THEMATIC REVIEWS MADE EASY
The frequency of requests for information by Regulators, about the Management and Governance of Investment Funds, continues to increase.
Requests for Information in a multi-fund and multi-service provider operating model can be very time consuming.
Fund Elements helps you to document your Operating Model using a proven approach in a secure App that is easy to access by your Governance and Operations Teams. In 14 days, we will deliver a meaningful Operating Model for your fund. Go to www.fundelements.io and click the 14 Day Free Trial to get started.
Most of the information requested is already is known as it was required during the setup of the fund. However, the format of the information, means it is not easy for your Operations Teams to access it and add any additional information when required. This often means the default for completing Thematic Reviews becomes email and spreadsheets.
Documenting your Operating Model is a once off exercise that identifies all of the information required to setup your funds - your legal entities, processes, people, systems, service providers and setup data.
Selecting an App that makes it easy to document your Operating Model in a way that it can be securely accessed by your Operations and Governance Teams will significantly reduce the time you spend responding to requests for information.
Lets take a look at what is involved in responding to a Thematic Review from a Regulator.
In September 2018, the Central Bank of Ireland ("CBI") published the results of a Thematic Review in relation to the Payment of Performance Fees by UCITS (See Central Bank of Ireland Industry Letter - Thematic Review of UCITS Performance Fees).
The review covered approximately 350 UCITS and required Fund Management Companies to assess whether the procedures used to calculate and pay performance fees were in line with the CBI's UCITS Performance Fee Guidance.
There are four steps to completing a Thematic Review of this type.
Step 1 - Identify
Step 1 involves the identification of the fund legal entities that are within the scope of the review.
In an Umbrella Fund Structure this will require a review of the prospectus to identify the UCITS sub-funds that pay Performance Fees to an Investment Manager. In reality, based on day to day operational knowledge, it should be relatively quick to identify and validate all of the in-scope funds.
As part of our 14 Day Free Trial, Fund Elements will setup your Organisation structure as illustrated above. This provides you with an expandable tree view for your business showing each legal entity (including sub-funds). Each entry is cross referenced by a URL link to the relevant page on the CBI's Register.
Step 2 - Setup
Step 2 involves setting up the review questions based on the requirements of the CBI's Thematic Review. The requirements include an assessment of the procedures used to calculate and pay performance fees were in line with the CBI's UCITS Performance Fee Guidance.
Fund Elements maintains a library of rules based on Regulatory and Statutory requirements that apply to Investment Funds. Each body of rules in the library consists of an expandable tree view of the actual rule that is hyperlinked to the source page.
Fund Element's App provides Data Table functional to allow you to collect additional information. In this example, we want to assess each of GemCap's sub-funds for compliance with the CBI UCITS Performance Fee Guidance.
Data Tables can be created and configured in line with requirements to collect information based across the entries in GemCap's Organisation.
Step 3 - Assess
Step 3 involves an assessment for each in-scope fund and is about answering the questions contained in the UCITS Performance Fee Thematic Review Data Table.
The main challenge with the assessment step, is that the Calculation of a Performance Fee for a UCITS fund is a process that is typically delegated to the Fund Administrator (the Depositary also has a responsibility to review the Performance Fee calculations).
Fund Element's App is accessible by the Governance and Operations Teams, including team members working at outsource partners. A work-space within the App has a dedicated security model that allows you to decide what information is available to each user or group of users.
Data Tables offer another layer of security as you can restrict access by user group. For example, you may wish to create a Fund Administrator user group and share a data table with only those users who are members of that group.
Step 4 - Report
Step 4 involves reporting the results of the assessment.
It is also about building your Regulatory Reputation by demonstrating a complete and professional approach in the knowledge that a risk based approach is a central part of the Regulatory Framework.
Fund Element's App includes reporting functionality that allows you to analyse the data collected in the UCITS Performance Fee Thematic Review Data Table. The data can be exported for further analysis.
To see what an Operating Model looks like for one of your funds on the Fund Elements App, go to www.fundelements.io and click the 14 Day Free Trial.
Thank you to GemCap (www.geminicapital.ie) for permission to use their Organisation structure in the example shown. The results shown in Step 4 - Report uses sample data.