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5th August 2015

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Ronan Daly, Partner at Centaur Fund Services, was recently interviewed on Albourne TV about the impact of AIFMD on fund valuations and how it impacts fund managers, fund boards and administrators. Drawing on his experience over the past two decades, Ronan assesses the impact of AIFMD on valuations and Depositary Lite services and offers his view of what the future holds for Managers,

Administrators and Directors as they adjust to this new regime. Here is a synopsis of the interview that was carried out exclusively for Albourne clients (www.albourne.com):

1. How does AIFMD impact the valuation process?

Traditionally, the roles and responsibilities of the Board of Directors and Administrator were well defined – the Board of Directors would appoint an administrator who would be responsible for valuations. To a certain extent, AIFMD has brought a level of confusion as to where responsibilities lie.

Fund managers now must take responsibility for valuations unless they appoint a third party valuer. It makes sense for managers to appoint an external valuer where possible and I think investors have a strong preference to remove the manager from the valuation process as much as practicable. It’s disappointing that very few administrators are willing to accept the appointment as external valuer. At Centaur we are happy to be appointed as external valuer as we feel that valuation is a core part of an administrator’s job.

2. Who is responsible for valuations under AIFMD – the Board, the Manager or the Administrator?

Historically, a Board would appoint an administrator to carry out the valuation function and so would have a claim against its Fund Administrator in the event of something going wrong. Now AIFMD has introduced managers into the equation, and so we need to consider if a Board can make a claim against the investment manager in the event that a valuation is incorrect and causes a loss to a fund. It would seem to me that a fund board will only be able to make such a claim if they include a specific valuation clause in the Investment Management Agreement (IMA).

At Centaur, we believe that a Valuation Service should be a core function of an Administrator’s Service offering. The role of the Administrator should be pretty simple: Firstly to verify that assets exist, then to value those assets.

As a result, we don’t charge any additional fees for this service. The Fund Administrator should be part of the process and should never take prices blindly.

3. How has AIFMD affected the Due Diligence process around valuation? 

We have seen a step up in Due Diligence over the past ten years, but believe that AIFMD has imposed more demands on managers to implement more Due Diligence on their service providers. The process is becoming more formalised and we are finding that Due Diligence is now taking place at least once a year with each of our clients. As managers have more ownership of the valuation function, they really need to spend more time ensuring that the valuation process is being carried out in a robust and consistent manner.

4. Do you see a Conflict of Interest for Administrators such as yourselves to offer Depo-Lite Services?

There is certainly potential for administrators to have a conflict of interest in overseeing their own compliance with AIFMD. Centaur has mitigated this by the development of a completely separate entity with different management, different processes and different procedures reporting into a separate board of directors. Although under the same parent company, our depo service is completely separate and independent.

[/vc_column_text][vc_empty_space height=”25px”][vc_separator type=”large” dh=”1″ color=”dark” align=”center” margin_top=”5″ margin_bottom=”25″][vc_column_text]                                        Interviewee Details:

Ronan Daly
Founding Partner

Centaur Fund Services Limited
13-17 Dawson Street, Dublin 2, Ireland
email: Ronan.Daly@centaurfs.com
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About Albourne Village TV

Albourne Village is a place for the alternative investment community to be seen and heard, to act and interact, teach and learn, amuse and recreate, yearn and earn. For more information, visit https://village.albourne.com

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