A survey of the funds industry has revealed a significantly more positive attitude to the regulation despite facing the imminent 22 July 2014 Alternative Investment Fund Managers (AIFM) authorization deadline.
This survey was carried out in the second quarter of 2014 and received 61 responses from fund administrators (including nine of the top 10 administrators) who collectively service assets totaling $35 trillion, and asset managers with collective Assets Under Management (AUM) totaling $10 trillion. Respondents service a mix of both traditional and alternative funds, including hedge funds, commodities, private equity, real estate, long only/ mutual funds, unit trusts, ETFs and partnerships. In this survey, the third in an annual series conducted by funds industry software provider Multifonds, the initial fears appear to have subsided, the challenges and predicted costs have significantly reduced and the industry is realizing the opportunities.
Expectations for the depositary costs associated with AIFMD are far lower this year compared to previous years and, of those who expressed an opinion, the majority (68%) now expect depositary costs to be less than 2.5 bps. This is at least a 50% reduction in estimates since 2013, when more than three quarters of those who expressed an opinion (77%) thought depositary costs would be in the region of 5–25 bps.
Reflecting these cost expectations, there is greater confidence (82%) that non-EU managers will now look to set up European operations to take advantage of AIFMD. Likewise, the industry doesn’t expect the same exodus of managers from Europe as a result of high costs; this year 53% expected EU managers to leave Europe to setup offshore structures to avoid the additional costs, a drop from 77% last year.
One of the biggest advantages is the AIFMD passport, which, once established, will help gather more assets in Europe according to 72% of respondents. AIFMD also looks set to achieve its goal of improving protection for investors, with 82% agreeing that this will be the case.
Keith Hale, Multifonds’ executive vice president for client and business development, comments: “As a regulation that came in response to the financial crisis in an attempt to regulate hedge funds, AIFMD seems finally to be emerging as a regulation that will bring some long term benefits to the industry. In previous years, the unclear cost of complying with AIFMD presented a real concern – the presumed high cost levels would be the tipping point for the Directive’s ultimate success or failure. With depositary costs in particular now looking to be far lower than expected, this year’s survey shows that those concerns have subsided and the outlook is more positive for AIFMD.”
In the meantime, 66% of respondents now cite reporting to regulators as their most pressing challenge. Hale continues: “While the outlook for AIFMD now looks more positive, regulatory reporting still presents an immediate challenge to firms that now need to report on a wider range of information. Fund managers must figure out how to marry their multiple systems together and then aggregate, store and report the resulting data. We found that only 33% of the fund managers responding have provisions in place so far for the reporting aspects of the Directive which suggests that while the outlook for AIFMD is positive, there is still work to be done to implement the regulation effectively.”
Survey Reveals 50% Reduction in Anticipated Depositary Costs Post-AIFMD
A survey of the funds industry has revealed a significantly more positive attitude to the regulation despite facing the imminent 22 July 2014 Alternative Investment Fund Managers (AIFM) authorization deadline.
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