Global market volatility and compliance with ever-changing international regulations are among the main reasons investors are demanding up-to-date data from their investment managers. To ensure that a fund or equivalent investment accurately reflects the wishes and requirements of its owners, an effective link between the investment manager and the fund administrator is vital.
In the Middle East, fund administration has generally not been part and parcel of the local fund management ‘package’, but is typically carried out in jurisdictions thousands of miles away.
Fund managers are routinely sold an ‘all in’ packaged solution when domiciling a fund in a particular jurisdiction with a local administrator, being assured that the proximity of the fund to the administrator is a distinct advantage. But there has also been a distinct disadvantage with this arrangement, particularly for Middle East investors.
While the ‘local’ administrator in a foreign jurisdiction can often provide high levels of standards, the fund manager will generally face significant time delays and, in the case of the Middle East, working-week conflicts when dealing with an overseas administrator.
The Abu Dhabi Global Market (ADGM) has this year brought fund administration within its own domain. The rules put in place by both ADGM and the Dubai International Financial Centre to do not actually make it incumbent on fund administrators to be locally based, which is also the case in most international jurisdictions, but they are undoubtedly between them increasing the attraction of redomiciling the administration of funds back to the Middle East, specifically in the UAE.
An understandably important role of the administrator, apart from being familiar with the jurisdiction, is undertaking due diligence procedures on investors and investor funds. The process often requires a need for the investor to supply certified personal due diligence information as well as evidence of source of funds, which is collated and reviewed by the fund administrator.
This can entail significant delays and incur costs as well as potential security breaches when the administrator is located on the other side of the world to the investors. Also, requirements such as preparation of net asset value calculations or production of financial statements may be needed quickly to respond to changing or unexpected circumstances, and a local administrator can respond immediately, whatever day of the week.
With MENA funds having a considerable portion of investors in the MENA region itself, appointing a local fund administrator in the region with whom a close and direct relationship is possible will help prevent delays and costs resulting in a smoother process for the investors, and a quick application of funds for the managers.
Daniel Dickinson is senior executive officer of PraxisIFM UAE
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