As Spiderman famously said: “With great power comes great responsibility.” For third-party management company (‘ManCo’) providers who assume responsibility for fund compliance, oversight and risk management functions, the same is true.
A ManCo is essentially an outsourced compliance function that is meant to give investors and regulators comfort that fund governance is carried out independently and to a high standard. But providers are paid by fund management firms – in other words, those they are meant to be keeping in check.
A ManCo’s responsibility is especially great for those that have assumed so-called Super ManCo status, whereby they are licensed to manage both Ucits funds and alternative investment funds. But over the past 12 months, amid the fallout from the Neil Woodford investment fund implosion, ongoing uncertainty around Brexit and some funding and staffing issues at prominent providers, the ManCo model is coming under greater scrutiny than ever before.
More questions are being asked of their balance sheets, operating models and human resources. Regulators want to ensure capital adequacy, rule out conflicts of interest and satisfy themselves that there is genuine substance in terms of staff and expertise.
But the ManCo providers, unsurprisingly, are adamant that the model itself is not under threat, even if not all providers will make it through the year in their current form.
Read the full article from our March issue here: Fund governance: Super ManCo scrutiny
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