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The SEC revamps Form PF

Introduced under the Dodd-Frank Act as a mechanism to enable US regulators to proactively identify build-ups of systemic risk in the private funds industry
Sumit Mahajan, CAIA, FRM
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Introduced under the Dodd-Frank Act as a mechanism to enable US regulators to proactively identify build-ups of systemic risk in the private funds industry – populated by hedge funds and private equity – the Form PF (Private Fund) reporting template is once again being updated by the Securities and Exchange Commission (SEC).

But why? The private funds industry is has developed from when the Form PF was first unveiled. Fuelled by inflows from major institutional investors seeking out alpha, the private funds industry’s gross asset value has increased by more than 150% since Form PF became mandatory, with AUM (assets under management) currently totalling $11 trillion. This growth in AUM has prompted calls for the industry to be subject to greater regulatory oversight.

At the same time, private funds have become more complicated in nature, as a growing number of managers launch hybrid strategies, which boast both liquid and illiquid properties.  If the Financial Stability Oversight Council (FSOC) is to carry out its remit of keeping abreast of systemic risk in US financial markets, then it is not surprising to see the SEC tightening up reporting from private markets.  

The SEC wants to obtain more detailed information from private funds, which in turn will help the FSOC assess whether or not there are systemic risks in the market. Among the provisions are proposals to enhance the reporting requirements for large hedge funds, covering areas such as investment exposures, borrowing and counterparty exposure, market factor effects, currency exposure reporting, turnover, country and industry exposure, CCP reporting, risk metrics, investment performance by strategy, portfolio correlation and liquidity, and financing liquidity. The SEC says this information will provide deeper insights into the operations and strategies of private funds, thereby improving data quality and comparability.

Furthermore, “the proposal would require additional basic information about advisers and the private funds they advise including identifying information, AUM, withdrawal and redemption rights, gross asset value and net asset value, inflows and outflows, base currency, borrowings and types of creditors, fair value hierarchy, beneficial ownership, and fund performance to provide greater insight into private funds’ operations and strategies, assist in identifying trends, including those that could create systemic risk, improve data quality and comparability, and reduce reporting errors.”

Earlier in the year, the SEC made some other revisions to Form PF, namely by requiring large hedge funds and private equity managers to report key events indicating significant stress at their funds within one day of them occurring. This comes amid concerns that the SEC and FSOC were receiving information about problems at funds months after the event, impeding their ability to keep check of systemic risks.

So how can firms ensure they keep on top of the SEC’s reporting requirements?

Those investment firms which carefully document their processes and adopt a rigorous approach to data management will be in a strong position moving forward, something which can be facilitated through a best in class Enterprise Data Management system.

Effective recordkeeping will be vital if fund managers are to adhere to the new Form PF measures. By having quality internal data management systems, populating the Form PF will become a relatively straightforward undertaking. Moreover, it will also ensure that Form PFs are compiled accurately and in a timely fashion, thereby helping managers to avoid incurring the SEC’s wrath.


SEC – August 10, 2022 – Statement on proposed amendments to Form PF
SEC  - January 26, 2022 – SEC proposes amendments to enhance private fund reporting
SEC – August 10, 2022 – SEC proposes to enhance private fund reporting

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