CACEIS NEWS 35

The Asset Servicing Journal

october 2013 n o. 35

www.caceis.com

AIFMD will help the international development of OPCIs p.5

EDHEC-Risk Days North America 8-9 October in New York p.7

CACEIS AIFMD Roadshow 15 October in Amsterdam p.7

Thierry Gaiffe, Paref Gestion

CACEIS extends its European depositary network with two new branches in Belgium and the Netherlands By opening two new depositary branches in Europe, CACEIS helps fund managers comply with and take full advantage of the AIFMDirective. p.2 Cash flowmonitoring under the AIFMDirective CACEIS adapts its cash flow monitoring for private equity and real estate funds. p.2 Real estate funds: German Asset Management is increasingly global Asset servicing providers need to become global to handle new challenges. p.3 CACEIS playing key role in Luxembourg’s growing real estate fund market Luxembourg – a leading European domicile for regulated real estate funds. p.4 A delegated risk management solution for AIFs Investment management companies can delegate their risk management function to CACEIS to ensure they remain in full compliance with AIFMD. p.4 AIFMD requires French SCPI managers to appoint a depositary CACEIS’s PERES team is helping asset management companies take full advantage of AIFMD and enhance real- estate fund distribution in France and the rest of Europe. p.5 New timelines for FATCA compliance Notice 2013-14 released by the IRS on 12 July 2013 revises timelines but has not affected the core principles of CACEIS’s FATCA implementation project. p.6

Real Estate Investment and Servicing at Centre Stage

kets have now calmed, real estate investment remains a popular way to diversify portfolios with a key feature of an attractive stable income return. Real estate fund services are a core area of CACEIS’s business and we have considerable ex- perience in providing high levels of servicing to real estate clients worldwide. With a dedicated PERES (private equity and real estate servicing) team consisting of fund servicing specialists, we can provide bespoke servicing on a single or multi-jurisdictional basis through our offices in Europe, North America and Asia. This juris- dictional reach enables us to assist clients on a global basis and we are able to provide specific regulatory and compliance oversight for each real estate fund whilst coordinating information at asset level in complex multi-jurisdictional structures. Our proven track record of servic- ing real estate funds and our confirmed repu- tation among the real estate community can also be evidenced by the numerous mandates recently won by our principal European cen- tres of excellence in Germany, Luxembourg and France, many of which are detailed in the “New Business” section of this publication. CACEIS’s PERES team is responsible for admin- istrating some €50bn in real estate assets and is adept in assisting not only pre-existing struc- tures, but can leverage its global expertise to of-

fer advice on the most appropriate structure, ve- hicle and jurisdiction when setting up any new real estate fund. From our experience of work- ing with some of the world’s leading real estate investment funds, we know that we can add the most value to our clients’ business when we are involved at all stages of the fund set-up and in- vestment lifecycle, and as our services are based on robust technology platforms, we can achieve significant administrative efficiencies and mini- mise operational risks. The strength of CACEIS’s offer to real estate funds is however not just in our real estate ex- pertise, jurisdictional know-how and sophisti- cated IT tools. It lies in the integrated nature of CACEIS’s entire service offering which covers the whole spectrum of asset servicing activities and is the reason why many real estate clients award CACEIS a global mandate for their funds. Our offer extends to custody and depositary, in- vestor services, and customised reporting, along with treasury services, bridge financing and corporate secretarial administration. Having all these services available enables real estate cli- ents to deal with only a single provider for all their needs, which serves to increase efficiency and mitigating risks. Finally, we add exceptional value to a client’s business by outsourcing the entire back-office, which enables them to focus resources on core investment-related activities and thereby maximise investor returns ■

JOE saliba, Deputy CEO, CACEIS Group

T hroughout the year, CACEIS takes part in a wide variety of industry events dedicated to specific sectors of the fund management and fund servicing business. This October, CACEIS is taking part in EXPO REAL, the International Trade Fair for Property and Investment which has been held annually in Munich since 1998. Real estate investment has grown in popularity, and subsequently features in an increasing number of investors’ portfolios especially since the 2008 crisis, largely due to its negative correlation with traditional equity mar- kets that afforded investors a safe haven from the recent market turmoil. Even though equity mar-

About EXPO REAL

The International Trade Fair for Commercial Property and Investment EXPO REAL, will take place from 7 to 9 October 2013 in Munich. The largest B2B trade fair for commercial real estate in Europe focuses on networking, market orientation and valuable business contacts. EXPO REAL participants cover the entire spectrum of the real estate industry: project developers and managers, investors and financiers, corporate real estate managers and representatives from economic regions and cities. We look forward to welcoming you to halle B1, Stand 541 . Key people from our international offices will be on hand to discuss our bespoke solutions for your specific needs.

7-9 October

2 caceis news - No. 35 - October 2013 products and services CACEIS extends its European depositary network with two new branches in Belgium and the Netherlands

By opening two new depositary branches in Europe, CACEIS helps fund managers comply with and take full advantage of the AIFM Directive.

