Changing the face of distribution
Etienne Deniau, Global Head of Business Development, Asset Managers and Owners at SGSS, was among the speakers that recently took part in structured discussions at the Fund Forum annual gathering in Monaco and addressed what he considers the guiding principles behind the AIFM Directive and some of its implications.
It is difficult to predict the extent to which the industry will concentrate and consolidate as a direct result of the AIFMD, but it will change the face of distribution radically. In particular, the negotiations being carried out by ESMA to extend quasi-European Union member status to countries such as Switzerland, and even Hong-Kong, take the industry into unexplored territory. Opening up the EU market to the non-EU world could prove to be a fascinating experiment, creating the prospect of funds managed from Hong-Kong being sold to investors in the EU.
Another topic of great interest concerns the potential reverse flow: how and when will we export new products driven by the AIFMD outside EU territory? This important question will, we hope, be answered in the coming years.
In the meantime, there are more immediate practical considerations that we need to take into account. The guiding principles behind the AIFMD have implications in terms of cost and technology.
“Negotiations being carried out by ESMA to extend quasi European Union member status to countries such as Switzerland, and even Hong-Kong, take the industry into unexplored territory.”
For example, alternative investment fund managers face additional direct capital costs because they will have to have more capital than previously required. An organisational requirement for them is to clearly separate investment and risk functions, and make sure that several internal policies - whether they concern segregation, investment, risk or pay - are WRITTEN and followed.
Depositaries will be a key stakeholder of the increase in investor protection. They should have strong reconciliation capabilities in securities, cash and other forms of contracts and assets. In addition, some depositaries will need to select and appoint their sub-custodians even more carefully after the introduction of the AIFMD, boosting their due diligence process. At SGSS, we already have an inherent advantage, as we have built a strong sub-custody network, selected through a highly demanding due diligence process.
SGSS can help by facilitating the transition for asset managers from the old world to the new world. In addition to our strong expertise in depositary services, SGSS can provide reporting and other essential services, either on a fixed all-inclusive basis or a flexible modular basis.
- AIFMD to change distribution radically
- Great interest surrounds export potential
- Depositaries to be key stakeholders in investor protection