessarily reflecting their own firm’s methodologies. At the same time, many regulatory reporting solutions in the market offered a ‘one size fits all’ approach, which contributed to overly-simplified reporting being widespread. In addition, manual manipulation of data and overrides were common in early filing periods.

This was acceptable on a short-term basis, but it is not sustainable from an audit and best practice perspective. There is a growing need for personalisation today which is driven primarily by the huge degree of variance in investment managers’ strategies. For example, managers will have differing views on what they classify as borrowing or what is deemed to be unencumbered cash. In addition, if a manager has a short position, it might be deemed as borrowing or there might be enough long cash to counteract it.

What type of considerations are firms making when putting outsourcing arrangements in place for regulatory reporting?

I would recommend that the firm’s business model be reflected in the regulatory filings and the reporting processes itself. Any outsourcing arrangement should be a partnership, where the outsourced party can bring both funds industry domain knowledge and industry best practices. The reporting platform should be flexible enough to accommodate manager or fund-specific methodologies. This removes the need for manual data amendments and saves the investment manager time, effort and potential errors in the regulatory filing process.

How can the use of workflow enhance the regulatory reporting process?

A regulatory reporting platform should offer workflow that is aligned with the investment manager’s business processes. Large investment managers will typically have separation of duties in the preparation, review and sign-off of the regulatory filings. Workflow should be intuitive, and enhance the review and sign off process. Audit trails are important for tracking critical path activities.

What is your best advice to firms on regulatory reporting?

Regulatory reporting does not have to be a manual, time-consuming process that distracts from a firm’s core activities. Outsourcing arrangements can work particularly well when the outsourcing partner takes the time to the understand the firm’s business model and is proactive in offering industry best practice advice. A regulatory reporting platform should eliminate the need for manual data amendments and have a streamlined workflow which then allows investment managers to retain control of their regulatory filings with minimal disruption to their business.


Blog, Buzz

Meet the Team- Wesley Cooper

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds. Today, we introduce you to our data architect, Wesley Cooper.

 

 

 

Name:

Wesley Cooper, Data Architect

Describe your job in three words:

Scalability, Reliability and Insight

What is the most exciting thing you are working on?

The latest iteration of our Rules Engine will have many innovative features. Working to realise the full potential of this product by focusing on externalised business logic and future enhancements, such as machine learning and natural language processing, has been very rewarding.

How has your background helped with your role in AQMetrics?

With a background designing and creating quantitative data models with Paddy Power and large real-time data processing systems with Verizon, I draw heavily from my experience in the design of our software stack. Everything at AQMetrics is built with the future in mind which is why there is a huge focus on best practice, best technologies and doing things the right way.

Best thing about working in AQMetrics?

I really enjoy being part a highly committed and tight-knit team here at AQMetrics, however, it’s the support that you get from all functions across the company which makes it a special place to work.

Who would you most like to swap places with for the day and why?

A personal hero of mine is San Antonio Spurs Head Coach Gregg Popovich. Trading places with one of his assistants for the day would be an incredible way to learn leadership, team-building and mentorship from one of the greats

Last book you read?

The Mongol Empire: Gengis Khan, his heirs and the founding of modern China by John Man

Website you visit the most?

fivethirtyeight.com to fulfil my addiction to forecast analytics and BBC.com for worldwide news.

Tell us something we don’t know about you. 

I am a Nevada licensed Croupier having professionally dealt Blackjack, Roulette and Baccarat.


Blog, Buzz

Meet the Team – Phoebe Toal

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds.

Each month, we introduce you to a member of our team. Today, it’s our Marketing Executive, Phoebe Toal.

 

Name:

Phoebe Toal, Marketing Executive

Describe your job in three words:

Challenging, Creative, Collaborative

What is the most exciting thing you are working on?

We are currently working on a MiFID II campaign and we’re gearing up for the Paris Fintech Forum at the end of January.

How has your background helped with your role in AQMetrics?

I studied Digital Marketing at DCU. The course taught me how to match analytic and creative skills for successful marketing.  My previous position was four years at another RegTech where I learnt about regulatory reporting and event marketing, giving me excellent experience for my current role.

Best thing about working in AQMetrics?

The whole team are interested and engaged in the company marketing activities, it is great to have access to so many domain experts. Management are extremely knowledgeable with a clear vision of what they want the company to achieve.

