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Overcoming AIFMD challenges

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Quintillion Limited is a European-based affiliate of U.S. Bancorp Fund Services, a global alternative administrator with assets under administration of USD117bn, with Europe’s AuA totalling approximately USD19bn.

Over the last two years, Quintillion focused on making structural changes to the business in response to European regulation. According to Ken Somerville (pictured), Head of Business Development, Quintillion, depo lite has been a “distinct and absolute” change to the business model.
“That has been facilitated in part through operational changes, in part through the banking license we have. There are quite a few moving parts to depo lite that need to be bundled together to meet regulations, to create a product offering and then roll it out to managers,” says Somerville.
“That has been a distinct change for us. We’re going to extend beyond that with a full depositary license. Planning is underway with a view to providing full depositary services in around 12 months time. That is in part driven by having the resources and the facility to do it under the bank and also the fact that we view some of the implications of AIFMD such as depositary services as becoming more necessary moving forward,” explains Somerville.
Adapting to AIFMD has therefore been less of an operational burden and more a business planning and infrastructure exercise. “Get that right and your operations model looks and feels much like the existing model pre-AIFMD,” adds Somerville.
Approximately 40 managers running around 130 individual funds use Quintillion’s administration services, of which Somerville estimates that a substantial proportion are now availing of depo lite.
“Both existing offshore managers who are looking at the prospect of establishing an Irish vehicle as well as an upshot in interest among US managers who are considering both the QIAIF and the UCITS fund structure. They are presently at the fact-finding stage. They can see the growth opportunities in the regulated fund space.
“We are working with US managers to give them a complete picture of what is required to establish one of these vehicles. I think next year we’ll certainly see launches. But understandably, there’s a lot of planning that has to go into launching a regulated fund outside of one’s default jurisdiction,” says Somerville.
The most pressing issue for managers, presently, is preparing for the first round of Annex IV reporting. Somerville says that Quintillion has been preparing thoroughly, building output files to support Annex IV.
“We started working with one external partner six months ago. They’ve been very competent at taking data from us, manipulating it, to produce regulatory reporting to meet managers’ needs.
“We are building our own supplementary information and reporting in tandem with some of theirs, and working with managers to build out the range of data needed in areas such as trade files,” confirms Somerville.
The real focus for Quintillion has been on data management. Using and producing quality data is the secret to getting a good reporting solution in place. “We provide ourselves on using ‘smart’ technology; piping good quality data in and out. That’s how we build the information model. We’re using data not only for administration but extending that use to regulatory reporting.
“Until a few cycles of Annex IV reporting have been completed there will be some teething problems. At this point, getting that first filing done is critical,” concludes Somerville. 

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