April 2016

FUND ADMINISTRATION: AIFMD still the most significant regulation

Company executives answer questions as part of Funds Europe's fund administration survey.

JEAN DEVAMBEZ, GLOBAL HEAD OF PRODUCTS AND SOLUTIONS, ASSET FUND SERVICES, BNP PARIBAS SECURITIES SERVICES

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
In 2015, the depositary business grew to 7,676 sub-funds (December 31, 2015 figures) up from 7055 the year before. Market growth has been principally driven by traditional asset classes as well as a growing interest in debt funds. Funds promotors and investors are likewise developing an appetite for ETFs.

Other market trends we have seen include private equity, for a stable and limited interest, where as we have experienced recent growth in a number of locations for real estate. Liquid alternatives remain a market trend, but interest in this has decreased compared with two years ago.

We have entered a phase where Chinese investments cannot be ignored despite recent market turmoil. Market participants have been investing through the following:  RQFII. Hong Kong-Shanghai Stock Connect/SPSA and CIBM Direct. We have been actively driving market research and market intelligence as well as proposing innovative solutions for our clients.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
As a bank at the heart of Europe, we see ourselves actively contributing to the developments of key regulations and initiatives. In 2015, BNP Paribas Securities Services developed a series of 18 one-page regulatory memos on various key regulations including: MIFID II, T2S and EMIR.

These three memos capture some of the regulations we currently have top of mind. Each regulatory memo includes an overview of the regulation as well as BNP Paribas Securities Services point of view on the regulation.

In terms of local regulation grabbing international attention, we are also closely following the Luxembourg RAIF regime. With the introduction of the RAIF, fund managers will benefit from a new flexible investment fund, with reduced time-to-market, combining the legal and tax features of the well-known SICAR (investment company in risk capital) and the SIF (specialised investment fund) regimes.

How has market volatility in the past year shaped the demands of your clients?
Clients are increasingly requesting flexibility from their providers. Funds used to be launched following a long term strategic approach.

Requests now take place in a more compressed amount of time. This means rapidly gaining exposure to new areas and proposing new and diversified exposures that require significant insight, specialised expertise and adapted investment/dealing processes.

The trend is not only time sensitive to deliver a service, but also needs to be agile in following and anticipating the clients reprioritisation of new services.

SÉBASTIEN DANLOY, HEAD OF CONTINENTAL EUROPE & OFFSHORE, RBC INVESTOR & TREASURY SERVICES (RBC I&TS), MANAGING DIRECTOR, LUXEMBOURG

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
In 2015, RBC I&TS supported the launch of nearly 250 new funds in Europe. As a specialist provider of fund administration services for real estate and private equity (REPE) funds, we see institutional and retail money increasingly shifting to REPE assets. We expect continued regulatory change to increase transparency, comparability and quality in professional management in relation to this asset class.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
The Ucits V Directive places greater obligations upon all depositaries, including a more rigorous liability regime. RBC I&TS has revised its standard depositary agreement to clearly describe additional duties. Within REPE, the AIFMD and Eltifs are key. The extent of regulatory demands and the need to structure local funds for different investor groups is having a direct effect on outsourcing considerations.

How has market volatility in the past year shaped the demands of your clients?
Clients have continued to highlight efficiency, cost management, and increased regulatory responsibilities, with a subsequent shift to bundled outsourcing models and a move towards value-added services. As a leading provider, RBC I&TS is able to help our clients meet their business and operational objectives via our strength and stability, specialist expertise, and the support we provide on regulation.

PIERRE CIMINO MANAGING DIRECTOR, CACEIS BANK LUXEMBOURG

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
Infrastructure, real estate funds and private equity and debt are currently popular, as opportunities currently remain in the market, and interest rates are low. ETFs are performing well against traditional investment funds, which are struggling to produce sufficient alpha to offset their TER [total expense ratio]. Listed derivative funds are also benefiting from the low interest rates, although we have only launched a few.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Priips is definitely on our radar, especially its transformation of the standard Ucits Kiid into the new ‘Kid’ in 2019. The new Kid covers any packaged retail or insurance-based investment product and is far more complex than its forerunner, with seven risk indicators compared to one currently. We are also closely following Solvency II and the impact of the ‘look through’, which requires highly detailed holdings data as well as the calculation of the risk-based capital requirement – the SCR.

How has market volatility in the past year shaped the demands of your clients?
Market volatility and the low interest rate situation have pushed our clients towards launching investments, such as listed derivative-based products, private equity, real estate and securitised products. We saw declining demand for funds in emerging markets where volatility was especially high, as investors sought to reduce their exposure to unpredictable markets.

