New clients coming to Apex Fund Services these days are asking a very different set of questions. The traditional list of due diligence and service provision questionnaires are secondary and assumed by potential clients with the ability to provide FATCA services, Form PF, OPERA reporting, Front end integrations, GIPS compliance, risk reporting, depositary lite, AIFM management company services foremost in their minds. There are many overlaps between increased regulation both sides of the Atlantic such as Form PF in the US and some of the required AIFM reporting or SEC Rule 506 and the CBI Corporate Governance Code and so on. The key from service providers is extraction and delivery to the client and to be ahead of the game so whatever reports needed are at hand.
As a global fund administration company with 33 offices in 24 separate jurisdictions the inward flow of traffic into Europe is very quickly creating tailbacks at the doors to entry but thankfully support is to hand and the roadmaps are becoming clearer.

Going far beyond the traditional definitions of administrator we find ourselves working with our investment fund managers to provide organizational and operational frameworks that adhere to the requirements of AIFM directive. In all the new AIFM compliant manager will have 169 separate obligations to comply with, quite the onerous task. More than ever, service providers need to be accountants, analysts and data miners to convert each aspect of the data that we produce relating to the portfolio, transfer or share registry, cash-flows into accurate and timely, T+0 same day in some cases, reporting to fulfil the needs of investor, regulator or tax authorities as the case may be.

The complexities relating to the latest tide of regulation to wash over Europe don’t stop at purely a set of obligations. Given the AIFM directive is being implemented in a staggered timeframe across Europe with many derogations away from local depositary or timing of replacement of private placement regime it further complicates the choices for the client as to where may be most suited to domicile their fund. To date 14 countries have transposed the directive into law, 12 within the deadline, with the rest of Europe at draft or partial implementation stages. The directive, whilst formally launched across Europe effective July 22 of this year has allowed Member states a one year transitional period. Whilst providing some relief in certain jurisdictions changes of the directive are still being imposed on the managers that fall under AIFM whether authorized or not.

Apex has focused on integration and straight through processing from front end to back end services over the last number of years in order to ensure that our databases of client information could be ready to adapt to the waves of additional regulation and reporting above, thus providing our clients with the tools to meet their needs under the directive.

Key considerations in meeting the demands of the post-AIFM world have forced service providers to re-design current offerings and re-train staff in delivering those services. Third party depositaries will require significantly more robust due diligence information from the administrators they work with to gain comfort from reliance on net asset valuations and share trading processes and administrators will need to begin to build additional controls around the reliability of this information into their internal and external audit frameworks. There remains some ambiguity as to the final formats of the reporting required but from our clients’ perspective it is crystal clear that they are looking to Apex to deliver what is needed as we have continued to roll out a continuous stream of new services around this reporting.

Taking a bird’s eye view of all of the changes that are going on, it is clear that it is driving particular trends across the industry. Administrators that have not been early on adopters of technology that allows clean and efficient extraction of this information for their clients will struggle to catch up and barriers to adopt the right technology along with depleted revenues of the last few years may lead to some bottom feeding at the lower tier with mid to large size administrators gaining market share in US or Europe.

Existing consultants and new emergent consultants offering Management Company ‘plug and play’ solutions have entered the arena quickly post July 22nd. AIFMD specific software that provide solutions to much of the new reporting are hungry for databases to sit on top of providing outsourced risk management as an approved provider of same. An entire pan-European wave of new services and technology solutions are popping up. Clients need a consolidated reporting package from their administrator which is what Apex Technology solutions, a parallel company, has worked hard to do to avoid the need for multiple service provider solutions to be presented and increase costs unnecessarily.

It is certainly an exciting time turning over a new chapter as the drawbridge of Europe gets raised for good not long after celebrating the 25 year anniversary of the first UCITS product.

Shall we be celebrating AIFMD in the same way in 2038?- I hope to be playing golf in the west of Ireland safe in the knowledge that ESMA had made it safe for investors to go back in the water having created a safer European Fortress of regulation.