Scrutiny sees shift to regulated fund structures
Crestbridge: Best Regulatory Advisory & Compliance Firm – The advent of the Alternative Investment Fund Managers Directive (AIFMD) changed the landscape of the financial industry dramatically, ushering in a stronger focus on regulatory compliance and increased governance requirements. In light of these developments, service providers have witnessed a shift from unregulated structures to funds, generally managed by an AIFM to gain access to the European passport. Daniela Klasén-Martin, managing director, Crestbridge, shares her views: “We anticipate that the regulatory trend will continue and that with increased scrutiny from regulators, managers will have to invest in additional resources covering for independent control functions.
“Crestbridge has capitalised on these trends throughout the years strengthening its outsourced regulatory offer and in particular third party management company services, independent risk management and MLRO services in different jurisdictions.”
As regulatory scrutiny continues to increase, Klasen-Martin advises clients to: “ensure you have a robust control environment, either investing to build your capacity internationally or through outsourcing to a service provider.”
She also has a few words of advice specific to UK managers in light of Brexit: “As from Exit day on 31 January 2020 UK will become a third country, meaning UK managers will not be able to market EU funds from UK. The equivalence regime in financial services is uncertain and will depend on alignment with EU regulatory regime. It is recommended you have a solution in place before the end of the transitionary period on 1 January 2020. If you do not have operations in EU, outsourcing to a third party manager, such as Crestbridge, is a compelling option.”
Klasén-Martin goes on to discuss the pressing challenges the industry faces: “The two main challenges have been managing the increased regulatory requirements and managing growing operations. Increasing regulatory and substance requirements are making asset management operations more expensive to run, compressing margins.
“In order to manage growing operations in line with the regulator’s expectations and at the same time keep profitability, we focus on people, process optimisation and systems implementation to scale the operations.”
Consistent investment in systems is also key. She points out Crestbridge was one of the first players to implement a risk management system specific to PE/VC assets: “We have implemented a system that enables us to follow the KRIs established in accordance with the risk management framework agreed with our clients and in compliance with the regulations. The system facilitates monitoring of KRIs and production of regular RAG reporting for our clients, which can be accessible through a web-portal. The system also provides automated AIFMD annex IV reporting.”
Talking about additional investment, Klasén-Martin comments: “We are currently implementing automated due diligence and KPI reporting system to cover for the increased initial and on-going oversight requirements.
Going forward, the firm expects the most significant growth to be experienced in its fund services offer, particularly focusing on alternative assets like hedge funds, private equity and venture capital. Crestbridge provides a whole range of services throughout different jurisdictions going from third party management company, Independent risk management, MLRO, depositary and fund administration. “We work as an open architecture and match our services to our clients’ needs, offering combined services depending on their requirements,” Klasén-Martin explains.
Group Head of Management Company Services, Managing Director, Luxembourg, Crestbridge
Daniela Klasén-Martin has over 25 years’ experience in risk management, financial management and corporate governance across various jurisdictions. She joined Crestbridge to lead the development of our Luxembourg office and launch our management company services.