As insurers, asset managers and third party administrators ready themselves to double their efforts on fund look-through for Solvency II, the issue of externally managed funds is the proverbial elephant in the room. Indeed, the various participants in the process of achieving full look-through are limited in their capacity to access the underlying assets of funds, where the funds are not under their direct management or administration.
This issue is important not only for the managers of fund-of-funds but also for their peers whose products are being held by fund-of-funds. Transparency must happen both ways and the industry does not yet seem to have fully appreciated the level of cross investment between asset managers. In spite of good intentions, the exchange of confidential business information among competitors remains a significant issue for the fund sector.
An appropriate response therefore requires the direct delivery of the look-through information from the manager of each fund in the fund-of-funds structure to the ultimate investor without having to work back up the investment chain or having to share data with competitors. This approach cannot be achieved in a siloed manner. A more desirable outcome for the asset manager would be a solution that enables the direct transmission of data access requests from the ultimate investor to the asset managers including the minimum information required to allow the asset manager to identify the last link in the investment chain, i.e. the fund directly invested in their product, is the only efficient and scalable solution to the external look-through issue.
Filed under: asset management, insurance regulation, look-through, regulation, Solvency II, transparency Tagged: asset managers, External Look-Through, fund-of-fund, Insurers, look-through, transparency
