AIFM solution offers open architecture
“Our AIFMD solution will be an infrastructure platform with distribution support but it absolutely won’t be an active distribution model; that’s a key differentiator for us,” Gavin Byrnes (pictured), Head of Business Development UK, UBS Fund Services, states emphatically.
UBS Fund Services is looking to roll out its AIFMD fund platform towards the end of Q4 2014. It will be domiciled in Dublin and will act as the AIFM for non-EU managers (particularly U.S. managers) in a similar way to how UCITS platforms operate today. “UBS will act as the administrator and custodian to the AIF but it will be an open architecture solution from a trading counterparty perspective,” confirms Byrnes, adding:
“Open architecture is critical: You can’t tell clients which trading counterparts they can use. We will handle all the heavy lifting from a valuation, admin, collateral management, regulatory reporting and risk management perspective. The only thing that will be delegated to the manager is the portfolio management activity.”
UBS Fund Services today already operates various fund platforms in Dublin under the UCITS and QIAIF frameworks and as one would expect of a global organisation, over the years it has built out a comprehensive framework of policies and procedures to meet the complexities of all strategies supported on such platforms. Being able to offer that same level of support to non-EU managers wishing to establish EU-based AIFs made logical sense.
“We have a platform that we are able to scale and the genesis (of the AIFMD solution) was to leverage this capacity and support clients to focus on the distribution aspect of their business; the two went hand in hand,” says Byrnes.
When considering an AIFMD solution there are three options:
- An infrastructure solution, offering no distribution support to the investment manager;
- An infrastructure solution blended with ‘passive’ distribution support and;
- An infrastructure solution blended with an ‘active’ distribution service.
The third option, says Byrnes, will most likely be pursued by managed account providers but he cautions this by saying: “The active distribution solution means that the platform is constrained in terms of the number of managers they can actively support. They are not going to onboard two CTAs who are competing for the same pool of assets; it would need to be one or the other so there are strategy capacity constraints.”
By using option two, UBS Fund Services will offer the best of both worlds – a flexible, open architecture model coupled with passive distribution support that will have no capacity constraints whatsoever for its clients. “Our distribution support will give managers access to the largest distribution network in Europe; No other provider has the same scale and capability that we could potentially offer managers,” comments Byrnes.
For US managers serious about continuing their European marketing activities such private labelling AIFMD solutions offer a potential lifeline. The reality is that reverse solicitation is less flexible in application and national private placement rules are equally as difficult to assess at an EU Member State level; eventually, most managers serious about targeting European capital will have no choice but to have an EU-regulated fund.
“The key message is that we’re looking to bring on quality managers that have an excellent focus on what they’re doing in Europe. The platform will be highly resourced and will add significant scale for managers looking for an infrastructure solution to address their AIFMD concerns,” concludes Byrnes.
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