Insights

Minimise effort and risk with AIFMD reporting

Minimise effort and risk with AIFMD reporting

Perspectives

AIFMD depositary pricing and capital

Taking a risk intelligent approach

AIFMD makes depositaries subject to far more detailed and prescriptive rules, which are driving changes to operational risk assessment, pricing structures, capital requirements and the depositary’s interaction with other industry participants.

This White Paper seeks to address these fundamental considerations by offering a methodology for evaluating depositary capital requirements and for determining a risk-based pricing strategy post AIFMD. To benchmark our analysis against industry trends, we also conducted a survey of 14 major European depositaries.

Key findings

Download white paper

AIFMD depositary pricing and capital

  • Depositaries need to reassess their risk profile post AIFMD and respond by either accepting, mitigating, transferring or avoiding these risks, dependent on the risk parameters set by senior management. A major part of the risk response will need to focus on the control environment, capital and pricing.
  • Depositaries need to adopt risk-adjusted pricing, based on individualised scoring in relation to a range of predetermined risk factors weighted in alignment with the organisation’s risk appetite.
  • Key risk pricing factors applied by depositaries include contractual agreements, automated reporting, network overlap and number of prime brokers. These are followed by jurisdiction of assets, type of assets, credit risk, segregation arrangements and unaffiliated entity.
  • Our analysis indicates that the impact of capital on depositary pricing is expected to be limited in the vast majority of cases and this is borne out in the survey results.
  • However, the impact of increased capital to the depositary’s cost-base could be material for depositaries with weaker control frameworks or with limited integration of sub-custody networks.

The depositary survey revealed that:

  • 77% of depositaries are ready for the onboarding of their entire client base by 22 July 2014
  • 85% of depositaries plan to increase headcount as a result of AIFMD
  • The top 3 concerns for depositaries are: prime broker interaction, liability and reliance on other parties for information
  • 100% of depositaries opted for contractual arrangements as their solution to address the issue of depositary liability with prime brokers
  • 62% of depositaries have developed a pricing matrix to take account of the new standard of depositary liability
  • 55% of depositaries cite a risk premium as the most impacting factor on depositary fees as a result of AIFMD
  • 62% of depositaries consider that AIFMD will impact on their internal capital requirements
  • 31% of depositaries plan to address the cash monitoring requirements by leveraging off a common utility with fund accounting

AIFMD depositary webinar

Visit the Deloitte Link n’Learn archive to view a recording of our AIFMD depositary webinar discussing the White Paper.

Agenda:

  • The changing risk and cost profile for depositaries
  • Operational impacts
  • Pricing strategy
  • Capital considerations
  • Findings of our European depositary survey

Speakers:

  • Brian Jackson, Partner – Investment Management Advisory, Ireland 
  • Jean-Philippe Peters, Director – Risk and Capital Management, Luxembourg
  • Michael Booth, Senior Manager – Investment Management and Private Equity, UK
  • Patrick Rooney, Senior Manager – Investment Management Advisory, Ireland

Download the webinar presentation

People

Michael Hartwell

Partner - Audit

People

Brian Jackson

Partner - Audit

People

Deirdre Power

Partner - Tax

People

Patrick Rooney

Senior Manager - Investment Management Advisory

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