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Survey: AIFMD to rival UCITS as a ‘de facto’ international standard for distributing AIFs

Tuesday, June 30, 2015
Opalesque Industry Update - Software company Multifonds has released the results of its latest survey on the impact of the Alternative Investment Fund Managers Directive (AIFMD) on the fund industry. Respondents from the funds industry, who collectively manage and administer assets exceeding US$16 trillion and US$20 trillion respectively, have expressed doubts as to the purpose of the regulatory data collected from AIFMD and question whether it is helping regulators to better spot threats and systemic risks that may impact market stability. Still, AIFMD is predicted to rival UCITS as a ‘de facto’ international standard for distributing AIFs.

Regulatory reporting biggest concern

In this survey, the fourth in an annual series conducted by Multifonds, the majority of respondents (56%) expressed uncertainty as to how regulators would use all the data collected from AIFMs. Furthermore, less than a quarter (23%) believe that AIFMD actually enables regulators to better identify threats to market stability.

In this year since implementation that has seen the majority of AIFMs complete their registration and authorisation process and submit their first sets of Annex IV reports, regulatory reporting has presented the biggest challenge, with the proportion of respondents citing regulatory reporting as their biggest concern rising to 81%, up from 66% in 2014. Over the last year, the AIFMs have had to work out how to marry their multiple systems together and then aggregate, store and report the resulting data. Now the focus is on the regulators to do the same.

Keith Hale, Multifonds’ executive vice president for client and business development said: “While it is encouraging the fund industry believes AIFMD has been successfully implemented, it is now on the shoulders of regulators to demonstrate the real value of the extensive efforts made by fund managers and administrators to comply with the Directive. With regulatory reporting clearly an increasing concern across the board, it is crucial that regulators vocalise the importance of AIFMD and clearly outline how the data will be used, otherwise it will be at risk of being perceived merely as an administrative or bureaucratic burden with little tangible value.”

While the usefulness of AIFMD and its reporting burden is still in question, the consensus within the industry is that local regulators have been successful in their introduction of the Directive, with 85% agreeing that it has been well implemented. Encouragingly costs and in particular, depositary costs have also stabilised in line with expectations. The majority (56%) have experienced an increase in depositary costs of less than 2.5bps. This is in line with the industry predictions made in Multifonds’ 2014 survey, when nearly half (49%) expected depositary costs to be lower than 2.5bps but in stark contrast with earlier estimates (in 2013) that predicted depositary costs could rise by up to 100bps.

AIFMD will come to rival UCITS as a ‘de facto’ international standard for distributing AIFs

The successful implementation has cemented the industry’s expectation of AIFMD becoming a global brand to rival UCITS, with the overwhelming majority (87%) believing AIFMD will come to rival UCITS as a ‘de facto’ international standard for distributing AIFs. This is significantly more than the figure in Multifonds’ 2014 survey, when just over half (54%) thought the same.

The extension of the AIFMD passport is seen as a critical milestone in AIFMD’s journey to becoming a global brand. The fund industry is in agreement in regards to the extension, with nearly three quarters (74%) believing that the AIFMD passport should be extended to EU managers from non-EU AIFs. However, of the three quarters that agree with the extension, 39% think this should only take place once private placement is abolished, suggesting that the existing channels are meeting the current market needs.

This survey was carried out in Q2 2015 and received 62 responses from the global fund administration industry, who collectively manage and administer assets exceeding US$16 trillion and US$20 trillion respectively. Respondents service a mix of both traditional and alternative funds, including hedge funds, commodities, private equity, real estate, long only/ mutual funds and unit trusts.

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