CACEIS NEWS 35

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