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Full depo lite flexibility for PERE managers

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“We’re seeing more interest than we did in the past. PERE managers are looking for expertise from their service partners under the AIFMD. In the past they would have gravitated towards other jurisdictions. More service providers are now comfortable with PERE as an asset class,” comments David O’Keeffe (pictured), CEO of SMT Trustees (Ireland) Limited (“SMT Trustees”).

Ireland has until now not really been a favoured jurisdiction to set up PERE funds but that’s changing.
“We are seeing more demand for non-correlated asset classes compared to traditional assets. Service providers like these funds because they are often of a substantial size and by their nature they are long-term investments,” says O’Keeffe, who notes that loan funds have become an increasingly popular fund vehicle this year: “A good many funds launched by SuMi Trust this year include loans as an asset class or at least have loans as an investment component to them.”
SMT Trustees is backed by Sumitomo Mitsui Trust Bank Ltd (SMTB), the largest Trust Bank in Asia with over USD2trn in assets under custody. SMT Fund Services (Ireland) Ltd is the administration arm of SuMi TRUST and operates as a completely separate legal entity.
The ability to offer depositary services to the funds of independent administrators is working well for SMT Trustees, which has been providing custody services for the last 20 years to regulated funds. Across its fund administration and custody businesses it counts more than 200 employees in Dublin and Dundalk.
“We offer custodial services to independent fund administrators who need to bring a depositary to the table. We now support five hedge fund administrators in Dublin in this capacity for their Irish regulated funds. Therefore the promoter of a fund is not limited to utilising the service providers who offer both depositary and administration services,” adds O’Keeffe.
Under the AIFMD, PERE managers need to get their ducks in a row. For EU-based managers, making sure that they have the right service provider in place to provide depo lite services is vital, especially if, further down the line, they decide to launch onshore funds in the form of an Irish QIAIF.
SMT Trustees has been providing depositary services to both UCITS funds and what were previously QIFs, since 1994. Supporting alternative fund managers under the Directive has not required significant operational overhaul.
“What probably distinguishes us from a number of others is that we also separate the three core duties of oversight, asset safekeeping and cash flow monitoring and can provide one or more of these as individual roles if the client requires it.”
“We are quite flexible in that regard and act not only with different administrators but also work with a number of different sub-custodians depending on the assets and requirements of the client. We have a custody network spanning more than 100 markets and also have a dozen sub-custodians independently appointed by us here in Dublin,” explains O’Keeffe.
“The administrator is already doing the record keeping so why not do cash flow monitoring also? The prime broker already has the assets so why not have the AIFM appoint them to do the safekeeping? We would then step in to safekeep and verify the assets that they don’t hold and also provide the required oversight function”.
“It’s the fastest to market option for a manager and invariably it’s the most cost-effective option as well,” concludes O’Keeffe. 

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