New depositaries come on line in AIFMD world

European tagThe Aztec Group is the latest of a group of fund administrators to gain a licence to provide depositary services in the UK under the new alternative fund management regime.

UK authorisation follows previous authorisations for the Jersey-based administrator in Luxembourg, Sweden, Jersey, and Guernsey.

Aztec, which has $110 billion (€81 billion) of assets under administration, is one of a number of firms that is offering depositary services to alternative investors, such as private equity houses or hedge funds. These firms did not need depositary services before the arrival of the Alternative Investment Fund Managers Directive (AIFMD).

Alter Domus, an administrator with $48 billion of assets under administration and which launched a depositary service this year, recently gained approval in the UK to add to existing approvals in Luxembourg and Guernsey.

Indos Financial, which Bill Prew, a former European chief financial officer at Barclays Global Investors, launched in 2012, says it was the first UK authorised AIFMD depositary and recently started providing its “depositary-lite” service to its first hedge fund client while preparing to go live with more than 20 others.

Under article 36 of AIFMD, managers of non-EU funds marketing to EU investors on a private-placement basis, can avail of depot-lite rules that exempt the depositary from strict liability for loss of assets. However, these managers must appoint one or more firms for safekeeping of assets, cash flow monitoring, and oversight.

Like depositaries with operations in offshore jurisdictions such as the Channel Islands, Indos – though a UK firm – plans to help fund managers with non-European funds comply with the AIFMD in order to market their funds in Europe.

Przemyslaw Koger, Alter Domus UK head of depositary services, says: “Structures of alternative investment funds are often complex and the ownership of assets is normally established by looking through the chain of ownership of several investment vehicles often based in various jurisdictions.”

A number of large custodian banks, historically the main providers of depositary services under pre-existing fund regimes, have also boosted their AIFMD-linked depositary services. BNP Paribas, for example, recently gained Netherlands and UK approval.

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