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The Depositary Dilemma

The AIFM and UCITS Directives assign strict oversight duties to fund depositaries. The reverse burden of proof on depositary controls and the possible restitution liability on assets held in the custody chain put a big strain on operations. Add to this dilemma the very thin margins in this business and the constant time pressure from large transactions, and the headache of a Head of Depositary is complete.

We understand this because we’ve been there ourselves. Having led a depositary business in the past, CEO Bert Boerman launched the company out of frustration that the depositary function was not more efficient.

But just as depositaries need to demonstrate their effectiveness, we also have a duty to make sure that others in the industry feel the same way. So we asked some depositary heads a number of tough questions:

  • How confident are you that the procedures that you designed to fulfil your depositary duties are consistently and accurately executed? (eg. controls on subscriptions & redemptions, cash monitoring, transaction controls)

  • Are you able to efficiently verify and track the ownership of assets held by the fund, including alternative assets?

  • How much time do you spend searching for information to execute your oversight duties?

  • How difficult is it to produce accurate reporting such as audit confirmations or ad-hoc information requests (or even worse, a regulatory inspection)?

  • Are you confident that the systems you use to record all this information and documentation are not prone to accidental human errors or ommissions?

  • And how much time do you spend chasing your team, your clients and your counterparties to obtain missing data and documents?

The feedback I got was rather unanimous in indicating that there is…, well let’s say “a LOT of room for improvement!”.

“I don’t want my team to have to waste time looking for the information”. This sentence has been one of the more recurrent wishes shared throughout my conversations with Depositaries since last year.

And they’re right. The time Depositaries spend searching for information is time not focusing on higher quality control tasks and improving the general oversight of their business. They need to guarantee they comply with all the regulations, because the risks of fines or reputational damage due to non-compliance are high.

The good news is that with dedicated and modern technology, it is possible to produce almost any report in just a few clicks

Why would you do the same reports over and over, manually, and with an increased risk of mistakes when you could have a tool to do it in real-time for you?

Have a look here at how easy it should be to create a report on a fund that you can share with your stakeholders.

4 Main Criteria to select your ideal provider

  1. Technology. Good news for you: the new generation of tech is affordable, fast to set up, and flexible. But technology alone is not enough, and at the same time, it needs to be complemented by an excellent level of business expertise. You need to make sure that the people behind the technology have a deep understanding of your business and goals and can guide you to set up the perfect environment adapted to your needs to guarantee your success.

  2. Implementation speed. You don’t have time to waste, and you need to improve your efficiency quickly while cutting costs. While it is customary in the market to offer a set-up speed that lasts from 3 to 12 months, did you know that you can get the first ROI with the proper technology and approach after only three weeks? For that, you need to have the right technology, methodology, and pragmatic approach: one process at a time with quick iterations.

  3. Flexibility and adaptability. Your ideal technology shouldn’t overlap with what you already have. It should be modular, bridging the data silos by connecting them. And it should be able to automate the processes you are managing manually.

  4. Support. And by support, I don’t mean only technical. I mean real business expertise to guide you in creating robust processes and involving the people from your business from the start to guarantee an efficient and quick transformation.

Did you know that you can find all this in one place? Curious? Give me a call!

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