A s part of CACEIS’s ongoing efforts to expand the service offering for its global clientele, the group has opened two new depositary bank branches in Belgium and in the Netherlands. CACEIS is an experienced provider of depositary services in the global marketplace and its depositary network covers a broad range of countries in the European Union. By open- ing these new depositary branches, CACEIS is extending its solid expertise in providing depositary and custody services to clients operating in the Belgian and in the Dutch market, in addition to the fund administra- tion services CACEIS in Belgium and in the Netherlands currently provides. Joe Saliba , Deputy CEO of CACEIS commented, “Clients have long relied upon CACEIS’s Belgian and Dutch fund administration offer, now we are bolstering that offer by bringing the group’s depositary banking and custody expertise to the Belgian and the Dutch markets. By doing so, our clients can benefit from a full-fledged asset servicing solution. For CACEIS, our clients and their investors, the safety of invested assets is fundamental, and CACEIS in Belgium and in the Netherlands will play a key part in ensuring the highest level of security for those assets.”

Challenges and Opportunities for AIFMs With the implementation of the Alternative Investment Fund Managers Directive (AIFMD) on 22nd July 2013, the launch of CACEIS Brussels and Amsterdam based de- positary banks comes at a critical moment for most asset managers and institutional cli- ents. Fund managers with products that fall within the scope of AIFMD have to comply with the directive’s requirements. Thanks to the AIFM passport, they may expand distri- bution of domestic funds outside their home country. Fund managers with products domiciled in several countries may restructure their fund ranges as well as their company structure. Non-EU fund managers will probably benefit from the AIFM passport from 2015 and will be able to manage EU AIFs and/or market EU and non-EU AIFs to European investors under some conditions. As an experienced partner in the AIF market, CACEIS can allow fund managers to benefit from a comprehensive package of services, save both time and money, increase efficiency and ensure they are fully compliant with the new regulatory environment. Engaging an expert partner able to support AIFMs will be a key benefit when setting up new funds and servicing structures. The cross-border registration and distribution of AIFs will inevitably require a broad expertise and a more technical ap- proach. The assistance of a service provider sufficiently experienced in the cross-border environment will be a key success factor in

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© Jenifoto - Fotolia.com

helping AIFMs seize new business develop- ment opportunities beyond their domestic borders. CACEIS will also be able to offer all services required by clients promoting investments under the UCITS regime. Furthermore, having received approval from the National

Bank of Belgium (NBB), the Belgian finan- cial institution supervisory body and from De Nederlandsche Bank (DNB), the Dutch financial supervision body, CACEIS is now able to offer a wide range of additional asset services to clients active in the Belgian and the Dutch market ■

Cash flowmonitoring under the AIFMDirective

CACEIS adapts its cash flow monitoring for private equity and real estate funds.

particularly problematic, the monitoring of accounts opened with a third party does re- quire a few operational adjustments. One should keep in mind that depositaries are not liable for the monitoring of cash accounts opened in the name of companies owned by AIFs. Cash flow management and accounting services meeting the new requirements of AIFMD AIFMD stipulates that fund managers must provide the depositary with all elements that could enable it to check the conformity of the flows recorded in the cash accounts of their AIFs. It is therefore the responsibility of the manager to inform the depositary about the opening of any accounts with a third party and to ensure that all relevant elements helping the depositary to fulfil its duties are duly transmit- ted (bank statements, general ledgers, etc.). This constraint makes it all the more attractive for AIFMs to outsource administrative and ac- counting tasks linked with the cash flow man- agement of AIFs to one single intermediary offering depositary and fund administration services. Underpinned by PERES (Private Equity & Real Estate Servicing), its dedicated business

line, CACEIS manages local teams following up the whole life-cycle of funds. By support- ing AIFMs in their fund structuring and in- vestment activities, CACEIS can acquire very precise knowledge of the funds’ incoming and outgoing flows. The proximity of operational teams facilitates the sharing of information within CACEIS and the checking process by the depositary. CACEIS also offers accounting services dedi- cated to the property accounts of French funds. Book-entries recorded by property managers are thus checked by an independent expert before being automatically integrated into the funds’ accounting. More than sim- ply ensuring reliable accounting services, this process enables depositaries to reconcile the flows of property managers’ accounts opened in the name of funds with banking movements in real time. It also allows depositaries to ob- tain, if need be, corresponding proofs. This non-exhaustive list of new initiatives re- flects CACEIS’s ability to adapt to this new regulatory framework and to provide AIFMs with innovative solutions that help them en- hance their efficiency and comply with the new requirements set out in the AIFM Directive ■

framework. Some provisions of AIFMD, like the cash flow monitoring of AIFs by a deposi- tary, are already applicable. As a leading AIF depositary holding more than €300bn in assets, with €50bn in unlisted hold- ings, CACEIS already monitors cash move- ments of AIF’s accounts (whether opened in its books or not). CACEIS also provides its clients with innovative solutions to help them best take advantage of this new environment. Broadening of the cash flow monitoring scope of depositaries Cash flow monitoring of accounts opened in the name of AIFs is one of the new duties assigned to depositaries by AIFMD. Because AIFs have the opportunity to open accounts in books other than those of the depositary, the monitoring process becomes more complex. This can happen with real estate funds using a leverage effect to finance some acquisitions or with accounts of property managers be- ing sometimes opened on behalf of the AIF. Although monitoring cash flows of accounts opened in the books of the depositary is not