DANIEL SIEPMANN, CHIEF EXECUTIVE OFFICER AT CREDIT SUISSE FUND SERVICES (LUXEMBOURG)

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
In the course of 2015, Credit Suisse Fund Services Luxembourg supported the launch of 11 third-party funds and 21 additional third-party sub-funds in existing umbrellas. A majority of these were alternative investment funds, with cross-asset class coverage, but also traditional long-only funds, as well as an increasing proportion of private equity/real estate and emerging market funds. Overall we noticed an increased diversity of products across our client base.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
As we are well advanced in the process of implementing Ucits V, we have substantially leveraged on our existing capabilities and support our clients in meeting new requirements on their side. Under Ucits V our clients enjoy state-of-the-art reporting, transaction booking, reconciliation, valuation, accounting and controls helping them to satisfy ever more sophisticated investor demands.

Our clients require enhanced services in relation to AIFMD and we are able to support them in delivering a full package of services. As the market adjusts to this key regulatory change, we see a broad spectrum of management companies emerging (ranging from pure third-party to in-house) whereby these management companies require their TPAs to bring enhanced services in line with these regulatory changes. 

ROBERT BRIMEYER, CHIEF EXECUTIVE OFFICER, ALTER DOMUS

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We have supported more than 40 fund launches for the year 2015. The trend is clearly remarkable on the private equity funds and debt instruments. We also see a rise in managed accounts.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Compliance with AIFMD as well as compliance with all regulatory reporting requirements (such as Fatca, CRS, SEC reporting) are the main regulatory challenges that our clients are facing and where TPAs can deliver valuable support. The key challenge for TPA is to be able to support clients in topics such as risk management, compliance monitoring, KYC [know-your-client] as well as regulatory reporting.

How has market volatility in the past year shaped the demands of your clients?
Being focused exclusively on alternative assets (excluding hedge funds), market volatility did not have a significant effect on our clients. Low interest rates, however, motivate more and more investors to invest into alternative assets, which explains the uplift in number of new funds raised. Many investors are interested in entering private equity as an asset class via debt funds, which provide an interesting exposure to private equity with a bit less risk and more recurring revenue streams as compared to direct PE funds.

TOBY GLAYSHER, HEAD OF GLOBAL FUND SERVICES EUROPE, NORTHERN TRUST

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We supported over 300 fund launches in Emea jurisdictions during 2015 – where we saw particularly strong interest in establishing new real estate fund structures in Ireland, and with the Icav now established as the preferred Irish fund structure for asset managers for Ucits and non-Ucits.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
With Ucits V successfully implemented, we see focus turning to Priips, which requires manufacturers and distributers of insurance-based investment products to produce and disclose a key information document to retail investors.

How has market volatility in the past year shaped the demands of your clients?
The impact of market volatility, together with the ongoing regulatory demands and the increasingly competitive nature of the asset management industry, is causing clients to further examine their business models to position themselves effectively for the long term. There remains continued demand from clients to outsource non-core functions. We also see clients assessing the application of newer smart technologies to deliver enhanced investor experience and improved access to wider distribution, whilst also improving the efficiency and underlying profitability of the client.

PAUL LAWRENCE, HEAD OF EUROPEAN FUNDS, ELIAN FUND SERVICES

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
Our business spans the alternatives market but there is still a clear trend for debt-related funds, whether these be opportunity funds, or alternative lending platforms. Infrastructure is also gaining momentum as an appealing asset class for investors and is finding an identity of its own in the private equity space.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
AIFMD is still the most significant piece of regulation affecting us and our clients in terms of meeting the reporting requirements in an efficient and robust manner and also monitoring the developments of the third-country passport for our Channel Islands-based business.  

Fatca and CRS tie for second place. The complexities of both are a significant distraction for clients and have required material investment by us to be able to report accurately on behalf of those clients.

How has market volatility in the past year shaped the demands of your clients?
We haven’t seen too much impact stemming from equity market volatility and if anything this has been a good thing for alternative investment fund managers.  What we are witnessing an increasing nervousness around are the implications of Brexit, which is a brake on commitment and investment decisions, for the moment at least.

RICHARD MILNER, HEAD OF SERVICE DELIVERY, EUROPE, HSBC SECURITIES SERVICES

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
HSBC Securities Services supported more than 2,100 fund launches in 2015. The vast majority of these fund launches have been on the traditional side, with most new fund launches either being for escrow/trustee, life and pension or unit trusts and, on the alternative side, hedge funds.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
We envisage many consequential service impacts deriving from our clients’ MiFID2, Priips and Emir compliance obligations, including:

  • Extended reporting to regulators
  • Production of Kiid-type documents for certain EU non-Ucits retail products
  • Initial/variation margin rules for uncleared derivatives
  • Share class restructures to accommodate permitted payments to distributors 
  • Potential restructure of fund expenses to accommodate new rules on research

How has market volatility in the past year shaped the demands of your clients?
Market volatility has led to more clients wanting to pool assets to reduce costs, etc. HSBC Securities Services has seen a marked increase in interest in tax-transparent funds, for example. In addition, increased volatility and bouts of market uncertainty have generally been beneficial for HSBC Securities Services as it encourages the trend of prospective clients thinking about seeking a safe haven of a well-capitalised bank…

