Become an AIFMD risk manager - Regulatory and governance

The financial turmoil has underscored the critical importance of understanding and managing risks within financial institutions. In that context, the regulatory environment has evolved to reinforce the risk management analysis and skills within the industry.

This change should not be underestimated, especially in the context of AIFMD. Indeed, the risk management function is one of the two key functions (portfolio management being the second) that needs to be part of the activities of an AIFM.

This is particularly relevant for Luxembourg, where portfolio management may not be fully performed within the AIFM, and where the risk management function will need to be enhanced or reinforced.

By the end of this course, participants will be able to:

• master the impacts of AIFMD in terms of risk management (governance, risk management procedures, disclosure...);
• define a risk profile using adequate approaches;
• define an adequate risk appetite and the related monitoring techniques;
• apply risk management principles throughout the investment process (mainly for non-traded assets);
• select and implement the different techniques and metrics required to monitor the six key risk aspects that need to be covered within AIFMD:
  • 1. Market risk
  • 2. Counterparty risk
  • 3. Credit risk
  • 4. Operational risk
  • 5. Liquidity risk
  • 6. Sustainability risk

This course will provide you with the appropriate level of knowledge to access the advanced modules focusing on private equity and/or on real estate.

• AIFMD background
• Governance of risk management function under AIFMD
• Regulatory environment
• Risk management approach for alternative investments including:
  • 1. Risk management through the investment cycle (from the fund creation to the liquiditation)
  • 2. Risk profiles and risk appetite definition
  • 3. Pre-deal and desinvestment risk analysis
  • 4. Risk monitoring for the 6 different types of risk and a "real life" example
• AuM and leverage calculation
• Focus on fund of funds
• Reporting

The sessions will include both presentation and workshops giving the opportunity to participants to put the recommendations into practice and share experience/views with others.

The risk management provisions of the AIFMD remain mainly principle-based and do not take into account the specificities of the different sectors impacted. The range of assets types that could be invested in by an AIF is nearly unlimited (e.g. bonds, equities, derivatives, funds, real estate, private equity, infrastructure etc.) and the same applies for the strategies (e.g. hedge fund: (long/short, CTA, market neutral), real estate: (core, core +, opportunistic), private equity: (leverage buy out, secondary, mezzanine etc.)).

Risk management policies, processes and procedures need to be adapted to each asset class and to the risk profile of each AIF. Risk management is not new to the alternative investment management industry. However, the directive introduced increased formalisation, prescribes the timing, extent and nature of controls and oversight to be performed, to a level that many players have not had to deal with so far. Future AIFMs need risk management experts who understand their industry, the regulatory requirements and are properly equipped to fulfil their obligations.

In that context, PwC’s Academy has developed an advanced training programme providing participants with the right level of knowledge, as well as a set of tools and techniques that will allow them to get up to speed and ready to properly answer the expectations of the regulator, the board and investors. In order to focus on the requirements dedicated to the main investment categories that can be found within the industry, we have also created specific sessions focusing on PEREs.

This training is coordinated by Benjamin Gauthier and Sébastien Schmitt, Partners at PwC Luxembourg.

Benjamin is a partner in the risk and regulatory team of PwC Luxembourg. He is playing an active role in the development of risk management practice for the asset management industry (including traded and non traded assets) considering both the regulatory requirements (i.e. UCITS IV, AIFMD) and best practices. He has led numerous risk management assignments including risk profiling and reporting.

Sébastien is a partner in the risk and regulatory advisory team at PwC Luxembourg where he assists asset managers with risk and regulatory requirements. He has spent 15 years in consulting for big 4 firms and assisting mainly asset managers as well as bankers and insurers with risk, transparency and regulatory requirements.

Sébastien has developed strong experience in risk management, financial and alternative investments.