Updated on: June 12, 2024
By: Michael Mekaeel, Head of Depositary
Global markets and economies have evolved significantly since the Alternative Investment Fund Managers Directive (AIFMD) went into effect across the European Union in 2013. This regulation has played a critical risk management role that has helped ensure the integrity and security of the financial markets by creating increased transparency, accountability, and oversight of complex financial instruments such as hedge funds, private equity, and other alternative investment funds.
This regulation requires AIFs to engage a depositary. Hired by a fund but viewed by regulators as a “watchdog,” depositaries are tasked with preserving the interests of the end investors in compliance with AIFMD.
To be successful in upholding its commitment to protecting the interests of both the fund and the end investor, a depositary must remain steadfast in maintaining objective independence while carrying out its duties, including raising concerns to regulators about their clients’ compliance efforts.
The relationship between a depositary and a PE firm can be viewed as merely a legal obligation, however, there are steps firms can take in the evaluation process to build the foundation for a strong partnership that helps uncover compliance concerns for proactive mitigation.
What to Look for in a Depositary Services Partner
In the years since AIFMD went into effect, regulators have become more astute in their understanding of the depositary role, which has enhanced their ability to attract talent and to conduct more in-depth inspections and examinations.
Getting the depositary relationship right is critical to your business, so there are a few key attributes to keep in mind when choosing a provider:
The Benefits of Integrated Depositary Services
An important consideration in choosing your partner is to examine the benefits of choosing an integrated provider. Because an integrated service provider can seamlessly coordinate with fund administration, accounting, and your transfer agent through practical information sharing on the back end, you save time by not having to send the same data to multiple providers and you create less room for error. Because they will have relationships across your organization, an integrated provider will ultimately gain a deeper, more comprehensive understanding of your fund profile, your processes, and your needs than a standalone provider.
Gen II: Your Answer for Unconflicted, Objective Depositary Services
At Gen II, we pride ourselves on our ability to provide unconflicted, objective independence that is combined with a commitment to professional relationship building and the collaboration necessary for a successful depositary services partnership. Our continuous oversight and monitoring are tailored based on the nature, scale, and complexity of your strategy and your organization. These factors coupled with our active industry engagement and intimate understanding of the regulatory requirements make us a worthy choice to fulfill your depositary requirements, safeguard the end investor’s interest, and protect your brand.
If you have questions, contact your Client Service Manager or contact us.
Published on: April 3, 2024
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