S ince July 2013, alternative investment fund managers have been sending in their AIFM application forms, gradu- ally seeking to comply with the new regulatory gilles de foucault, Product Manager, CACEIS

No. 35 - October 2013 - caceis news 3 produCts and services

new business Real estate funds: German Asset Management is increasingly global CACEIS is the leading

independent depositary bank for real estate funds and AIFs in Germany According to the German KAGB regulation, AIFMs must appoint a depositary for each AIF they manage, if it is to be marketed within the EU. The depositary has the responsibility for monitoring the fund assets held in custody as well as the AIF’s cash flows. As CACEIS in Germany is a specialist in servicing alternative and real estate assets in open and closed end funds, the bank has benefited more than any of its competitors from the recent consolidation trend in the industry, and has attracted many new clients: ▷ Reconcept GmbH Reconcept GmbH, an initiator of closed-end funds in the renewable energy sector, has appointed CACEIS as its depositary in Germany. Since the beginning of July 2013, CACEIS has acted as funds trustee for investments into the currently active, closed-end wind energy funds of the company. ▷ Mondial Kapitalanlagegesellschaft mbH Mondial Kapitalanlagegesellschaft mbH, a Germany-based investment company, selected CACEIS to perform the Depotbank function for its Real Estate special funds. Mondial’s funds include investments in commercial estates such as for local suppliers, logistics or student hostels. ▷ PROJECT Investment The investment and real estate specialist, PROJECT Investment, has taken another major step towards compliance with the Alternative Investment Fund Managers (AIFM) Directive by engaging CACEIS as its depositary services provider. ▷ GLL Real Estate Partners GmbH (GLL) GLL Real Estate Partners GmbH (GLL), the Munich-based real estate fund management company, has entrusted the depositary function of its most recent special-AIF to CACEIS to ensure it fully complies with the AIFM Directive and the KAGB regulations. The fund invests primarily in commercial real estate in Europe and in the United States. Key to the selection of a depositary was the ability to provide a unified cross- border depositary offer in Germany and Luxembourg as well as to meet GLL’s individual needs in the pension fund and insurance company sectors. ▷ Cordea Savills Invest GmbH Cordea Savills Invest GmbH, the investment company of Cordea Savills group, is going to transfer the Depotbank services for their real estate funds to CACEIS in the third quarter of 2013. The mandates transferred to CACEIS cover investments on a pan-European basis ■

Asset servicing providers need to become global to handle new challenges

asset management. Several well-known as- set managers of real estate funds are already operating in many countries or even across Europe and they are beginning to centralise their European asset management in one location or at least are inching towards im- plementing decision processes at global or corporate level. This approach increases syn- ergies and improves the investment decision efficiency of the asset manager. As a result, the value added chain which pre- viously existed at national level is collapsing. Sales, distribution, asset management and fund administration, as well as depositary bank services were until now handled on a country-specific basis at the national level. European or global operations and centrally- controlled specialists are gradually emerg- ing, each of which focus on one function of the asset management value added chain which is organised and steered at interna- tional level. Besides, this enables asset man- agers to reconsider their business model and quite often to concentrate on core competen- cies such as sales and asset management. At the same time, some functions like post trade processing, administrative, compliance and regulatory obligations which are in- creasingly expensive - but not core to invest- ment performances - are being outsourced to specialised service providers, which are re- quired to have also transnational capabilities. Service Providers will face new challenges on the German market In addition to meeting key challenges like the harmonisation of corporate structures under corporation law, integration of IT and per- sonal staff as well as management of cultural change, service providers also need to meet a range of national requirements in areas such as tax or reporting. Providers are needed in the real estate fund space with genuine core competencies in the main European markets and the capacity to provide services from the middle office through fund administration to the depositary bank. After a certain delay, fund administration, which is usually still performed “in-house” for real estate funds, even in global organisations, will also tend to be outsourced to service providers like CACEIS. in the real estate fund industry As real estate asset management will be per- formed increasingly at the European rather than national level, the players downstream in the value chain have to organise their re- spective units similarly to provide the corre- sponding services to clients and customers. Providers, which possess a competency in real estate funds, that is becoming increas- ingly important, can provide local knowl- edge and support as well as transnational services in the areas mentioned above. One can foresee that such services will also be provided from central hubs for several coun- tries. Those challenges to the asset servicing providers are similar for real estate and secu- rities funds. To provide adequate services and meet ex- pected performance, a European footprint and transversal capability is required in the real estate fund sector ■ Fundamental challenges for asset servicing providers

A period of low interest rates, rising cost pressures and regulatory chang- es at national, European and interna- tional level are reducing margins throughout the asset management industry. Retail inves- tor’s low buying appetite over the last months was an additional quantitative effect depress- ing business, which had a lasting impact on the industry development and profitability. Until recently, the value added chain in the asset management industry was very much nationally based. Even in international com- panies, both investment decisions and asset management processes were often driven locally. In last past years, securities asset managers have been rethinking and adjust- ing their organisation towards focus on core competencies and transnational structures, with increased reliance on outsourcing to global asset servicers. Real estate fund managers have followed the same trend and are increasingly reposi- tioning themselves towards a transnational, pan-European value added space as well. While having to comply with the framework of AIFMD obligations, we see managers of bastien charpentier, Senior Country Manager, CACEIS, Germany Key Figures for Real Estate Business of CACEIS in Germany: 15 Real estate investment companies Assets under Depotbank: € 12bn Market value of directly & indirectly owned properties: € 20bn 50 Real estate funds 800 Accounts for properties 537 Properties 184 Shared investments Figures as at June 2013

