This article talks about one of the biggest decisions for fund managers under AIFMD, which is whether or not to appoint an external AIFM.
In the US, especially, fund managers are getting to grips with the concept that someone else can take over and run the governance function and do all the necessary risk management without necessarily giving up too much control," says Kavitha Ramachandran from Maitland.
"In terms of characteristics, they are looking for experience and expertise within the management company, and whether or not the AIFM can provide a one-stop-shop solution (by also hosting sub-funds on a platform) – there is a general view that managers prefer to go to one service provider and avail of a consolidated service rather than shopping around to choose multiple providers. Fund managers should also consider the size of the group providing the AIFM service, with respect to strength of balance sheet, given that any such undertaking is a long-term commitment. "Gone are the days when a small team of people can operate as a management company. Substance has become an important element under AIFMD. We have clients coming to visit us in person to make sure we have the right infrastructure, human resources and the like, so substance really matters," says Ramachandran.
Then of course there's the fee consideration. Launching an AIFMD-compliant fund and appointing an external AIFM comes with additional fees but Ramachandran says that managers understand that they are paying those fees "for clear value-added services".
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