Some country-specific questions were discussed during the European roadshow. Below is a selection of key findings:
MILAN : How do you deal with regulatory rulings like depositary liability that impacts the NAV calculation and/or foreign AIFMs managing Italian AIFs without having to comply with same obligations as the local AIFM?
Following on from the above points raised on the additional liability responsibilities on the
Depositary under UCITS V, Italy is unique in that it operates a model called Affidamento.
This allows the Management Company to appoint the depositary to directly calculate the fund’s NAV. The depositary defines the valuation criteria and agrees on them with the ManCo. “In 2014, when AIFMD was transposed into Italian law, legislators removed Affidamento for Italian hedge funds but it remained for UCITS. We do not know if it will remain under UCITS V. It is good for the depositary because it is strictly linked with the ManCo and is directly responsible for carrying out the valuations; it strengthens the relationship between the two parties,” said Angela Bracci.
As such, Italian depositaries have more responsibility for UCITS funds than other EU Member States. For Italian AIFMs, Affidamento improves efficiency in the operation of UCITS funds but this option is not available to foreign AIFMs running Italian UCITS funds. In Germany, by contrast, managers have the option of being jointly responsible for the production of the fund’s NAV with the depositary. The question is, when the independence provisions between the depositary and the asset manager come into effect in October, will Affidamento continue? Will the German model continue?
“Could the depositary provide an external valuation role under UCITS V? No one yet knows,” said Napolitano.
LONDON : What will be the impact of BREXIT on the UK funds industry?
The London panel said that a lot of UK asset managers are sitting on the fence. At this stage there are still so many ‘What ifs…’ that it is hard to know what the negotiation would be in the event of Brexit but Karen Bowie’s opinion, “If there were a Brexit it would be profoundly disruptive to the asset management industry”.
One fear is that Brexit could make it harder for UK managers to sell UK-domiciled UCITS funds in Europe because of tariffs. If that were the case, UK managers might potentially start considering whether or not to re-domicile their funds in EU fund centres such as Ireland and Luxembourg. David Painter had a slightly different view on this, however:
“It’s more an issue of where the manager is located rather than where the fund is located,” said Painter. “If you’ve got a fund in Luxembourg it’s probably managed in a similar way to one managed in the UK or Ireland. Brexit might, therefore, impact where the manager resides in terms of running the fund. Will they choose to remain in the UK? That might change.”
ZURICH : How do you deal with the MANCO passport and/or UCITS/AIFs distribution from/to Switzerland?
The ManCo passport is not a priority in Switzerland, according to SFAMA’s Markus Fuchs. What is of more importance, he said, is the fund passport for marketing and distribution. “We are doing everything possible through discussions with ESMA to allow Swiss-based managers to passport funds, irrespective of whether these are domiciled in Switzerland or offshore, into Europe,” commented Fuchs.
AIFMD is the first regulation to allow a fund passport for third countries like Switzerland. The fact that the Swiss authorities introduced a revised version of the Collective Investment Schemes Act (‘CISA’) in 2012 to bring it into line with AIFMD was important, given that ESMA approved Switzerland for the third country passport at the end of 2015.
"For those Swiss managers who already have a presence in Europe it’s less important but the passport is a huge advantage for small and mid-sized Swiss managers to market their funds – be they Swiss funds, Lux funds, Cayman funds – into Europe. “It is important that Switzerland fights to get this passport formerly introduced. After all, EU managers have full access to Swiss investors,” said Clemetson.
With respect to the ManCo passport, GAM’s Rutishauser confirmed the group operates two Management Companies in Luxembourg and Ireland, the former being a ‘Super ManCo’ to support GAM’s range of UCITS funds and AIFs. He said that whilst it could feasibly be possible to converge the two ManCos into a single hub, to run alongside its Swiss Management Company, there remains a degree of skepticism as to whether the passport would be truly beneficial.
The biggest financial players are operating out of one ManCo in Europe and passporting the ManCo license to different fund hubs. On paper it looks nice to do this but there are practical issues that could arise; if there is an issue in Luxembourg and the ManCo is based in London, who is responsible? How would it would on the tax side?
“For the time being we are happy to operate from different hubs in Europe,” concluded Rutishauser.