Depo-Lite: A new role for the Fund Administrator

The implementation of the Alternative Investments Fund Managers Directive (‘AIFMD’) in July 2013 gave rise to a number of new opportunities for fund administrators within Malta.

Before the onset of AIFMD, the role of the fund administrator was clearly defined, with accounting and posting of trades, accruals and revenue income, NAV calculation and shareholder transfer registry services, providing the core elements of the business. Following the implementation of AIFMD however, the fund administrator has increased opportunities to provide additional services to funds.

The role of the depositary has expanded from one of simply holding assets and providing a custody service, to providing a comprehensive oversight of the fund’s management of its cash-flow, operations and compliance with the fund’s prospectus. Some of these services can be delegated to third parties such as administrators; the fund administrator can therefore look towards providing additional services to his client, such as overseeing their fund, monitoring its cash flow and also in some instances, acting as a depositary to the fund.

Under Article 21 of AIFMD, an EU fund manager is obliged to appoint a depositary for each EU fund that he manages.  Non EU funds managed by an EU fund manager, who wish to market them in the EU through a private placement, are subject to a ‘Depo Lite’ which as the name implies is a lighter version of the traditional requirements of Article 36. The lighter version affords the ability to share the responsibilities of the Depositary between more than one entity; usually split between the broker and the fund administrator.

These roles are required to carry out the following three duties:  to monitor the cash-flow of the fund; to keep a record and verify ownership of the fund’s assets; and to monitor the fund’s operations to ensure it is compliant with its prospectus. To a certain extent, two of the functions (cash flow monitoring and overseeing the fund’s operations) were already part of the fund administrator’s ‘job description’; however verification of ownership of assets is usually undertaken by a prime broker.

In a depositary role, the fund administrator would need to ensure that the fund’s cash-flow is being properly monitored, especially the funds received from investors who have subscribed to the fund, and to ensure all cash is properly booked and reconciled within the fund’s chart of accounts; this requirement significantly ties in with the fund administrator’s existing role and responsibilities.

The custodian’s additional responsibility for monitoring the fund’s operations to ensure compliance with the prospectus overlaps with the current role undertaken by a fund administrator, who already needs to be aware that the fund is compliant with its own prospectus.

Malta has placed itself on the financial services map within the EU over the past few years and has been voted ‘the most favoured destination’ in 2013 for EU Managers by Hedge Review magazine; an honour which has been a long time coming.

Not only has Malta withstood many of the challenges resulting from the global economic crisis, it has also continued to grow its diverse economy, including one of the fastest growing financial services centres in the world. Following its movement from an offshore to an onshore jurisdiction, today’s Malta is a jurisdiction that boasts an actively supportive government and a robust regulatory framework; qualities associated with a well-established and reputable jurisdiction, both sustainable and effective in regulating a range of Financial Services.

It also boasts a low cost business environment; both in human resources and office rental as well as a low cost of living. However, this low cost advantage is not at the expense of low quality service; Malta offers a

highly skilled and highly qualified workforce, available at competitive rates and for all areas of their ever expanding economy.

The costs of establishing and managing a fund in Malta is also significantly less than doing so in the more quoted fund jurisdictions. Investment managers are however catching on, with more than 620 fund licences issued by the regulator.

Malta, once described as the ‘best kept secret in the funds industry’, is now widely recognised as one of the principal fund domiciles within the EU combining operational and service excellence with attractive pricing for all your fund requirements.

Abacus is soon to launch its Depo Lite service from its Malta office. For more information on our Depo Lite service or if you would like to know more about what Malta has to offer and how we might be able to assist you, please email at enquiries@abacusiom.com or telephone +356 2065 0500.