Alter Domus hosted a breakfast seminar in London entitled ‘AIFMD Depositary: Concrete solutions to the challenges ahead’.
Private equity and real estate funds will, as AIFs, fall under the scope of the AIFM Directive and will require firms to appoint an independent depositary in order to comply with the regulations. With over 10 years’ experience as a PE and RE specialist, Alter Domus has created a Depositary Services function in Luxembourg (subject to regulatory approval), and is also in the process of providing such services in the UK, to support managers under the Directive.
The depositary will be responsible for three key tasks: safekeeping of an AIF’s assets, cash monitoring, and oversight duties. To handle these requirements, Alter Domus has developed an in-house proprietary client portal called ISIWIS. Everything from the collection of subscription agreements, capital calls, ensuring subscription capital goes into the AIF’s cash accounts, down to shareholder registers and trade registers will be captured and warehoused in ISIWIS, to support managers who wish to become AIFMD-compliant.
Speaking at the seminar, Fabrice Buchheit, Head of Alter Domus Depositary Services, said that the strategy is a highly tailored one in which an assessment of the fund’s structure is made with the manager to establish the fund’s profile: “This profile will then drive the delivery of an operating memorandum that will identify and develop key lists of documentation and communication flows. We will match our processes with the fund’s processes, not impose our own. We will look at how the fund works and ensure that we have clear communication with the manager in order to perform our duties effectively as the appointed depositary.”

Alter Domus has long had a depositary function in Luxembourg, where the firm was established 10 years ago. Under the Directive, it will, as a non-bank entity, be allowed to act as a depositary for closed-ended funds investing mainly in non-financial assets.
“We are very focused on private equity and real estate, that’s our core business,” said Buchheit. “Our processes will be tailored to each fund to make the depositary function as seamless as possible. We will be supported with technology – our client portal makes it straightforward to build and centralise documentation flows in a streamlined way.”
However, not all AIF managers will want to become fully compliant from day one. For many, the option to continue marketing non-EU funds (i.e. domiciled in the Channel Islands) through national private placement regimes remains attractive.
Either way, both Jersey and Guernsey are making strides to ensure that AIFMs have the choice to continue with private placement, or become AIFMD-compliant in 2015: the date scheduled by ESMA to allow managers of non-EU funds to leverage the fund passport.
Mark Vidamour, a director at the Alter Domus Guernsey office, said that the Guernsey Financial Services Commission had announced that existing authorised regulation on closed-ended funds would stay in place. In addition, however, it has announced AIFMD marketing rules which will effectively bring into being Articles 42 and 43 of the Directive (on transparency and reporting) into Guernsey regulations.
“The aim of this is to aid national private placement in to the EU and the wider EEA,” said Vidamour.
Both jurisdictions have signed co-operation agreements with ESMA, and at the jurisdiction level, Jersey has signed 25 co-operation agreements, with Guernsey having signed 27.
This should give reassurance to non-EU managers who wish to continue using offshore jurisdictions, and which allows them to avoid becoming AIFMD-compliant or having to appoint a depositary. If, however, the AIFM is based in the EU (i.e. London) but running a non-EU fund, they will come under the full remit of the Directive, bar the need to appoint a depositary.
“Last week the GFSC also announced a consultation later this summer in respect of what they are calling the ‘AIFMD Equivalent Opt In Regime’. This will effectively be a full cut and paste of the Directive into Guernsey regulations. In Jersey, the Jersey Eligible Investor Fund, a new type of fund, will, it is hoped, become eligible for the fund passport under the Directive in 2015,” explained Vidamour.
Both islands are, then, positioning themselves to offer a dual approach. As Spencer Wells, a director at Alter Domus in Jersey, added: “Both want to continue to take advantage of the Private Placement Regime. In 2015, they will also want to take advantage of the ability to passport funds set up in each island into Europe. Both are working hard to develop products that will be fully AIFMD-compliant.”
