Last May, MS Management Services SA, a Luxembourg-based subsidiary of the Maitland group, received authorisation from the CSSF to act as a third-party AIFM to alternative investment funds. At the same time, it established its own umbrella fund platform, MS SICAV SIF, to support managers wishing to fast track the process of launching an AIFMD-compliant fund in Europe.
Although less than a year in operation, there are already plans to extend the AIFM license capabilities to support private equity and real estate managers, in addition to hedge funds.
“We already provide administration services for PERE funds. Also, we have the accounting and administration infrastructure in our corporate services teams to handle the SPVs typically used in these vehicles,” explains Kavitha Ramachandran (pictured), Senior Manager, Business Development and Client Management, Maitland Luxembourg.
“We see this as a real growth area. We’ll follow a similar strategy to the existing one for hedge fund managers; that is, to have a platform product that will cater for these more illiquid asset classes, as well as offer outsourced AIFM services to managers running their own AIFs.”
Maitland’s platform has onboarded a number of clients with several more AIFs currently going through the approval process.
“When we get an enquiry, the client always asks for information on both the ManCo stand-alone services and the platform. However, I’d probably place greater weight on the product platform in terms of the level of future growth. The main factor that drives managers to use MS SICAV SIF is speed to market,” says Ramachandran.
One aspect that PERE managers who are looking to market in Europe need to be comfortable with when using a third party AIFM is just how important a role they will play. PERE funds have been lightly regulated structures; hedge funds have at least had a few years under Dodd-Frank and MiFID I to get used to regulation.
“Overall, the fund board is still responsible but suddenly they have to start dealing with an AIFM who has just as much authority to tell the manager what they need do as the board,” says Ramachandran, adding that the valuation model used by Maitland in respect of its hedge fund and FoHF clients would be robust enough to give comfort to PERE managers.
“Typically, with PERE funds you can’t really appoint an external valuer in the true sense of the Directive for liability reasons. The fact is that external valuers or property appraisers don’t value the structure up the entire chain; their only responsibility is providing a valuation of the ‘real’ assets but there might also be swaps and other instruments being used in a PERE fund. This requires a more comprehensive valuation function and solid technology infrastructure.”
In addition, any third party AIFM to a PERE fund will need to effectively monitor the entire structure, including any SPVs being used. That requires having the right processes and procedures in place and as Ramachandran notes: “The AIFM has to provide and demonstrate a more intensive level of governance to handle the additional risk involved.”
“Moving forward, we will continue to refine our processes in line with new developments under AIFMD. What we know about Annex IV reporting today, for example, is different to that of six months ago. We’ve also incorporated an integrated FATCA service into our AIFM solution which is a significant value add for our clients.”