Holger sepp, Co-Head, CACEIS, Germany

other asset classes such as alternative invest- ment, also embarking in this direction. German managers see time for action In the wake of the financial crisis, the asset management industry faces new challenges. During the boom era, asset managers could count on the industry volume growth to ex- pand and increase market share by devel- oping new markets and customer groups. During this period, asset managers partially over-compensated structural or operational weaknesses through growth. Declining rev- enues and margins now force a rethink. On the other hand, regulatory require- ments, e.g. under Solvency II, UCITS IV and AIFMD have tightened and increased costs. Further regulations like UCITS V & VI are on the way. These adjustments are neces- sary to protect investors, but they are cum- bersome and expensive. With the decline in sales, particularly of high-margin retail products, and asset price deflation impacting volume downwards, these new challenges are putting asset managers under pressure, espe- cially those operating on a local scale. Asset managers in the securities industry in particular recognised this some time ago and played a pioneering role. Here, the last ten years have witnessed a split and specialisa- tion in the value chain. Players are increas- ingly concentrating on their individual core competencies. Asset management players focus on decision making and the sale and distribution of the respective investments products. Those core functions are therefore becom- ing separated from activities like middle and back-office functions or fund administration. In parallel, depositary banks and custodians have focused more clearly on their business offering: as such, they have developed out- sourcing opportunities to investors and as- set managers. In Germany, for example, the once classic “parent/subsidiary” model, in which the parent company took on the role of depositary bank for its respective asset management subsidiary, has almost vanished – it now remains within the dominant local retail banks only, like savings bank and co- operative sector. Focus on core competencies in Germany

Value chain increasingly internationalised

Following the international integration of core processes, the next wave of specialisa- tion is increasingly developing in real estate

4 caceis news - No. 35 - October 2013 products and services CACEIS playing key role in Luxembourg’s growing real estate fund market Luxembourg – a leading European domicile for regulated real estate funds.

incorporated as an FCP (Fonds Commun de Placement or Common fund). Its use also ex- tends to areas as diverse as North America, Asia and Africa. The majority of real estate funds in Luxembourg are governed by the SIF Law, which reflects the popularity of the regime for real estate fund initiators using a regulated onshore investment fund vehicle. In order to remain fully compli- ant with the new requirements laid out in the AIFM directive, Luxembourg made a number of modifications to its SIF law back in June 2012. In 2013, the regulator approved the adoption of a new legal structure known as an SLP (Special Limited Partnership), which is inspired by the popular company structure used in the US, UK and a number of other countries. Luxembourg is now in a strong position to leverage the opportunities AIFMD presents in Europe and seek to create a brand in the alter- native investment market, similar to the global brand it has built up with UCITS.

CACEIS can help real estate managers take full advantage of AIFMD’s opportunities CACEIS’s dedicated PERES team (Private Equity & Real Estate Servicing) is composed of real estate specialists in Germany, France, Luxembourg, Switzerland, the United States and Canada, and services more than €50 billion in assets. The teams have gained extensive expertise in the real estate industry over the past decades, pro- viding effective support to real estate managers investing directly or indirectly via local SPVs. CACEIS offers fully outsourced or modular so- lutions to real estate managers, and can advise companies on establishing a regulated vehicle in Luxembourg. The PERES team also provides a range of additional services covering company secretary, domiciliation, investor services, ac- counting, financial reporting, depositary, custo- dy and cross-border fund distribution support ■

annum since 2006, when real estate assets under management in the Grand Duchy totaled some €8 billion. 35 regulated real estate investment funds were launched in 2011, bringing the total number of real estate funds established and ad- ministrated in Luxembourg to 183 in July 2012. A decade after Luxembourg’s success in de- veloping its cross-border UCITS industry, the Grand Duchy has again sought a central role in Europe’s cross-border real estate industry. Today, Luxembourg has become the preferred domicile for the establishment of funds invest- ing in multi-sector real estate assets, distributed to institutional investors around the world. Often categorised as “real estate investments”, some of the main European infrastructure investment vehicles have elected to domi- cile in Luxembourg. These finance important Brownfield or Greenfield development projects such as Private Public Partnerships for trans- portation infrastructure, telecommunications infrastructure and renewable energies devel- opments. A Domicile with a Stable, Business- Friendly Legal Environment The Luxembourg Specialised Investment Fund (SIF) was launched in 2007 and is regulated by the CSSF, Luxembourg’s financial authority. Over the years, it has proved to be an ideal vehi- cle through which to acquire real estate assets in Europe, especially property in Germany, when investment management and from the de- positary bank. Asset Managers must also possess information systems suitable for identifying the various categories of risks to which the funds are exposed (market, li- quidity, counterparty, operational, etc.) and set up appropriate systems and procedures to manage those risks. In addition, fund man- agers are obliged to conduct stress tests on their portfolios on a regular basis. Accordingly, the directive obliges manage- ment companies to rethink their organisa- tional model, and they can count on CACEIS to help them with assessing the directive’s impact on risk management and to provide them with operational assistance. The CACEIS group has set up Luxcellence, a management company in Luxembourg, reg- ulated by the CSSF in accordance with the regulations for conventional and alternative funds. Since its inception, Luxcellence has developed expertise and a complete range of services adaptable to different manage- ment profiles. Leveraging the experience ac- quired by supporting international manag- ers on conventional and alternative vehicles, Luxcellence is able to act as a delegated risk management provider. Separated from CACEIS from a functional and hierarchical perspective, Luxcellence meets every aspect of the directive’s require- ments concerning the delegation of risk management by an investment company. Luxcellence has its own governance frame- Risk Management support by Luxcellence

