20 February 2015

Hedgeweek: How to access Europe using third party AIFMs

By 2018, any AIFM, EU or otherwise, will have to have an AIF for marketing and distribution purposes. The benefit of appointing an external ManCo is that a New York-based manager can safely enter in to a sub-advisory relationship, where they join a platform and the Investment Manager delegates the portfolio management function back to them. At the same time, that manager can freely market their AIF, in full knowledge that all the regulatory and compliance demands are taken care of by the outsourced AIFM. And that is a major advantage to US managers as it immediately circumvents one of their biggest fears: namely complying with remuneration rules. 

“What we’ve done at ML Capital is to provide a complete solution set. One being the Montlake QIAIF platform, the second being the launch of ML Management Ltd, which is our AIFM ManCo. “The idea is that by doing all the heavy lifting, we allow the manager to focus on running their strategy, whilst we take care of operating the new fund structure for them and supporting their asset raising ambitions. For managers operating in the US, by using a third party AIFM and platform, it removes the risk of them getting caught up in the remuneration rules,” confirms Richard Day, COO of ML Capital. An important consideration for managers when selecting an AIFM is the depth of operational expertise in areas such as Annex IV reporting. At Cordium, they have created what they call the Cordium Total AIFM Solution (CTAS); a Malta-based AIFM solution. 

Annex IV is a challenge. That’s the one area that managers have been struggling with. The point of using something like CTAS is that the manager doesn’t have to worry about the burden of Annex IV as they know our team at Mirabella Financial Services will take care of it. The idea of the report is to provide systemic information in an aggregated form. The FCA has had IT issues getting their reference numbers and access to GABRIEL in a timely fashion, some managers have received messages telling them to submit via email while others have had access to GABRIEL but the scheduling has not been right. 

One of the key elements of the directive, in relation to risk management, requires managers to have an intimate working knowledge of the strategies they propose to market in Europe. As such, any hosted AIFM solution must have highly qualified risk professionals that can work with a spectrum of investment strategies; PERE funds as well as hedge funds. “We’ve written countless manuals, upscaled our operational procedures, developed different risk reporting frameworks. We’ve got an array of documentation and monitoring programmes that try to anticipate different variations in clients’ strategies. We’ve embraced that challenge, as any hosted AIFM should,” states Bobby Johal, Managing Consultant at Cordium.. 

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