Now that the transitional period under the AIFMD has passed, more firms will be getting to grips with the obligations of IPRU(INV) 11 which addresses the prudential requirements of both Collective Portfolio Management Firms (CPM) and Collective Portfolio Management Investment Firms (CPMI). As a reminder the former is a full-scope UK AIFM (or UCITS management company) that does not have Part 4A permission to undertake any of the permitted MiFID-type activities (as under AIFMD Article 6(4) or under UCITS Article 6(3) as relevant) whilst the latter type of entity does.
For the avoidance of doubt, IPRU(INV) 11 is not relevant to small AIFMs; they will either be under IPRU(INV) 5 if they only undertake ‘managing an AIF’ but if they undertake any MiFID activities outside of this then they will be a MiFID firm and so fall under GENPRU/BIPRU or IFPRU as applicable.
Some of the requirements under IPRU(INV) 11 are based upon either the “funds under management” (the ‘funds under management requirement’ of IPRU(INV) 11.3.2) or the “value of the portfolio of AIFs managed” (for ‘professional liability risks’ as per IPRU(INV) 11.3.14 or 11.3.15).
The “funds under management” figure for the calculation includes AIFs & UCITS which the firm is the appointed AIFM/UCITS firm (so will include those funds where it has delegated the portfolio management) but excludes any third-party funds it is managing as a delegate.
On the other hand the “value of the portfolios of AIFs managed” will not only include those AIFs for which the firm is the AIFM but will also include the portfolio management of third-party AIFs. Unlike ‘funds under management’, the calculations only involve AIFs; there is no mention of the value of UCITS or other third-party portfolios that are not AIFs. The prudential requirements of the AIFMD were modelled on UCITS IV so both Directives have a funds under management requirement of 0.02% of the amount by which FUM exceed €250m; in contrast only the AIFMD has a professional liability requirement.
