The AIFM Directive is a ‘significant opportunity’
For UBS Fund Services, the AIFM Directive represents a significant opportunity to expand its business offering. As a global operation, it is well positioned to capitalise on the regulatory changes being introduced in Europe as compared to administrators without a European presence. In addition to offices in Dublin and Luxembourg, both of which are already working to support managers under the directive, UBS also has its own dedicated AIFMD working group whose sole focus is keeping on top of salient issues.
“We see a lot of opportunities to help our existing non-EU managers, some of whom are looking to establish AIFs and are asking what our offering is in Europe and whether or not they should use our fund administration services in Dublin or Luxembourg,” explains Monette Windsor (pictured), Head of UBS Fund Services, Cayman Islands.
“We already have a management company set up in Luxembourg and we’re currently in the process of establishing one in Dublin. We will therefore be able to offer those services to any manager who would prefer to use a third-party AIFM. We are also looking at depository solutions and that is probably the biggest opportunity for our Cayman office.”
An EU manager, who wishes to continue marketing offshore funds into Europe via private placement will have to comply with three sections of the AIFM Directive under Article 36, namely the safekeeping of assets by a custodian (by their prime broker), cash monitoring (by their fund administrator), and a general oversight function. This benefits managers in that they can maintain their prime brokerage and fund administration service agreements. Only an additional third party relationship needs to be added for the oversight function. Alternatively, their current administrator may be able to perform this oversight function.
These three services above are referred to as a ‘depository lite’ solution because it means the chosen providers of these services (which might be a fund’s existing administrator like UBS Fund Services) does not have strict liability for loss of assets, which is the case when complying in full with the directive.
“We are looking to launch a depository lite solution out of our Cayman office in early 2014 and we’re already working with a couple of clients on that initiative. CIMA are interested in learning how such a new service offering could bring benefits to Cayman-based managers.”
What this shows is that UBS Fund Services is positioning itself to support its hedge fund clients across the full spectrum of the directive. The private placement rules are changing in every country. Our clients are looking at key countries and that’s why UBS Fund Services is rolling out its depository lite solution. It’s not a one-size fits all solution. “Depending on what each manager does in the EU, how many markets and investors they have, we want to ensure we can offer a full AIFMD solution so that different parts of it will be available to managers; depository lite solutions for managers who continue with private placement, and management company solutions for managers who wish to become fully compliant,” notes Windsor.
One distinct advantage for UBS Fund Services is its connection to UBS bank, which has the largest distribution platform in Europe; something that managers will no doubt be keen to leverage if they wish to avail themselves of the funds passport into certain countries.
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