Italian pension funds that were set up before November 15 1992 have until this Thursday to comply with regulation, which includes tighter investment limits and the requirement of a custodian.
These pre-existing pension funds, of which there are about 235, were previously left relatively free of Italian financial regulation. Following a Ministry of Treasury decree on May 31 2007, the pension funds were given five years to transition toward meeting the much stricter regulatory criteria.
However, while an extension might be given for certain aspects of compliance with the newly regulations, it is unclear whether Commissione Di Vigilanza Sui Fondi Pension, the pension fund regulator, would give extension with regard to the absence of a custodian. It is also unclear what the obligations of the custodian will be given regulatory changes under UCITS and AIFMD.
Furthermore, says Rome-based Hogan Lovells Partner Jeffrey Greenbaum, obligations on custodians under AIFMD transfers more risks and requires the casse to be more prudent.
In anticipation of the regulation, pension funds such as Monte Dei Paschi Di Siena began to put RFPs out for custodians last year. However, says Greenbaum, they are getting two different bids, and the difference between a UCITS bid and an AIFMD bid could be as high as 125 bps. Greenbaum suggests these RFPs have come too early as it is unclear what custodians obligations will be given the uncertainty around AIFM and UCITS.
(JDC)