Who would you most like to swap places with for the day and why?

Tina Fey, would love to know more about her creative process.

Last book you read?

Milkman by Anna Burns. Winner of 2018’s Booker Prize.

Website you visit the most?

The Guardian for the news and The Hollywood Reporter for entertainment news.

Tell us something we don’t know about you. 

I’m a qualified Pilates Instructor.


Blog

Meet the Team – Steve Barnes

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds.

Each month, we introduce you to a member of our team. Today it’s our Chief Technology Officer, Steve Barnes.

 

Name:

Steve Barnes, Chief Technology Officer

Describe your job in three words:

Interesting, exciting, challenging

What is the most exciting thing you are working on?

Most recently, moving AQMetrics cloud platform to a true self-service model for customers, because it empowers customers to be in control of their own data management, so they can own, manage and use the system as they see fit.

How has your background helped with your role in AQMetrics?

I’ve worked for software companies in the finance industry, mainly in technical roles, for nearly 20 years, starting in anti-money laundering & working in areas such as fraud, sanctions, screening. This has given me a unique insight into what banks, fund administrators and investment managers need to do from both a business and technical point of view to adhere to regulations.

Best thing about working in AQMetrics?

Helping build the diverse team. Also, I truly believe we are delivering solutions that are changing the way the industry thinks. We are a cloud-first company, and have the skills, expertise and experience to create software in a way to allow fast adoption of best in breed technology and practices and deliver these to our customers.

Who would you most like to swap places with for the day and why?

Chris Hadfield, the astronaut. His view of the world is pretty unique and I’d like to experience it for a day.

Last book you read?

The Man Who Touched His Own Heart by Rob Dunn. Books describing medical firsts intrigue me and the stories about the first attempts to perform heart surgery are amazing.

Website you visit the most?

Twitter and Wiggle.

Tell us something we don’t know about you. 

I served two years apprenticeship as a butcher when I was 16.


Blog

CEO Message: 2018 was a year of change, what lies ahead in 2019?

Geraldine Gibson-Dautun, CEO

There is no doubt that the world around us is changing rapidly and never more so than in 2018. This was a transformational year for AQMetrics.

We started into 2018 with the dawn of MiFID II. All of our preparatory work and that of our customers throughout 2016 and 2017 paid off. We successfully went live on the 3rd of January 2018 as an Approved Reporting Mechanism, a Data Reporting Service Provider authorised by the Central Bank Of Ireland under ESMA’s MiFID II. Almost one year on and we still wear our authorisation as a badge of honour. We are proud to be one of the only regulated RegTech firms in existence.

Acquisitions across the industry continued apace throughout 2018. As a direct result, we have seen an increased need for holistic and independent technology solutions in the market. A wave of acquisitive moves in 2018 has led our larger customers to extend their use of the AQMetrics platform, as they scale and deepen their risk and regulatory reporting capabilities.

As firms prepare for Brexit, the movement of investment managers into EEA member state jurisdictions has led to an increase in demand for multi-jurisdictional regulatory risk and reporting solutions. As a result, AQMetrics has broadened its customer base across Europe and has started to be seen as a leader in the regulatory risk and reporting space, particularly in central Europe.

In a world of uncertainty, there is one thing that I am sure of; I cannot predict the future. My team and I have a mission to be a global leader in the regulatory risk and compliance technology space. How we do that depends not only on what we have learned from our past experiences but also on our ability to prepare for future change, even when we cannot predict all outcomes. We look at dynamics and trends that help us navigate the best course for AQMetrics and our customers. Here is a summary of what we expect for 2019 and beyond.

Growth in the financial services sector. The financial services sector continues to grow despite macro challenges. With nine years of a bull run we think that in 2019 growth will continue in the sector, albeit we recognise that markets work in cycles and at some point the bear will raise its head.

Unfortunately, investment managers have suffered more than the broader market in 2018. But there is some light at the end of tunnel. With fixed income margins holding better than equities and the larger managers continuing to attract new business, we don’t think we will see the bear in 2019. We expect to see most growth in the passive space with global ETF assets having the potential to grow five fold to $25 trillion by 2025. With over 80% of EU and US active funds underperforming their benchmark in 2018, we anticipate that growth will remain more visible on the passive side as we go into 2019.