Net assets under management in Luxembourg real estate funds (€ billion)

10 15 20 25 30

Part II (2010 Law)

Institutional Funds/SIF (Law of 13 February 2007)

W ith more than 180 funds and net assets in excess of €25 billion, Luxembourg is one of Europe’s lead- ing domiciles for regulated, cross-border funds investing in real estate. The real estate investment fund industry in Luxembourg has grown by more than 20% per pascal hernalsteen, Head of Private Equity & Real Estate Servicing, CACEIS, Luxembourg

0 5

2000

2001

2002

2003 2004

2005

2006

2007

2008

2009 2010

2011 07/2012

Sources: ALFI/CSSF

Set-up of a Risk Management framework With Luxcellence, clients enjoy the benefit of economies of scale and customisable so- lutions that are immediately operational. They can supplement the delegation of risk management with made-to-measure perfor- mance measurement and market risk analy- sis services through various simulation sce- narii (VaR, IRR and stress tests). The Group frees up its clients from the administrative burden arising from regulatory changes, enabling them to focus on their core compe- tencies and the new opportunities created by the European passport ■ A delegated risk management solution for AIFs Investment management companies can delegate their risk management function

work and possesses a risk management team with 13 analysts dedicated to this function, which is independent of CACEIS’s operational services but still benefits from the Group’s tech- nological infrastructure. This framework al- lows everyone to conduct their activities with- out conflicts of interest arising. In addition, the risk management team uses industry-leading software and conducts an ongoing market watch, adjusting its model when necessary. Luxcellence helps its clients to assess the risk profile and devise the appropriate risk management framework according to their strategy for conventional, alternative, private equity and real estate funds. It also assists with the drafting and regular monitoring of the risk management policy. For each fund, a risk matrix is produced through analysis of the performance and investment objectives. It includes indicators for each type of risk (market, credit, liquid- ity, operational, valuation, counterparty, distribution, performance, compliance with regulatory ratios). An Executive Report aimed at senior manag- ers analyses large pools of data to provide key risk indicators, and proposes potential ac- tions when required. It provides a snapshot of all the events, giving clients an overview of the business using tables, charts and a brief commentary including any breaches of regu- latory or statutory ratios. Luxcellence’s ana- lysts meet with clients on a regular basis to provide them with additional explanations.

T he AIFM directive stipulates the ob- ligation for AIF managers to comply with a series of standardised valua- tion and delegated risk management rules. In this area, the directive requires manage- ment companies to separate risk manage- ment from operational functions, from the to CACEIS to ensure they remain in full compliance with AIFMD.

Executive Report

Compliance Risk

Distribution Risk

Performance & Market Risk

Operational Risk

Liquidity Risk

Counterparty Risk

Settlement Risk

pascal pira, Head of Risk Management, Luxcellence, CACEIS

No. 35 - October 2013 - caceis news 5 produCts and services

AIFMDwill help the international development of OPCIs Thierry Gaiffe, Managing Director, Paref Gestion

In France, real estate investment funds (SCPIs and OPCIs) have been seeing large inflows for several years. Given the positive environment in your sector, what are Paref Gestion’s key areas of development? Since 2008, real estate funds have outperformed other collective asset management products in France. Investors are looking for stable returns, and real estate investments have been very popular. According to ASPIM, OPCI funds had assets under management of €28.9bn at the end of 2012, and SCPI funds saw net newmoney of €1,103m in the first half of 2013, taking the market capitalisation of SCPIs to a new record of €28.55bn. Since 2009, Paref Gestion has benefited from this positive environment and has seen inflows of around €200m. However, we are still very careful to ensure a good fit between inflows and investments.

