Consulting firm Veneziano & Partners has published a white paper on the future of delegation for investment management.
The white-paper is addressed to US fund managers intending to tap European markets and be mandated for investment management of EU domiciled funds.
“The Future of Delegation of Investment Management” aims at illustrating some of the main points surrounding the delegation of investment management and the ESMA opinions of summer 2017, with a view to providing a road map to US Fund Managers interested in dipping their toes in the European investment market.
The firm writes that delegation plays a pivotal role both in the ESMA cross-sectoral opinion and the investment management opinion and represents a space where there is high likelihood of increased costs due to ensuing heightened scrutiny by National Competent Authorities (NCAs).
“More intelligence work, policies, procedures and machinery will be required in order to allow US Fund Managers to run European operations going forward. Special attention will have to be paid on how functions are delegated from EU to non-EU entities in order to maintain alignment with the new principles created by ESMA opinions.
“In fact, it has become clear that delegation and outsourcing are seen as privileged avenues used by UK market participants to circumvent the loss of passporting rights. In particular, ESMA cross sectoral opinion, whilst recognising the efficiencies that can be achieved through outsourcing and delegation, also stresses the risks inherent to such practices, especially in cases of outsourcing to non-EU counterparts.”
“The way to Brexit is paved with unintended consequences,” says Attilio Veneziano, founder of Veneziano & Partners. “The generalised clamp-down approach on outsourcing and delegation adopted by ESMA in its opinion on investment management is tainted with the same lack of perspective on the bigger picture that characterised Brexit. ‘Non-EU’ is indeed a blanket categorisation – one that indiscriminately captures today what the UK will only become in an immediate future. Whilst it seems quite clear that these new ESMA principles and EU Commission proposed measures were conceived with the future of the UK in mind only, the new approach of heightened supervisory convergence affects other market participants today, who were never the intended ultimate recipients of the created principles.”