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AIFMD could push funds to synthetics
03 January 2012
Custodian banks are concerned about how the depositary liability regime under the AIFM directive could affect asset allocation trends and complicate the investment process. Stephanie Baxter reports
Read more:
AIFM directive
ESMA
David Aldrich
Florence Fontan
European Commission
The depositary liability regime under the alternative investment fund managers’ directive (AIFMD) could push funds to move to synthetics and change the relationship dynamics between custodians and fund managers.
The most recent development in the directive was the European Securities and Markets Authority’s (Esma) advice to the European Commission on the directive’s level II implementation measures. This was meant to bring clarification on the vague sections of the liability regime, but industry participants say there are still a lot of issues in play.
In its advice, Esma defined when there is a ‘loss’ of a financial instrument held by the depositary or sub-custodian, and in what circumstances the depositary will not be expected to return it. Custodians will be liable to return assets if they are lost due to accounting errors or operational failures at the sub-custodian.
If the sub-custodian becomes bankrupt the custodian will be held liable...
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