rules) is a flexible tool that can be tailored to the requirements of an institutional investor that wants to outsource its property needs. Paref Gestion targets this kind of vehicle. AIFMD introduces new constraints, but also opportunities for international growth. How is Paref Gestion adapting to the new regulatory environment? I believe that AIFMD will help the international development of OPCIs. We are currently meeting foreign investors who are interested in the vehicle, and the marketing passport also gives us international credibility among foreign independent distributors. Paref Gestion already met most of the directive’s requirements in terms of its compliance system, internal control, observance of conduct rules and depositary, having selected CACEIS for its OPCI funds. The new regulations harmonise operating rules within the EU and reduce the competitive advantages of asset management companies operating in countries where regulations were less stringent. What impact is AIFMD having on SCPIs? AIFMD was transposed into French law in summer 2013, and at the same time changes were made to improve the management of SCPIs by giving greater flexibility. SCPIs will now be able to acquire buildings indirectly via intermediaries and they can plan to launch new buildings. Previously, the sole aim of SCPIs was to acquire and manage rental properties. To put them on an equal footing with other real estate funds, the period during which SCPIs have to own properties has been reduced from six to five years. In addition, companies managing SCPIs must appoint a depositary, which I believe makes them safer for investors. Which CACEIS services can help Paref Gestionmeet the requirements of AIFMD? Paref Gestion has used CACEIS’s depositary services for its OPCIs, and we are very pleased with the result. CACEIS gives us confidence in dealing with the new regulatory framework with respect to this service. CACEIS’s work as custodian has supported our internal control procedures and our audits of external partners, such as property management companies. Its regulatory expertise has also been very useful in practical terms. These qualities make CACEIS a natural partner for SCPIs ■

At 30 June 2013, Paref Gestion had €800m of assets under management, with €140mmanaged for the Paref parent company - a real estate investment company listed on Euronext - and €660m for third parties. Paref Gestion is an independent player serving both institutional and individual investors. In early 2008, Paref Gestion was approved by the French regulator (AMF) as an SGP (Investment Management Company). Under this authorisation, we manage two OPCI funds (Vivapierre specialising in tourist and leisure properties, and Polypierre specialising in all kinds of business properties) and four SCPI funds (Pierre 48 for residential properties, Novapierre 1 for retail properties, Interpierre France for business properties and Capiforce Pierre for retail properties, offices and business premises). Paref Gestion is planning to develop an SCPI for retail properties in Germany supported by an experienced local partner in retail properties management. I tend to describe SCPIs as real estate products and OPCIs as financial services, because they can be customised. The OPCI RFA (real estate fund with streamlined operating

AIFMD requires French SCPI managers to appoint a depositary

C ACEIS has supported asset manage- ment companies in developing OPCI and SCPI real estate funds since 2008, and is now helping them comply with AIFMD, which was transposed into French law through an executive order and decree on 25 July 2013. Real estate funds are increasingly popular among institutional and individual investors in France (OPCIs and SCPIs assets under management reached 58 billion at end June 2013). Investors see real estate, and the stable returns it offers, as an attractive alterna- tive to the volatility of equities. The particular characteristics of these real estate funds - i.e. their diversification, risk advantage of AIFMD and enhance real estate fund distribution in France and in the rest of Europe. CACEIS’s PERES team is helping asset management companies take full

mitigation qualities, returns and tax ben- efits - also explain their success. They now have the potential to be successful throughout Europe due to the AIFMD and its marketing passport, which will enable asset management companies to market OPCIs and SCPIs in all EU member-states. A pragmatic approach to AIFMD Asset management companies authorised to market OPCIs already comply with the main principles of the new regulations regarding conflicts of interest, compliance and control. However, they will have to meet new require- ments, such as being assessed by an independ- ent expert, separating risk management from operational functions, performing stress tests, and reporting to investors and regulators. SCPI managers must appoint a depositary by July 2014 at the latest. CACEIS is an active member of the AFTI and took part in all industry working parties along- side ASPIM and AFG in order to prepare for the practical implementation of these meas- ures. As a result, it has been able to develop solutions addressing the new requirements of real estate fund managers. CACEIS’s pragmat-

ic approach involves adopting the level of de- tail required by asset management companies and addressing their concerns, ensuring that the transition to the new regulatory environ- ment is as smooth and transparent as possible. An organisation and solutions that meet the new requirements of AIFMD CACEIS’s Private Equity & Real Estate Servicing department (PERES) comprises sales, middle-office and fund administra- tion teams working exclusively for real estate and private-equity fund managers. CACEIS France’s Real Estate clients have warmly wel- comed this new organisation, since it gives them a single specialised contact who can quickly provide practical solutions to their needs, and ensures effective transaction pro- cessing. As regards checking the effective ownership of assets held by funds and moni- toring cash flows, the operational process is made more efficient by the close relationships that CACEIS establishes with the real estate managers’ accounting teams. CACEIS meets the requirements of AIFMD regarding its depositary service, but also helps asset management companies meet new re- quirements and market their funds interna- tionally. To help asset management companies control their spending on information systems and human resources, CACEIS enables them to outsource various tasks. For example, the group has set up Luxcellence, which can han- dle risk management for asset managers. This arrangement enables each party to carry out its business without any conflicts of interest. As well as risk management, clients can out- source performance measurement and market

walid mounaouir, Head of Private Equity & Real Estate Servicing, CACEIS, France

risk analysis based on portfolio VaR calcula- tions and stress tests. CACEIS also offers ser- vices supporting the cross-border marketing of funds. By helping to give investors accurate informa- tion, CACEIS enables asset management com- panies to meet the expectations of clients and regulators more effectively as regards trans- parency, risk, performance and valuation, and allows them to focus on managing their real- estate investments. These services illustrate the specific skills of CACEIS’s teams, which provide ongoing support to asset manage- ment companies with their plans to set up real-estate funds and market them in France and elsewhere in Europe ■

CACEIS is the leading depositary and administrator by number of asset management companies and OPCIs: 65 OPCIs 14 Asset Management Companies By meeting evolving client needs and the requirements of AIFMD, CACEIS is aiming to become the leading depositary for French SCPIs.