With an ever flattening US yield curve, a brief inversion of the yield curve in early December and the gap between the two and ten year notes at its narrowest since 2007, one could say that a recession is looming. Looking a little closer at this perception however,the inverted yield curve doesn’t by default cause a recession, it’s merely an indicator. When short term interest rates in the US are inflation-adjusted they are still below 0% and so we predict that the recession will not be hitting in 2019 and most likely growth will continue, albeit somewhat slower than previous years.

Brexit. Unfortunately we cannot ignore the impact of Brexit. The UK will most likely leave the EU in the next six months. The UK was a major force at the EU financial services regulatory table, and a leading proponent for much of our current market regulation. This will, of course, change from 2019 onwards.  Cross-country alliances in financial services will undoubtedly shift and financial services will become more dispersed. We see this already with some of our partners and customers setting up their front office in Paris and back office in Dublin. Undoubtedly the regulators across Europe will be focused on cohesive supervision of these major players.

European capital markets. With Brexit afoot, we believe that an enhanced European capital markets framework is opening a new chapter for Europe. Of course, the success of the European capital markets will depend upon consumer confidence and trust in the financial services sector. Clearly regulation plays a key role here.

Technological innovation. Innovation and the use of technology across the financial services sector is here to stay. We expect to see increased participation by regulators with FinTechs and software firms, as the ecosystem widely adopts the transformational power of technology. AI is moving from a buzzword to mainstream applications as we head into 2019. We also appreciate the need for information security at AQMetrics, which is why we are ISO 27001 certified. We anticipate that many more software and technology vendors will follow suit and place information security at the core of everything they do from 2019 on.

With all of these predictions, what does 2019 hold for AQMetrics? We will continue to offer automated data management and regulatory reporting solutions across AIFMD, Form 13F, Form PF, CPO PQR and MiFID II transaction reporting online 24/7 for self-service customers.

For 2019, we have our eyes firmly set on our customers’ digitisation needs in the performance and risk management space. Our data visualisation tools and configurable dashboards have been well received by our customers through 2017 and 2018, and we will continue to focus on this area. Our AI capabilities, coupled with data analytics and data insights, are providing much needed independent risk systems for our customers. This will continue to be an area of focus.  

2018 was a year of awards for AQMetrics. We were delighted to win the ‘Best RegTech Solution’ at the HFM Technology European Technology Awards 2018, the MEDICI Top 21 – RegTech Award and the ‘Best Technology Firm’ at the CTA Intelligence US Services Awards 2018. We have set the bar high for ourselves by being named on the RegTech 100 list for the second consecutive year and we go into a new year determined to do that again in 2019.

Wishing you a prosperous and happy new year.

Geraldine


Blog, Buzz

Meet the team – Bruna Natal Oshiro

At AQMetrics we have a highly skilled, experienced and diverse workforce with wide ranging backgrounds.

Each month, we introduce you to a member of our team. This month it’s Bruna Natal Oshiro from our engineering team.

 

Name:

Bruna Natal Oshiro, Senior Lead Java Developer

Describe your job in three words:

Exciting, challenging, rewarding.

What is the most exciting thing you are working on?

A new extension  to our real-time, data-driven rules engine.

How has your background helped with your role in AQMetrics?

I’ve been working in software development for over 10 years. I have experience with C, PHP, .NET C#,  front-end technologies but chose Java to deepen my expertise and career. I believe my experience across these technologies has provided me with a strong foundation, and helps with my everyday job at AQMetrics.

Best thing about working in AQMetrics?

AQMetrics has a very approachable management team, who provide us with everything we need to deliver excellence to our clients. We always have exciting projects to work on and great people to work with.

Who would you most like to swap places with for the day and why?

Vice President and Prime Minister of the United Arab Emirates, HH Sheikh Mohammed Bin Rashid Al Maktoum, he once wrote: “The word impossible is not in a leader’s dictionary. No matter how big the challenges are, strong faith, determination and resolve will overcome them”.

Last book you read?

Thinking, Fast and Slow by Daniel Kahneman.

Website you visit the most?

Brazilian economic indicators – https://economia.uol.com.br/cotacoes/

Tell us something we don’t know about you. 

I worked as a physics tutor when I was at school and during my college years.