The third party AIFM: a multiple benefit solution
DMS Offshore Investment Services identified the need to create an AIFMD solution for its clients three years ago when it opened its Dublin office. It was one of the first firms to establish an authorised Alternative Investment Fund Management Company in both Ireland and Luxembourg.
DMS boasts a 21-person team focusing on AIFMD and as Derek Delaney (pictured), Managing Director of DMS Offshore Investment Services (Europe) Limited comments: “DMS were cognisant of the fact that its Cayman client funds were going to encounter significant fund governance challenges when dealing with AIFMD. As directors of these funds, we’ve been proactively engaging with fund stakeholders over the last two years to help them understand the challenges that they are likely to face and developing solutions accordingly.”
Reverse solicitation and pursuing private placement in individual member states are two options available to managers who wish to continue marketing their funds without launching an AIF. The third and fourth options pertain to whether the manager is Europe-based or US-based: both of which will see DMS use the AIFM license to full effect.
“There’s a split in how our European and US clients are dealing with AIFMD. EU managers are typically setting up their own funds and with that fund structure they are putting in place an independent fund management company; when we come into that structure we provide 16 management functions. We delegate the investment management function by appointing them as the investment manager.”
Where the AIFM solution provided by DMS becomes useful is when some EU managers need to demonstrate segregation of investment management from risk management. “It’s difficult if you’re a five-person hedge fund. These managers are utilising our ManCo to support their EU funds,” says Delaney.
“A significant part of our offering is DMS Risk Management Solutions (RMS) Group. AIFMD is about risk mitigation. What we’ve concentrated on is making sure we have a top tier risk solution in place. So they are the main elements of our AIFMD solution: the registered ManCo (AIFM) in Ireland and Luxembourg and the RMS group that underpins everything.”
Unlike their European counterparts, US managers are less predisposed to setting up their own funds. In that sense, the AIFM solution provided by DMS is more comprehensive as they are able to piggyback on its AIFM license and launch an AIF.
“What we say to them is ‘Look, we have a platform in place where we are responsible to the regulator, we have the administrator, depositary, legal services all in place. If you want to have a fund we can get that up and running for you in six to eight weeks’,” says Delaney.
“We assign a dedicated project manager through to launch and they guide the manager through the entire process. If the manager is SEC-registered then getting approved in Luxembourg or Ireland is a simple process: potentially two to three weeks. We get the administration and custody agreements in place, get the fund prospectus ready with all the necessary disclosures and advise the central bank on the countries the fund will be distributed in to; confirming that such a function will be delegated to the US manager.”
What is also important, says Delaney, “is the collective experience we can offer during the launch process as well as the ongoing support with Annex IV reporting to the local regulator.”
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