Europe: Potential AIFMD bottlenecks
More than 80% of alternative fund managers globally have yet to apply for authorisation under the Alternative Investment Fund Managers Directive (AIFMD) with their local regulator, according to research by BNY Mellon and FTI Consulting.
According to a survey by the two firms, 41% of respondents will submit their application in the first quarter of this year, with another 20% planning to do so between May and July.
This means fund managers are likely to experience bottlenecks during the authorisation process, which can take several months, says the research.
The survey estimates the average cost per firm of compliance at around $300,000, and an additional one-off project cost may add an extra $100,000-250,000 per institution.
BNY Mellon surveyed 50 firms across Europe, the US, Asia and Latin America, with assets totalling $4 trillion – of this amount, $20 billion will fall under AIFMD.
The compliance deadline for non-European fund managers seeking to market products in Europe is 2015, although a specific date has not yet been settled on. But even after the deadline, they may still be able market their funds via reserve solicitation and private placement, subject to each jurisdiction’s laws.
International: fund houses facing more scrutiny
Global fund houses, including hedge fund managers, with more than $100 billion in AUM may face greater scrutiny if proposals by international financial regulators are given the green light.
A January 8 report from the Switzerland-based Financial Stability Board and the International Organization of Securities Commissions says asset managers and other financial institutions (excluding banks and insurers) can create systemic risks via exposure to creditors, counterparties, investors and other market participants; or through liquidation of assets, which could trigger a decrease in asset prices or disrupt trading or funding in financial markets.
Hedge funds with either a nominal market exposure of $400-$600 billion or AUM of $100 billion-plus were also included in the review.
However, investment industry lobby group ICI Global argues that, unlike banks and insurance companies, “asset managers do not invest on a principal basis and do not take on balance sheet risk. Thus, a fund’s portfolio results – whether positive or negative – belong solely to the fund’s shareholders, and do not flow through to any other fund, to the asset manager, or to the financial markets at large."
ICI Global adds that due to their structure, operations and regulation, regulated funds and their managers “have not been and are highly unlikely to be a source of systemic risk”.
The review deadline for the assessment report, Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions, is April 7.
Vietnam: New foreign ownership rules
The Vietnamese government this month announced plans to relax foreign ownership. The move will allow for foreign strategic investors’ ownership to be increased from 15% to 20%, effective February 20. However, the limit on total foreign ownership limit in banks will remain at 30%.
Separately, Vietnam’s prime minister is expected to sign a drafted law to increase the cap of shares foreigners can own in listed firms. The proposal would allow foreigners to own 60% of voting shares in ‘non-conditional’ industries, up from the current cap of 49%.
The proposal will also cap foreign ownership limits in unlisted public companies at 49% of the entity’s voting shares – currently the cap is at 49% of total shares – and remove the cap entirely for non-voting shares.
Hong Kong: Reit reform needed, says Aprea
The Asia Pacific Real Estate Association (Aprea), a regional lobby group, last week expressed support for the Hong Kong government’s push to reform the city’s real estate investment trust (Reit) industry.
In response to proposals in a report published by the city’s Financial Services Development Council (FSDC) late last year, Aprea says: “Jurisdictions in the region are implementing proactive policies to capitalise on the demand and capture a larger share of the market and Aprea encourages Hong Kong to do the same.”
The FSDC’s proposals include: removing restrictions for Mandatory Provident Fund scheme holders seeking to invest in Reits; giving Hong Kong the same tax transparency treatment as other jurisdictions; allowing Reits to undertake limited property development activities; and encouraging the government to improve takeover code applications for local Reits.
Such problems have prevented Reits from taking off in Hong Kong, argues Aprea.
“Back-testing various Reit markets has shown that Asian Reits have generally outperformed bonds and general equities during the last five to 10 years,” says Lim Swe-Guan, Aprea chairman.