Communication And Due Diligence Critical for Successful AIFM Switching, Ocorian States

• It is seeing a surge in switching enquiries, with 10% of clients now transitioned from other AIFM providers
• Ocorian sees this as a future trend within the third-party AIFM provider environment
• Fund managers need to establish a partnership with new AIFM provider

Poor communication and mistakes with due diligence are the biggest issues for alternative investment fund managers switching administrators, Ocorian, the specialist provider of alternative fund services and global leader in entity administration, fiduciary and compliance solutions warns.

The specialist provider of AIFM services to private capital alternative investment managers has seen a surge in alternative fund managers who are expressing interest in switching to use its services with an increase of 10% onboarding this year already. It is seeing a rise across all private markets asset classes, with managers stating that the incumbent AIFM providers don’t have the required specialist asset class knowledge in the areas of private equity, real estate, infrastructure, debt and fund of funds.

Ocorian which is establishing a track record of successful onboarding and has a 100% client retention rate for its AIFM services is urging alternative fund managers considering moving AIFM providers to focus on communication and due diligence as the key factors in a successful move.

Thomas Fahl, Head of AIFM, at Ocorian said: “Third-party AIFM providers have historically been seen as more of a long-term relationship. Fund initiators were often viewed as more likely to switch fund administrators – Ocorian has already welcomed over 40 new fund admin clients in the last year, but stay with their AIFM provider over the longer term. However, we’re seeing a mindset shift with clients more likely to ask for an RFP during the relationship and every week we are having conversations with clients who are looking to switch.”

Ocorian’s research* in April 2023 found 23% of managers are looking at switching fund administration provider over the next 18 months. Ocorian believes the third-party AIFM landscape may see a similar trend in the coming years as switching service provider becomes more common practice.

Starting communication early and being open about the reasons for a move will help secure support while having a thorough understanding of the new AIFM’s track record and experience including regulatory compliance, team and resources, approach to risk management and fees will ensure there are no nasty surprises, Ocorian advises.

Fund managers should consider creating an FAQ document for stakeholders or hosting a Q&A session while providing regular updates throughout the transition process with a point of contact for stakeholders.  

Managers also need to consult with legal counsel, secure AIF board and shareholder approval and engage tax advisers, as well as securing regulatory approval at the closing of the process.

Effective data transfer is essential when switching AIFM as identified by Ocorian’s research. If the relationship with the existing AIFM has broken down, the initiator of the fund has to ensure the incoming AIFM has access to all the data they need, and managers may need to secure additional support to ensure a smooth transfer.

Stephen Hickey, Head of AIFM, Ireland at Ocorian said: “Working with an AIFM provider is a partnership. It is important that both sides are confident the relationship will work over the long-term. That should include doing thorough due diligence and visiting the AIFM’s office to meet the team and build a strong relationship from the start.

“Switching or appointing a new third-party AIFM provider can present challenges. However, these can be overcome with the help of the right new AIFM service provider and at Ocorian we have a track record in making sure the process is smooth.”

Ocorian’s AIFM teams are based in Ireland and Luxembourg and have extensive expertise in managing private equity, real estate, infrastructure, debt and venture capital. Its sector specialists help ensure a smooth alignment on investment processes with the fund manager and offer expertise on complex risk and compliance matters.

Its AIFM services provide the infrastructure, expertise and legal documentation in place in Luxembourg and Ireland to enable the fast and efficient set-up and launch of a new fund or migration from another provider.  This enables managers to focus on capital raising, asset management and generating returns.

For further information visit Ocorian’s AIFM services or contact its Fund Services’ Business Development Team.

ENDS

Notes to editors

*Ocorian commissioned independent research company PureProfile to interview 100 alternative fund managers across real estate, private debt, private equity and infrastructure, residing across the UK, US, France, Germany, Netherlands, Sweden, Switzerland, Finland and Norway during April 2023.

Please note that this press release is intended to provide a very general overview of the matters to which it relates and is provided for your convenience. It is not intended as legal or investment advice and should not be relied on as such.

Press Contact

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About Ocorian

Ocorian is a global leader in corporate and fiduciary services, fund administration and capital markets. It has US$270bn in assets under administration and employs over 1,500 professionals.

Supporting and protecting global investment is Ocorian’s priority; it manages over 17,000 structures on behalf of 8,000+ clients including financial institutions, large-scale international organisations, and high-net-worth individuals.

Ocorian provides fully compliant, tailored solutions that are individual to clients’ needs, no matter where in the world they hold financial interests, or however they are structured.

The group offers a full suite of corporate, fund and private client services across a network of offices spanning all the world’s financial hubs. Locations include Bermuda, BVI, Cayman, Denmark, Guernsey, Finland, Hong Kong, Ireland, Isle of Man, Jersey, Luxembourg, Mauritius, Netherlands, Norway, Singapore, Sweden, UAE, the UK, and the US.

To find out more about Ocorian and its services, including regulatory information, visit www.ocorian.com.