MRFP: A case of optimising production of a regulatory document

Published on February 19, 2025 by Uday Kumar and Sandip Chakraborty

For any asset manager in Canada, adherence to regulatory reporting requirements is not just non-negotiable; it is also quite demanding. At the start of each reporting cycle, it is normal to expect all key personnel to be occupied with producing myriad marketing materials. It is also not uncommon for equally important regulatory reporting requirements to get jumbled up in their list of priorities.

One such document is the Management Report of Fund Performance (MRFP). The MRFP is an important regulatory document that details the performance of an investment fund, provided by a fund manager to investors and regulatory authorities as part of their reporting obligations. The report contains key information on the fund’s investment strategy, key performance indicators and explanations relating to the fund’s overall performance.

It is common for asset managers to struggle with the completion and timely submission of MRFPs, for several reasons. One reason could be the strict deadlines managers must adhere to, particular at as hectic a time as immediately after the end of a quarter. Our experience in producing MRFPs for Canadian asset managers helps us bring an expert’s view to the matter.

Key instructions for MRFP production

• Language: An MRFP must state the required information concisely and in plain language.

• Format: An MRFP must use only those headings and sub-headings shown in the prescribed form.

• Material information: Disclose only such information that can change or influence a reasonable investor's decision to buy, sell or hold securities of an investment fund.

Understanding the importance of an MRFP

An MRFP provides critical insights and analysis of an investment fund, providing stakeholders with a clear picture of how the fund and the fund manager have performed. Management discussion of fund performance in the MRFP is an analysis and explanation designed to complement and supplement an investment fund’s financial statements. The discussion is the equivalent of a corporate management discussion and analysis with specific modifications for investment funds, providing the manager with the opportunity to discuss the investment fund’s position and financial results for the relevant period.

Commentaries within an MRFP can narrate the fund’s history and provide insights that explain its future trajectory. A fund’s MRFP is prepared twice a year, i.e. in the form of an interim and annual report. It includes commentary on a fund’s results of operations, sheds light on recent developments within the asset class, lists financial highlights during the reporting period and provides a portfolio summary.

Apart from being a regulatory document for asset managers, it represents an opportunity to engage directly with investors. Regardless of a fund’s performance, providing a cohesive narrative that explains the reasons behind the result can foster an enduring relationship with investors.

Identifying common challenges in preparing an MRFP

To grasp the typical challenges asset managers encounter when preparing a fund’s MRFP, it is best to look at a real-life case of how to manage and overcome the challenges.

We helped a Canadian asset manager establish a production process for its interim and annual MRFPs for all its funds. The manager has faced significant challenges in the past in fulfilling reporting obligations and adhering to regulatory deadlines.

Challenges during the peak post-quarter production cycle included the following:

1. Limited availability of key stakeholders

It is important to remember that MRFPs must be produced and submitted within a very tight schedule after the end of a quarter. During such times, it is normal for subject-matter experts (SMEs) and portfolio managers (PMs), the key reviewers of and decision makers for MRFPs, to face capacity constraints, as they would also be addressing other urgent responsibilities. These individuals had limited time available to draft and review interim or annual market commentaries for the different funds.

2. Potential inconsistency in content across reports

With the PMs managing multiple funds, they could choose to express their thoughts on different funds in in different language and tonality. While this is understandable, it adds to the work of the editorial and compliance teams during production and could result in delays.

We noticed a significant inconsistency in the content of the MRFPs for the different funds. It was clear that the commentaries had been either rushed or collated from different sources without a uniform tone. There was also inconsistency in the length and tone of the different sections of the report.

3. Lack of coordination among stakeholders

Preparing an MRFP calls for the collaboration of a number of teams, such as the performance team, the regulatory compliance team and other service providers. In the case of this particular asset manager, the teams were not aligned in terms of expectations and delivery deadlines. This added to the difficulties faced during the critical production period.

4. Lack of timely communication between stakeholders

One of the most understated challenges of the MRFP production process is a clear, timely communication plan that keeps all stakeholders informed of the expectations for this production process. Without a pre-planned communication plan, teams often scramble at the last minute to complete these regulatory documents. In this case, the manager faced additional challenges, including a lack of ownership, which contributed to the overwhelming pressure to comply with regulatory deadlines. This came down to the lack of a proper communication plan among the stakeholders.

Optimising the MRFP production process for a Canadian asset manager

 

Solutions implemented

We assessed the situation and worked closely with the stakeholders to create an efficient process. This was done to maximise efficiency and reduce the strain on resources, ensuring the timely delivery of high-quality MRFPs in line with the client’s schedule. This was an opportunity for us to identify process-level strategies that asset managers could employ to overcome challenges in producing MRFPs:

1. Develop standardised templates

Creating standardised templates for MRFPs can significantly improve the efficiency of the report-preparation process. By establishing a clear structure and format for these reports, consistency and accuracy can be ensured across documents. This method will save time and focus the efforts of SMEs and PMs on writing on the fund’s performance. The other largely “administrative” sections of the document can be completed by other team members.

2. Collaborate with stakeholders

Involving stakeholders in preparing MRFPs is essential for gathering important insights and feedback. Engaging key decision-makers guarantees that the reports align with their expectations. Collaboration with stakeholders can also enhance the overall quality and relevance of the reports.

3. Leverage automation tools

Investing in automation tools for data collection, analysis and publication can also enhance the efficiency of preparing MRFPs. These tools streamline repetitive tasks, enabling asset managers to dedicate more time to the strategic aspects of report preparation.

4. Ensure effective communication among teams

There is no alternative to an effective communication plan that includes all the stakeholders in the production process. Taking ownership of tasks and setting clear timelines is just as important as communicating these expectations to the relevant stakeholders. This is crucial for ensuring regulatory deadlines are met while not compromising the quality of the content.

5. Engage a skilled service provider for outsourcing

Asset managers have the option to delegate investment commentary responsibilities, especially for regulatory documents such as MRFPs, to a proficient third-party service provider. Outsourcing can ease the burden on SMEs and PMs during such critical times, while enhancing operational efficiency and reducing expenses for the organisation. Additionally, the chosen service provider can tailor reports to meet specific client requirements.

Conclusion

Preparing MRFPs can be challenging, but with the right strategies in place, asset management firms can overcome obstacles and create insightful reports. Our experience with this particular asset manager proves that although difficult, it is not impossible to cover commentaries on almost 100 funds in 10 business days.

By developing standardised templates, using automation tools, engaging with stakeholders and simplifying data analysis, asset managers can optimise MRFP production, enhance the overall impact of reports and adhere to the strict deadlines governing these regulatory documents.

Note:

In September 2024, the Canadian Securities Administrators (CSA) issued a notice proposing changes to the continuous disclosure framework for investment funds. The proposed changes aim to enhance the framework’s effectiveness while easing the regulatory burden faced by fund managers.

The CSA identified three specific areas for review:

• Replace interim and annual MRFPs with interim and annual fund reports

• Provide an exemption from certain conflict-of-interest reporting requirements to simplify reporting and remove duplication

• Remove the requirement for class- or series-level disclosures from a fund’s financial statements

Sources:

• Legal and Regulatory documents – Mutual Funds

• 81-106F1 – Contents of Annual and Interim Management Report of Fund Performance

• CSA: Proposed changes to continuous disclosure rules for investment funds | BLG

• Canadian Securities Administrators Propose Amendments to Modernize Continuous Disclosure

• Are You a Meerkat or an Ostrich? – Viewpoint Investment Partners

---

---