PHILIP T MASTERSON, SENIOR VICE PRESIDENT, MANAGING DIRECTOR, SEI INVESTMENTS – GLOBAL FUND SERVICES

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
SEI has supported nearly 30 fund launches during the period, with private equity and credit (including direct lending and bank loan funds) being the dominant themes. Through the first quarter of 2016, this trend has continued and we have also seen an increase in the demands for outsourcing of regulatory services. In addition, we’re seeing increasing demand for our electronic subscription solution for private funds.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Clients appear to be focusing on Fatca/UK-CDOT and the upcoming implementation of Common Reporting Standards. We are seeing more and more clients interested in our services for supporting these and the amount of transparency that we can provide in our process is one of the key differentiators in our service offering. We have begun to experience more regulatory outsourcing agendas from prospects for which we do not provide fund administration services, which speaks to the flexibility of our reporting platform. 

How has market volatility in the past year shaped the demands of your clients?
SEI has seen the recent market volatility provide further opportunity for alternative funds to review their outsourcing needs.  

PERVAIZ PANJWANI, HEAD OF EMEA GLOBAL FUND SERVICES, CITI

About how many fund launches have you supported this year?
There were 166 fund launches ranging across Sicav, Ucits and Oeics and mainly for global equity-type funds.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Regulatory impacts from an administration point of view include investor monies reporting, Common Reporting Standards, Priips, Emir and Solvency II.

How has market volatility in the past year shaped the demands of your clients?
As the Emea business continues to see growth through new fund launches and an increasing asset base, our clients’ requirements for enriched investment data, enhanced risk analytics and robust IBOR datafeeds continues to grow.

There has also been growth in the use of instruments such as ‘repos’ and OTCs, as clients increase the breadth of instruments they use to invest with.

MARIE JUHLIN, HEAD OF SEB FUND SERVICES, SEB

About how many fund launches have you supported?
A few Ucits funds [in 2015], which seek to generate attractive risk-adjusted returns or long-term absolute returns.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
MiFID II and Ucits V... have the most attention at the moment.

How has market volatility in the past year shaped the demands of your clients?
Our risk managers have, as expected, noticed a larger use of financial instruments, such as Volatility Index futures, variance swaps, or alternatively call overwriting strategy for mitigating the risks that resulted from economic events and geopolitical  events. 

MARCEL GUIBOUT, EMEA HEAD OF FUND SERVICES, JP MORGAN

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We have supported a volume of both new fund and share class launches this year, as well as supporting a number of consolidation activities as our clients adapt their strategies to meet future distribution trends. Liquid alternatives has been an area of continued activity in both single and multi-manager form as institutional investors seek to diversify strategy.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Recently, we’ve been very focused with our clients to see through the implementation of Ucits V, as well as providing the data to enable our clients to support Solvency II reporting.

How has market volatility in the past year shaped the demands of your clients?
Having seen through a number of periods of market volatility over the last few years, we continue to see evolution of our clients operating models, with change activity in areas such as fair valuation and swing pricing.

KAVITHA RAMACHANDRAN, SENIOR MANAGER, BUSINESS DEVELOPMENT AND CLIENT MANAGEMENT, MAITLAND 

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
Over six fund launches, which includes umbrella structures with multiple sub-funds. It has been a mix of hedge funds, plain vanilla long-only funds, private equity and real estate.

Our AIFMD-compliant platform and white-labelled solution combined with our third-party alternative investment fund manager solution continues to be attractive to both EU and non-EU managers seeking to use the AIFMD passport. 

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Ucits and AIFMD rank among the key regulations for our business. We await the new legislation on the Raif in Luxembourg which promises to be ground-breaking.

How has market volatility in the past year shaped the demands of your clients?
We have seen an increased demand for new funds in all domiciles. Managers are being cautious and launch times are being extended. We have seen increased interest and demand in private equity and real estate, which ranks amongst the popular asset classes. From a marketing and distribution perspective, more and more managers have also realised how cumbersome private placement is in the EU and are tending towards an AIFMD-compliant structure.

CLAUDE PECH, GLOBAL HEAD BUSINESS DEVELOPMENT, PICTET ASSET MANAGEMENT

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
We had 33 launches, Swiss and Cayman funds, from plain vanilla to alternative asset classes.

How has market volatility in the past year shaped the demands of your clients?
We have seen more interest in ‘shadow booking’ funds and private equity as traditional markets have been difficult in late 2015/early 2016.

AET RÄTSEPP, HEAD OF FUND SERVICES, SWEDBANK

About how many fund launches have you supported this year and what type of strategies or asset classes has there been a trend for?
Swedbank has supported around five fund launches during 2015, mainly long-only European equity funds.

Which are the top one or two regulations that you are most observing at present from a TPA point of view?
Currently we are looking into Solvency II regulation demands, which are mainly for insurance companies reporting, but have landed on third-party administrators’ tables as we administer funds which insurance companies are investing in. Another wider topic is global tax transparency, which will make some corrections in the reporting and master data management.

How has market volatility in the past year shaped the demands of your clients?
There have been no changed demands due to volatility.

©2016 funds europe