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Global fund industry survey reveals positive outlook for aifmd and 50% reduction in anticipated depositary costs

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23 June 2014
United Kingdom

Multifonds, a leader in investment fund software, today announces the results of its latest survey on the impact of the Alternative Investment Fund Managers Directive (AIFMD) on the fund industry.

Respondents from the funds industry, who collectively manage and administer assets exceeding US$10 trillion and US$35 trillion respectively, are showing a significantly more positive attitude to the regulation despite facing the imminent 22nd July AIFM authorization deadline. In this survey, the third in an annual series conducted by Multifonds, the initial fears appear to have subsided, the challenges and predicted costs have significantly reduced and the industry is realizing the opportunities.

Expectations for the depositary costs associated with AIFMD are far lower this year compared to previous years and, of those who expressed an opinion, the majority (68%) now expect depositary costs to be less than 2.5 bps. This is at least a 50% reduction in estimates since 2013, when more than three quarters of those who expressed an opinion (77%) thought depositary costs would be in the region of 5-25 bps.

Reflecting these cost expectations, there is greater confidence (82%) that non-EU managers will now look to set up European operations to take advantage of AIFMD. Likewise, the industry doesn't expect the same exodus of managers from Europe as a result of high costs; this year 53% expected EU managers to leave Europe to setup offshore structures to avoid the additional costs, a drop from 77% last year.

One of the biggest advantages is the AIFMD passport which, once established, will help gather more assets in Europe according to 72% of respondents. Once the passport builds momentum, the well-established fund domiciles stand to benefit most, particularly Luxembourg and Ireland, which respondents identified as the domiciles of choice. AIFMD also looks set to achieve its goal of improving protection for investors, with 82% agreeing that this will be the case.

Keith Hale, Multifonds' executive vice president for client and business development, commented: "As a regulation that came in response to the financial crisis in an attempt to regulate hedge funds, AIFMD seems finally to be emerging as a regulation that will bring some long term benefits to the industry. In previous years, the unclear cost of complying with AIFMD presented a real concern - the presumed high cost levels would be the tipping point for the Directive's ultimate success or failure. With depositary costs in particular now looking to be far lower than expected, this year's survey shows that those concerns have subsided and the outlook is more positive for AIFMD."

In the meantime, 66% of respondents now cite reporting to regulators as their most pressing challenge. Hale continues, "While the outlook for AIFMD now looks more positive, regulatory reporting still presents an immediate challenge to firms that now need to report on a wider range of information. Fund managers must figure out how to marry their multiple systems together and then aggregate, store and report the resulting data. We found that only 33% of the fund managers responding have provisions in place so far for the reporting aspects of the Directive which suggests that while the outlook for AIFMD is positive, there is still work to be done to implement the regulation effectively."