UK depositaries get green light

Private equity firms concerned with the complexities and time associated with hiring a depositary — one of the requirements of the Alternative Investment Fund Managers (AIFM) directive that becomes law on 22 July — can begin preliminary work now, according to recent communications from HM Treasury, the UK's tax authority. 

HM Treasury also confirmed that the next draft legislation will permit so-called third-country fund managers to use a one year transitional period to market into the UK, ending any ambiguity on this topic stemming from Treasury’s current AIFM draft legislation. 

UK private equity firms subject to the AIFM directive had been unsure exactly how to go about hiring a depositary given most firms plan to take advantage of the transitional period to comply with the rules. Firms were initially only permitted to begin working with depositaries once they were in full compliance with the AIFM and authorized by the Financial Conduct Authority.

But by allowing depositaries to begin working with private equity firms before fund managers receive authorization it will relieve the pressure and workloads on both depositaries and private equity firms, said David Bailey, chief executive of Augentius Depositary.

“We are now starting to initiate the take-on processes with some managers,” said Bailey, who added that fund managers “are keen to get on with marketing their funds when summer’s over.” 

Under the AIFM directive, depositaries will act as an investor safeguard responsible for safekeeping funds' financial assets, monitoring cash flows and ensuring a GP complies with its own governing documents.