REGULATION

6 caceis news - No. 35 - October 2013

New timelines for FATCA compliance

focus

FATCA requires foreign financial institutions to report directly to the information about financial accounts held by US taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest IRS. More information is available on the IRS website: Foreign Account Tax Compliance Act (FATCA) . FATCA’s current status timeline 18 March 2010 FATCA Law. January 2013 Dissemination of IRS’s final regulations. 1 January 2014 Information entered into the Portal before 1 January 2014 will not be treated as a final submission. FFIs may finalise their registration information beginning on or after 1 January 2014. The first IRS FFI List will be posted by 2 June 2014 and will be updated monthly thereafter. To ensure inclusion on the initial list, FFIs must finalise their registration by 25 April 2014. No GIINs will be issued in 2013. Verification of a reporting Model 1 FFI’s GIIN is not required for payments made before 1 January 2015. 30 June 2014 The Notice provides that for withholding agents, registered deemed-compliant FFIs and FFIs whose FFI agreements become effective on 30 June 2014. 1 July 2014 FATCA withholding on new accounts will become effective 1 July 2014. Accounts opened before 1 July 2014 will be considered to be “preexisting accounts” (delayed six months from 1 January 2014). 31 December 2014 Remediation for high value accounts must be completed by this date. 31 March 2015 Basic report to the IRS. 31 December 2015 Remediation for all accounts must be completed. 31 March 2016 Intermediary report to the IRS. 1 January 2017 Entry into force of the FATCA tax on foreign passthrough payments and on gross proceeds from sales of US assets. 31 March 2017 Full report to the IRS ■

Notice 2013-14 released by the IRS on 12 July 2013 revises timelines but has not affected the core principles of CACEIS’s FATCA implementation project.

T he FATCA project was entering its fin- ishing stages when the Internal Revenue Service (IRS) issued its last notice ex- tending the main deadlines for the tax collabo- ration project. The day before the portal was scheduled to open, the IRS announced that the timelines set out by the final regulations and IGAs have been extended by six months. The IRS states that this latest extension is due to certain comments made by foreign financial institutions (FFIs) and US tax agents concern- ing the practical difficulties encountered in im- plementing FATCA requirements, as well as the numerous negotiations still ongoing between the IRS and a number of countries wanting to sign an IGA. The new FATCA implementation schedule now sets an initial deadline for application of the new regulation of 1 July 2014. This new date applies to: ▷ New relationships, ▷ Due diligence on pre-existing accounts, ▷ Application of withholding tax. As regards registration, the portal is opened since 19 August 2013. However, a transitional period has been created during which any FFIs needing to register can start their registration on the portal. This information will remain avail- able on the IRS’s website and may be changed until 31 December 2013. During this period, no finalised registrations will be taken into account. Furthermore, no GIIN (Global Intermediary Identification Numbers) will be issued until the start of 2014. From 1 January 2014, each FFI should finalise their previously created registration in order for it to be finally confirmed. Any FFI that has submitted their registration before 25 April 2014 will be guaranteed to be in- cluded in the first list of FFIs issued by the IRS at the start of June 2014. It should also be noted that an FFI wanting to register on the portal have need two essential prerequisites: ▷ The GIIN of the lead FFI if the FFI is a mem- ber of an Expanded Affiliated Group, ▷ The signature of the IGA of its country of incorporation in order to be able to claim the more favourable reporting status of an FFI un- der an IGA. Lastly, reporting dates are maintained. The pro-

Françoise Hommel, Senior Project Manager, CACEIS

duction date for the first reports has been set for 31 March 2015 for 2014 data. CACEIS is continuing with the implementation of FATCA requirements. Notice 2013-43 has changed the deadlines for the project. However, the provisions defined since the final regulations of January 2013 and the new IGAs issued in May this year are not called into question. Thus CACEIS is continu- ing to move forward efficiently with the imple- mentation of a FATCA compliant system that fully meets the requirements of the regulations within the Group’s various business units. CACEIS in position to better serve its clients As FATCA requirements apply to the majority of its clients, notably the mutual funds, CACEIS has enhanced its entire range of ser- vices to allow its clients to fulfil their obligations. As a reminder, obligations that have to be met by financial institutions considered as Foreign Financial Institutions (FFIs) are: ▷ Analysis of pre-existing clients and measures to bring documentation into compliance, ▷ New relationships according to FATCA rules with effect from 1 July 2014, ▷ Follow-up of circumstantial changes in the accounts (monitoring of indicators of US resi- dence),

▷ Withholdings (not before 2017 for investment funds), ▷ Reports on US clients, recalcitrant account holders and payments to Non-Participating FFIs (starting March 2015). In its capacity as a transfer/centralising agent, CACEIS provides its fund and management company clients with a range of services to meet their obligations under FATCA from 1 st July 2014. Your usual contacts remain at your disposal for any further information ■ The Foreign Account Tax Compliance Act, better known as FATCA, was signed into law in March 2010 by President Obama. Its aim is to increase efforts undertaken by the United States to crack down on tax evasion by US taxpayers in foreign countries. These measures require foreign (non-US) financial institutions to contribute to these efforts by disclosing to the US Treasury information on American citizens’ income and assets. Within the meaning of FATCA, all financial institutions are required either to apply a 30% withholding tax on the income of those persons who do not agree to have the information disclosed to the IRS.

