10th Apr 2018

UCITS and AIFMD | Regulatory Challenges for Treasury & Finance

Changes to UCITS and AIFMD are coming and financial institutions. Finance professionals need to know what these changes are and how to respond to them. In this video, James and Dave cover everything from convertible assets, to the current problems with audit management data:



Key changes to UCITS and AIFMD that treasury and finance professionals need to be aware of

This is more applicable to financial institutions and finance professionals who are looking after a UCITS fund or an AIFMD fund today. They will have to adhere to both the directives, which necessitate that the funds have easily convertible assets within them to cover any capital loss within the investments held by those collective schemes.

So, if you were to go out today and place your money in an index fund or a collective fund, a part of that fund has to have liquidity within it. The problem for a fund managers is that they have an audit management system which instructs trades through to a custodian via a broker, and then you have the custody record.

So, you have the audit management record, which is created by the actual fund manager and then you have the record at custody. There isn’t anywhere in between, so you have the audit management data that comes from the bank and then the custody record is usually delayed. So, when this happens you often have a mismatch because one settles before the other. The liquidity that the fund manager needs to be aware of isn’t necessarily up to date. There are issues if you don’t keep within that range and the fund doesn’t become compliant after a certain point.

This means that treasurers or oversight managers need sight of the liquidity within each one of those funds to ensure that they have convertible assets to hand, including cash and money markets, as well as easily convertible instruments which you can take to cash without a loss or without the loss of capital. So the preservation of the initial capital is going to be important within that pool, therefore treasurers and oversight managers within those areas will have to keep a close eye on the liquidity of availability within those funds.