Become an AIFMD risk manager - Focus on private equity

The financial turmoil has shown how important it is to understand and manage 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 and especially in the context of AIFMD. As a matter of fact, 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. 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,...) 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...).

The 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 introduces 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 that 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 program 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 focussing on PEREs.

Our complete program is made of 3 modules:

Become an AIFMD risk manager - Regulatory and governance (3h)
Become an AIFMD risk manager - Focus on private equity (4h)
Become an AIFMD risk manager - Focus on real estate (4h)
The module 1 is a prerequisite to access the modules specific to private equity and real estate.

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 five 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

• understand in detail the valuation principles (mainly for investments in non-traded assets) given the pertinence of valuation in the risk assessment and monitoring.

This particular module is an advanced course that deep dives all the above themes in the private equity industry. To access this course and take the best of this learning experience, participants should consider the "Become an AIFMD risk manager - Regulatory and governance" module as a prerequisite.

• Risk Management under AIFMD (including ‘real life’ examples)
• Risk profiling: specificities of Private Equities
• Market Risk: analysis of the different techniques/metrics and their adequacy depending on the AIF’s strategy
• Leverage: methods used to generate and measure leverage
• Liquidity risk: how to manage it from both an asset and liability perspective?
• Counterparty risk: how to properly manage it and implication of future regulatory changes (EMIR)?
• Credit risk: measurement techniques
• Operational risk: to what extend operational risk could be material to the AIF and its investors and what are the existing techniques to monitor it?
• Risk dashboard: risk measures are only efficient when they are clearly reported. How to properly structure Risk dashboards?
• Valuation: interaction between valuation principles and risk assessment are multiple, how to properly leverage on it?
• Disclosure requirements: the level 2 guidelines have confirmed a detailed set of reporting requirements. What does it imply from a Risk Management standpoint?

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.

An attendance certificate will be sent to participants.

This training is coordinated by Benjamin Gauthier and Alexandre Goossens, 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 participated and led numerous risk management assignments including risk profiling and reporting.

Alexandre Goossens, Partner at PwC Luxembourg, is responsible for the real estate and infrastructure Advisory services. Alexandre is in charge with the set up of risk management tools for funds investing in alternative assets (real estate, infrastructure, real estate debt). He is also an active member of the Royal Institution of Chartered Surveyors (RICS).