Interview with Neil Simmonds, Simmons & Simmons

neil simmondsNeil Simmonds joined Simmons & Simmons as a partner in 2003 from another London law firm having also previously worked at the Investment Management Association (IMA) where he was closely involved in the introduction of OEICs/ ICVCs in the UK and was responsible for the model instrument of incorporation now used extensively by the industry. He is recognised as a leading individual in the current edition of Legal 500 for investment funds and hedge funds and regularly speaks at conferences and contributes articles on related subjects. Mr. Simmonds specialises in investment funds (both on-shore and off-shore) with emphasis on open-ended products including UCITS in Ireland, Luxembourg and the UK as well as hedge funds and funds of hedge funds in the Cayman Islands and other off-shore jurisdictions. He also advises extensively on portfolio management agreements and generally on compliance and regulatory issues. Having advised several major players in the hedge fund space and just recently having helped to transform a wide range of UCITS funds into a UCITS multi-manager structure we were curious to find out what type of trends he sees within the regulated fund industry. You recently advised a major global banking group in relation to the establishment of their new range of UK UCITS funds using a Luxembourg based management company rather than the usual UK based one. Could provide us with some details?

Neil Simmonds: Yes – we think this was the first time that a non-UK management company has been used as the management company (technically the “authorised corporate director”) of a UK UCITS. This required using the UCITS IV management company passport which has been available since July 2011 but which has been to date not been used in the context of UK funds. Do expect this to be a start of a trend?

Simmonds: We certainly expect much more use of the cross-border ManCo passport. There have already been a few Luxembourg funds established (and we know of more in the pipeline) which rely on a UK or Irish management company and it makes much more sense to do that than duplicate cost, resource and compliance effort by establishing a new ManCo locally in every country in which you have funds. We also expect managers of alternative or non-UCITS funds to make use of the passport in the AIFMD to manage their non-UCITS funds from a single home jurisdiction and we see no reason why this could not be the same jurisdiction and even the same entity as is used to manage UCITS. Some are calling this the rise of the “SuperManco” and we are already helping clients to achieve a more streamlined governance and resource structure across the European centres. What type of asset managers could benefit most from such a passported UCITS ManCo structure?

Simmonds: Particularly institutional managers with multiple centres of operation across Europe who have to date maintained local regulated management companies to support their local ranges of UCITS because that was the only way they could do it. With the passport under UCITS IV and now with the AIFMD coming into force from July this year, management groups are able to plan their structure more efficiently and more logically – to establish centres of expertise where that expertise lies rather than to satisfy historic and to some extent artificial regulatory requirements. Do you expect that most off-shore hedge fund managers will set-up regulated fund structures to run along their flagship funds with the increasing regulation ahead or where do you see the market heading?

Simmonds: As far as the AIFMD is concerned we don’t expect a rush of managers from outside the EU setting up onshore hedge funds for sale to professional investors in the EU. For the time being there are advantages in remaining outside the EU and having your Cayman fund comply with the minimal requirements of transparency to utilise continuing private placement regimes. In due course it may be that these are switched off and at that point we would expect the take up of EU funds to expand. In the meantime we do expect EU based managers of both UCITS and non-UCITS to start to access the economies of scale and resource available under both UCITS and AIFMD to streamline their management structures across Europe. Thank you for the interview.