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Brown Brothers Harriman & Co.
A global leader with close to 200 years of experience, Brown Brothers Harriman (BBH) helps many of the world's most sophisticated mutual funds, investment managers, banks and insurance companies achieve their international business objectives. With approx...
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Hedge funds in AIFMD passport limbo | Global Custodian
Sean Tuffy, senior VP investor services at Brown Brothers Harriman suggested that companies may decide to move their fund to an onshore EU country which would likely be Luxembourg or Ireland.
"Right now the trouble is that there are more questions than answers," said Tuffy
Just 17 per cent were planning to appoint a depositary-lite. â€œFirms, by and large, are appointing full-scope banks to act as depositary-lite or depositary under AIFMD so they can migrate business from the former to the latter once the private placement regime expires,â€� explains David Oâ€™ Keeffe, chief executive officer at SMT Trustees in Dublin, a subsidiary of SuMI Trust. Irish service providers certainly seem well placed to provide both depositary-lite and full depositary services to AIFMs. â€œOn the full-scope depositary side, Ireland is well-ahead of the game, and certainly ahead of competing jurisdictions such as Luxembourg,â€� says Sean Tuffy, senior vice president at Brown Brothers Harriman (BBH) in Dublin. â€œIreland has had the concept of the trustee for many years now, servicing UCITS funds and non-UCITS funds such as Qualifying Investor Funds (QIFs) and their successor, the Qualifying Investor Alternative Investment Funds (QIAIFs).
Although fund administrators are always careful to establish depositary lites as wholly separate businesses, with different reporting lines and boards of directors, they remain vulnerable to the insinuation that a depositary-lite reporting on the valuation work of a sister company will be loath to report malpractice to the regulator. Thirdly, in Ireland in particular, depositary lites face the further disadvantage that Ireland, while a world-leading fund administration centre, is not a world-leading fund-raising centre. â€œThis is the biggest challenge for Ireland in regards to building up a depositary lite industry,â€� explains Sean Tuffy of BBH. â€œESMA has made it clear that asset managers must appoint a depositary-lite in the jurisdiction or jurisdictions where the fund is being distributed or the AIFM is domiciled.
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Sean Tuffy, senior vice-president of investor services at Brown Brothers Harriman, the investment group, agrees.
"It would be a pretty big ...
"It would be a pretty big change for the end investors to accept that the cash-out is not at the price they see," said Sean Tuffy, the head of regulatory intelligence at Brown Brothers Harriman & Co.
The fees also could hit investors who buy shares on days when a lot of cash flows into a fund, which also requires trading, Tuffy
"If the SEC
comes and says you can add this to your toolkit, I don't think there will be a lot of handwringing because those who don't want to do it, won't use it," Tuffy
"The challenge is that now the ...
"The challenge is that now the US rules are set, the current European proposals hew much closer to those US rules," says Sean Tuffy, head of regulatory intelligence at Brown Brothers Harriman, the financial services group.
"But the market is structurally very different."
While the US market has a very high retail share - Mr Tuffy's
parents in Boston can write cheques from their money market fund - in Europe most of the assets in such funds are institutional, from corporate treasuries, which see the funds as a cash-management tool.
Another distinction, which increases the risk that legislation could cause problems, is that much of the assets in European money funds are from outside the continent, in particular from Asia.
It is hard to get a precise handle on the proportion of assets coming from overseas, as there is no requirement to report it, says Mr Tuffy
says the money market fund providers among his
clients are concerned about the prospect of regulation that would make their products unsaleable in particular jurisdictions or to particular client groups.
cites the example of a Luxembourg-based constant value fund marketed to corporate treasurers in Japan, who might not be permitted to hold the same fund if it were of variable value.
According to Mr Tuffy
, money market fund providers in the US have already moved from announcing their plans to adapt existing products to the new regulations to "rumblings of a second wave of announcements looking at alternative structures to reconstitute prime money market funds".
describes this as "money flowing around the obstacles to meet what the market wants", but says European investors "are going to have a harder time getting around the rules".