AIFMD implementation deadline draws mixed responses
The implementation deadline for the Alternative Investment Fund Managers Directive (AIFMD) on 22 July has drawn mixed responses from those who see it as increasing costs and narrowing investor choices, compared to those who see opportunity in being ready to offer services in line with the new regulatory regime.
BNY Mellon is among those who point to downsides associated with the new regime. It said a survey of companies with some $5trn in assets under management found that there is still considerable uncertainty within the industry as to the effects of it, and that it is likely to increase costs without any equal benefits to investors.
“50% believe that their organisation will be disadvantaged in some way by AIFMD over the medium term. Only 18% believe there to be a benefit,” BNY Mellon said.
“While 58% have a project team in place to deal with the issue, 73% do not expect to apply for authorisation before 2014.”
According to the survey, AIFMD project costs range from $300,000 to $1m per institution.
Other research from KNEIP, the software and services provider to asset managers, points to increasing budgets for implementing AIFMD.
Surveying over 90 alternative investment fund managers in London, Paris and Luxembourg, the research found 58% were employing or considering employing new staff to help their back offices.
Furthermore, it found 29% of AIFMs saw increasing costs as their key concern regarding the regime, with a further 27% seeing reputational damage from failing to comply in time as their main concern.
One of those businesses that has announced its preparations is BNP Paribas Securities. It said that following “significant” investment it was prepared to offer AIFMD compliant processes across all affected jurisdictions, for its depositary services.
Philippe Ricard, global head of AFS products, said: “We are fully set up to support our early mover clients and congratulate those pioneering AIFMs who have already successfully navigated their way to AIFMD compliance. We also encourage those who are yet to start the journey – it’s not as daunting as one might think! AIFMD can provide asset managers with an opportunity to grow their business in Europe, and we have developed dedicated approaches to assist and help our clients do just that by benefiting from our global network. This covers a wide range of areas including fund structuring and cross-border distribution.”
One of the reasons that businesses have found it difficult to implement responses to AIFMD is the lack of final implementation rules delivered by national regulatory authories. For example, the Swedish Financial Supervisory Authority did not announce final rules for the local market until 2 July.
As Jake Green, financial regulation lawyer at Ashurst, said: “The European ‘harmonised’ Directive could not be less harmonised if it tried. Attaining compliance from day one will therefore be considerably difficult, if not nigh on impossible. Current European guidance does as much to confuse as it does to guide, and several material issues remain unresolved, such as the applicability of the AIFMD to certain structures.”
BNP Paribas Securities Services said it had developed a specific AIFMD transition package, including: a comprehensive methodology to launch the AIFMD change over for each type of fund (standard, Hedge funds, Private equity or Real Estate funds); a practical tool box for the on-boarding process to execute the transition; and a detailed ready-to-use planner.
In the UK, new business INDOS has applied for regulatory authorisation to offer depositary services under the new regime.
Stephen Kinns, partner at Crossbridge, said that while the regime has come into force, he did not expect new infrastructure in place being used until early next year.
“There is a mismatch in expectations between clients wanting a full service solution at zero incremental cost, and service providers who are looking to offer a ‘regulatory minimum’ with a price increase to reflect the increased liability.”
“Service providers will need to use the transitional period in the next few months to make sure they have enough operational capacity in place to start executing in line with the new directive in early 2014.”