Uncertainty is the biggest hurdle in fund regulation transitions according to leading think tank
04 Oct, 2012
Legal professionals working within financial services say the uncertainty surrounding regulatory changes and the instability of the euro are their biggest challenges today.
The forum, hosted by DMJ Recruitment in association with Macfarlanes, was chaired by Bridget Barker – Head of Investment Funds and Financial Services at the law firm. The panel comprised of General Counsel from leading investment management firms including Edoma Partners, Patron Capital and CBRE Investors.
The overwhelming consensus was that the relative ambiguity of ongoing legislative amendments, such as the Alternative Investment Fund Managers Directive (AIFMD), are causing confusion. Although some technical advice was published last year, further clarity is needed on key issues including depositary liability and delegation to third countries.
Elizabeth Horner, General Counsel at CBRE Investors offered an example of a question mark surrounding the depositary provisions, “How do you value property as a private equity investment? Do you go by the red book valuation, or the seller’s opinion?”
Beatriz Meldrum, General Counsel at Edoma Partners, queried the economic implications of the proposed aggregation of depository and administration services and commented, “We know where the flags are but don’t have the answers. Ultimately investors may end up picking up the costs”.
The forum found that doubt surrounding legislative transition was compounded by the unpredictability of the single currency. While the future of the euro remains uncertain, there is confusion as to what will happen if the currency is not available.
Kendal Langford, General Counsel and Partner at Patron Capital commented that her firm’s fund documentation allows it to change the denomination of the fund to US dollars at the final rate of closing day, should the euro collapse. But the think tank concluded that ultimately, General Counsel would have to turn to foreign exchange controls for guidance, if the single currency was to disband.
Meldrum summarised that, “it is the uncertainty that is killing us”.