Timeline

UCITS VI Consultation by the Commission services launched on 26 July 2012. Deadline to reply: 18 October 2012, adoption of legislative proposals expected by October 2013.

MiFID and MiFIR Trialogue: Negotiations started in July and an agreement is foreseen by end 2013.

Securities Law Regulation Commission: Proposal expected for autumn 2013.

october

november

december

2014

UCITS V The trialogue discussions between the European Council, the parliament and the European Commission on Ucits V could be pushed back until after the European elections and the second half of 2014.

Central Securities Depositories Regulation

Packaged Retail Investment Products (PRIPs) European Parliament: Vote in Plenary expected for 18 November 2013.

European Parliament: Draft report adopted in ECON on 4 February 2013. Plenary sitting date expected for 9 December 2013.

No. 35 - October 2013 - caceis news 7 EVENTS

CACEIS AIFMD Roadshow 15 October in Amsterdam

EDHEC-Risk Days North America 8-9 October in New York The Global Institutional Investment Conference will focus its second day on global asset allocation and alternative investment for institutional investors and private wealth managers.

© Jenifoto - Fotolia.com

Lionel Martellini, Scientific Director, EDHEC-Risk Institute, will present the new research chair “ From asset allocation to risk re- porting ” on risk assessment and performance reporting launched by EDHEC-Risk Institute andCACEIS, during a plenary session chaired by Joe Saliba , Deputy CEO, CACEIS. By supporting this new three-year chair, CACEIS confirms its will to play a major role in the analysis of the key evolutions of its in- dustry. With a better knowledge of the risk factors to which the asset management play- ers are exposed, the Group further develops its ability to provide its client base with the best possible solutions ■

Exploring challenges and opportunities for the hedge funds, private equity funds, real estate and traditional non-UCITS funds.

T he client event is designed to explore the legal and operational issues arising for all asset managers worldwide who manage non UCITS funds (European or not) actively distributed in EU in the scope of the Alternative Investment Fund Manager’s Directive (AIFMD). CACEIS as a global AIFMD partner will pre- sent to asset managers the comprehensive asset servicing solutions at each stage of the product life cycle.

The event will take the form of presentations and audience Q&A with: ▷ Clayton Heijman , Managing Director, Privium Fund Management; ▷ Karina Wirschell, Managing Director, CACEIS Netherlands; ▷ France Colas , Head of Regional Coverage, Benelux, Nordic Countries, Russia, CACEIS; ▷ Bart Speybrouck, Business Development Manager, CACEIS ■

© SOMATUSCANI - Fotolia.com

CONFERENCES Q4 2013

IN THE PRESS Q3 2013

8 October Swift/Afti Sibos 2013: Striking facts Paris “Roundtable” Eric Derobert , Group Head of Public Affairs, CACEIS 6-7 November Real Estate Fundsforum Frankfurt “Roundtable” Holger Sepp , Co-Head, CACEIS, Germany

15 November Global Equity Organization Amsterdam 15-17 November Alphametrix Private Equity Summit Miami Serge Weyland, Head of Regional Coverage, North America and UK, CACEIS

5 December AFG roadshow London ■

July 2013 Funds Europe “Luxembourg Roundtable” Serge Weyland , Head of Regional Coverage, North America and UK July 2013 Börsenzeitung “CBD’s growth in comparison to market (BVI figures)” Holger Sepp , Co-Head, CACEIS, Germany July 2013 Analyse financière “From depositary to asset servicing: What are the changes for the industry? François Marion , CEO, CACEIS “How consistent are the various European directives in the asset management industry?” Eric Derobert , Group Head of Public Affairs, CACEIS “Managing conflict of interests” Anne Landier-Juglar, Advisor to the CACEIS General Management for the Development of the depositary function September 2013 Funds Magazine “SocialMediaStudies” Arianna Arzeni, Head of Business Development Support, CACEIS September 2013 Funds Asia “Asia roundtable” David Li , Managing Director, CACEIS Hong Kong September 2013 Funds Europe “Custody Survey” Pierre Cimino, Responsible for CACEIS entities in Luxembourg, Belgium, the Netherlands, and Hong Kong ■

19-20 November ALFI-European Alternative Investment Funds Luxembourg

A global player in asset servicing... Offering leading value in investor services demands constant evolution. At CACEIS, our strategy of sustained growth is helping customers meet competitive challenges on a global scale. Find out how our highly adapted investor services can keep you a leap ahead. CACEIS, your comprehensive asset servicing partner.

... and climbing. Custody-Depositary / Trustee Fund Administration

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