Last week, Indos received authorisation from the FCA to provide depositary services to unauthorised funds, including investment trusts, private equity and real estate funds.
The independent depositary is the brainchild of Bill Prew, the COO of a large hedge fund company and formerly of Barclays Global Investors and PwC, who saw an opening in the market for an independent, non-bank depositary.
Less than three years later, the business acts as the depositary for 70 funds across 56 managers with a total of $14bn worth of assets.
Pre-AIFMD, only authorised funds, like Oeics, were required to retain the services of a depositary for safeguarding their assets
But after the piece of regulation was introduced in 2014, managers of unauthorised funds in Europe found themselves needing to acquire the services of a depositary in addition to an administrator and custodian.
Presently, there are only nine banks in the UK that have been granted this level of permission by the regulator – BNY Mellon, JP Morgan, HSBC, Citi, Natwest, Caceis, State Street, RBS, Northern Trust and Societe Generale – which is part of the problem, according to Prew.
“In the hedge fund world, most depositaries won’t act for a fund unless their affiliate does the fund administration,” he explained.
“Nine times out of 10, the depositary is affiliated to the custodian or fund administrator. It’s all kind of bundled up.
“It is a pretty opaque world, with a lot of cross subsidy going on. Banks want the custodian or administration business. None want depositaries. They do it as an accommodation, to wrap up the whole relationship.”