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Funds
compliance and AML procedures must also be drawn up and continually monitored in accordance with the Directive. By far the biggest challenge for managers arises from Annex IV reporting obligations. These entail inter alia the interpretation and analysis of comprehensive legal terms and categories as well as ensuring that templates and codes are used in accordance with the regulatory requirements.
The issue of resources may not faze the larger fund managers who have substantial investments already committed to their European ventures. Their choice of an outsourced AIFM may be influenced more by cost and timing considerations.
However, often smaller fund managers do not have the resources to separate out those key functions of risk and liquidity management from portfolio management. The prospect can also be cumbersome for non-EU managers to establish a real presence abroad when they are so remote. They may already be accomplished managers with experience in other jurisdictions but not have the local knowledge to launch as quickly and efficiently as they may expect; or it may be the
first AIF they are launching and they have staff available and already approved by the previously worked within a large institution regulator to become the AIFM to an AIF
with additional resources and have never had to deal with such an extensive piece of legislation or Annex IV reporting. With over three hundred data reporting points and 30 days to report (45 for funds of hedge funds) every quarter, employing an outsourced AIFM may be the best solution for the smaller fund manager. This red tape and bureaucracy may distract these managers’ focus from their original aim of being a successful portfolio manager and they may be more suited to opt for an outsourced AIFM solution.
Significant trust
As well as assisting with the compliance function and ensuring that the ever expanding regulatory requirements are adhered to, often the outsourced AIFM can offer other services and means of support including fund administration, share transfer services and connections to other service providers e.g. depositaries, banks and brokers if the manager does not already have those estab- lished contacts they want to use. The out- sourced AIFM should have knowledgeable
which would reduce the time to launch the AIF.
If a client chooses to engage a third party to act as the outsourced AIFM to their AIF it must be clear from the outset between the parties that this is effectively a partnership. Significant trust must be built up between the parties. The client relinquishes elements of control over the AIF but in turn will no longer bear the full responsibility if anything goes wrong. Therefore for both the client and the outsourced AIFM the future will be a very close working relationship requiring the parties to work together to ensure the right people are focused on what they are best placed to do and the traditional portfolio manager is supported and assisted in complying with a complex and all-encom- passing new piece of EU legislation.
www.helveticfund.com
Simon Stone FRICS FIRRV MRPAS +44 20 7079 3981
Nicholas Vaus MRICS CEnv MBIFM +44 20 7079 3964
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