What Additional Data Do Quarterly Form PF Filers Need?

May 1, 2018 by Chintan Gandhi

What Additional Data Do Quarterly Form PF Filers Need?

Hedge funds and hedge fund advisers that exceed the SEC’s Form PF filing threshold for “large” hedge funds/hedge fund advisers[1] find themselves with what can be viewed as a “good problem to have”: while good for business, exceeding the threshold also means more work thanks to being required to complete section 2 of Form PF on a quarterly basis.

If you find yourself in this situation, you may already know the challenges you face. This blog post will summarize what additional information you need as a quarterly filer to help you prepare for the next submission deadline.

Holdings Data

The biggest challenge of preparing a quarterly Form PF filing is the need to submit additional and detailed holdings (positions) data, including:

  • A monthly breakdown of the holdings for reporting quarter. This is a major difference for quarterly filers, as Section 1 only requires information as of the reporting date (e.g., 12/31). The detailed quarterly breakdown is required for the adviser in aggregate as well as for each private fund above the threshold.
  • Categorized holdings according to a specified list of 26 possible asset classes with 80 sub-asset classes as determined by the filing. This list is not a 1:1 match with the Global Industry Classification Standard or the Bloomberg Industry Classification Systems, so you may need to create a mapping guide to this list.
  • Categorized holdings data by geographic regions and certain countries. Your firm likely already tracks this, but it is good to keep in mind.

Risk Data

Hedge fund advisers will need to provide a number of data points to help identify the associated risks of its funds, including:

  • Risk Measures — For advisers with fixed income, repo, and/or CD holdings, the quarterly filing will require a calculation of the aggregate holdings by month and direction of the:
    • Duration;
    • Weighted Average Tenor; or
    • 10-year bond equivalent.
  • Risk Metrics — For advisers that regularly calculate VaR, Section 2’s Question 40 requires a number of data points for these metrics.
  • Risk Shock Factors — For advisers that conduct risk testing based on market conditions, Section 2 requires the impact of the following market factor changes:
    • Equity Price;
    • Risk-free interest rates;
    • Credit spreads;
    • Currency rates;
    • Commodity prices;
    • Option implied volatilities; and
    • Default rates.

Collateral and Borrowings

Quarterly filers will need to provide a greater level of detail in the following areas than is required for Section 1, including:

  • Collateral Data — For the top five counterparties to which the fund has an exposure (or vice versa), Section 2 requires a breakdown of the amount and type of collateral (cash, securities, other) posted to each.
  • Borrowings Data — Section 2 requires the adviser to provide the following data for each month in the reporting period, including:
    • Unsecured Borrowings — includes amount and percent by institution type; and
    • Secured Borrowings per prime brokerage, reverse repo, or other secured borrowings — includes amount by type (cash, securities, other) and percentage by institution type.

AUM growth above the threshold defined by Form PF for a quarterly filing may be a good problem to have, but it is a problem that requires much more detail and data. Filing Form PF every 90 days (after 60 days of quarter-end) necessitates having an effective and efficient process in place, and preferably one that is automated.

[1] The SEC defines large, single private funds as those exceeding $500M in regulatory AUM; large hedge fund advisers are those exceeding $1.5B in regulatory AUM.

How ACA Can Help

Firms that need to file Form PF on a quarterly basis can benefit from ACA’s Regulatory Reporting (ACA RR) platform, as it is designed to help reduce risk and increase operational efficiencies through:

  • Automated, repeatable workflows for generating filings;
  • Data validations at multiple stages;
  • “Filing-over-filing” reports to help identify inconsistencies or questions;
  • Internal notes to document assumptions; and
  • Easy access to the source data used in filings.

If you would like to learn more about ACA RR and how it can help your firm, please fill out our contact form.

About the Author

Chintan Gandhi is a Managing Director with ACA's technology division. He has over fifteen years of experience as a business analyst and project manager in the financial industry, supporting buy-side and sell-side clients. With his technical knowledge and industry expertise, Chintan plays a key role in developing and delivering financial software solutions, including portfolio management, order management, and regulatory reporting software for Form PF and AIFMD Annex IV. He joined ACA when the firm acquired NorthPoint Financial. During his tenure at NorthPoint and at ACA, Chintan has worked and works as a valued adviser to clients. In particular, he makes sure they can maximize technology platform benefits for their businesses. Prior to ACA, Chintan served as a vice president at Credit Suisse and Citibank, a senior consultant at Random Walk Computing (acquired by Accenture), and a project manager at OM Technology. He began his career as a business systems analyst at Prudential Securities. Chintan earned his Master’s degree in Management Information Systems from Kean University and his Bachelor’s degree in Biology from Rutgers University.

 

 

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