For Professional Clients only

Strategic management solutionsOutsourcing to AMX Ireland

Strategic management solutions from AMX

If you manage a SMIC, you should consider a ManCo

The Central Bank of Ireland (CBI) has been increasing the level of governance required from Irish investment funds. There is now more scrutiny of substance, capital, internal controls, delegate oversight and staff expertise. In particular, the expectation is that during 2020 the CBI will require Irish Self-Managed Investment Companies (SMICs) to appoint an external fund management company (ManCo). 1

We expect that most investment managers will want to appoint a third-party ManCo rather

than set up their own entity. However, given the CBI’s ongoing focus on ManCo capabilities,

we would anticipate that many pre-existing ManCos will struggle to take on new funds without

materially increasing personnel (and may in fact need to reduce the number of funds for which

they act).

We are confident that AMX’s 2019-authorised Irish ManCo meets the CBI’s requirements.

Our SUBSTANCE, SKILL BASE and STABILITY makes AMX an obvious choice.

In addition, AMX offers investment managers significant optionality to partner together as part

of a broader strategic relationship. The Irish ManCo is just one part of the AMX concept as a

global investment platform. As explained further below, we believe that this is a key differentiator

compared to other Irish ManCos.

1 As per the CBI’s CP86 regime (its adoption of the European Securities and Markets Authority (ESMA) July 2017

opinions on the level of substance required from EU management companies) the CP86 thematic review that was

initiated in September 2019 to assess the level of substance and time commitments within existing SMICs and ManCos.

This review is still ongoing and the industry with findings expected from the CBI in Q2 2020.

AMX standardises, centralises and streamlines the entire process so it works better for everyone

Skill base

The ManCo is a regulatory-driven outsourced compliance function, designed to reassure regulators (and investors) of the independence and quality of a fund’s governance arrangements. In selecting a ManCo, investment managers will want to ensure that their provider meets the regulator’s onerous expectations. As a recently regulated business, AMX is confident that we meet these requirements:

• AMX’s structure allows it to provide management company services to asset managers globally, taking on all AIFM3 and UCITS 4 management company responsibilities and therefore freeing asset managers to do what they do best: manage the investments of their investors.

• Our six Designated Persons have a wealth of experience in backgrounds such as compliance, asset management and asset administration.5

• Given our experience of managing our own QIAIFs and UCITS, we understand how ManCos should manage funds and meet the needs of investment managers’ and investors’. For example, when a fund appoints a ManCo we prioritise the investment manager’s ability to provide continuity of service to the fund and its investors, keeping changes to a minimum.

• AMX provides technology-driven governance: Our efficient oversight function is driven through AMXOne, AMX’s proprietary, cloud-based data platform. Fund oversight data is sourced directly and independently from the fund administrator, reducing the data burden on the investment manager.

3 Alternative Investment Fund Manager4 Undertakings for the Collective Investment in Transferable Securities, the EU regime for retail investor investment funds5 Our team has accumulated many years of experience at firms such as BlackRock, Citco, HedgeServ, State Street, Maples & Calder and BNY Mellon

AMX’s structure allows it to provide management company services to asset managers globally.

Substance

Questions are being asked of ManCo balance sheets, operating models and human resources. Regulators want to ensure capital adequacy, rule out conflicts of interest and satisfy themselves that there is genuine substance in terms of staff and expertise. AMX is well placed to answer these questions:

• 35+ full-time AMX Ireland employees: This is significantly more than many other Irish management companies. 2

• Six Designated Persons (DPs): At AMX Ireland one person is assigned to each CBI–mandated key management function.

• AMX Ireland is overseen by a Board of Directors that includes three independent non-executive directors with deep experience of the funds industry. The Board meets in person on a quarterly basis and, additionally, whenever required.

• Additional support is provided when required from AMX’s 60+ strong London and US teams, covering technology, investment risk, manager onboarding and legal.

• Authorised by the CBI to both manage QIAIFs and UCITS, with experience across a range of asset classes (traditional and alternative).

2 PwC ManCo/AIFM Benchmarking Survey 2019

We expect that most investment managers will want to use an external ManCo rather than building their own:

Challenges Manager-built ManCo Using the AMX ManCo

Set up / onboarding time 9+ months 1 – 3 months

Build cost Min EUR 3 million Zero

Regulatory capital ManCos are required to have

sufficient capital in place

based on AUM

No extra regulatory capital

required for the investment

manager

Staff ManCo directors: CBI

requires >50% to be EEA

resident and at least two

to be Irish resident

Designated Persons must

carry out six managerial

functions (typically a

minimum of 110 days’ per

function i.e. 660 days in total)

No extra staff required for

investment manager

CBI relationship Investment manager, as

parent of the ManCo,

will manage the ongoing

relationship with the CBI

AMX takes on sole

responsibility for managing

the CBI relationship

UCITS and AIF expertise To manage funds under

both regimes, a “Super

ManCo” is required with

higher compliance and staff

expertise requirements

AMX has a SuperManCo

Build or buy?

Stability

To be a trusted partner of choice, ManCos need to offer assurances of the long-term viability of their businesses and their ability to continue to offer high quality service, with future growth potential:

• AMX is backed by Willis Towers Watson (NASDAQ: WLTW). Willis Towers Watson is a leading global advisory, broking and solutions company that has 45,000 employees serving more than 140 countries and markets. It is also one of the largest global players in the institutional investment market with a wider mission to change the way the investment industry operates.

• Strategically, Willis Towers Watson’s investments business has made the decision that AMX will become its preferred implementation route for clients globally.

Optionality: wider strategic benefits of partnering with AMXIn addition to our ManCo service,

AMX provides an institutional platform

that gives investors and investment

managers a better way to do business

with each other. Built with a fund

infrastructure designed for the needs

of institutional investors, AMX

negotiates with counterparties,

transitions assets, provides reporting,

and adds an extra layer of oversight.

Investment managers that use the AMX

platform are able to leverage AMX’s

fund structures that optimise investor

tax outcomes, our global distribution

capabilities, our technology-driven

investor reporting tools and our improved

counterparty negotiating power.

Although we believe that our ManCo

services alone are sufficiently

compelling, we are also unique in

offering investment managers access

to a significantly wider opportunity set.

Brokers

Distributors**

Investment Manager Administrator

Depositary

MLRO*

Fund***

CoSec

Directors and Designated

Persons

Brokers

Distributors**

Investment Manager Administrator

Depositary

MLRO*

Fund*** AMX ManCo

DirectorsCoSec

Directors and Designated

Persons

Moving from a SMIC to ManCo

* Money Laundering Reporting Officer** Distributors often appointed by fund or investment manager*** Assumes fund is a PLC or an ICAV (Irish Collective Asset-management Vehicle)

SMIC ManCo

• Fund profile return

• ManCo annual and interim accounts

• Fund annual and interim financial

statements

• Annual Pre-approval Controlled

Function (PCF) confirmation

• Annual Key Investor Information

Document (KIID) document filing

• Investment manager due diligence visit

• Administrator and Depository

due diligence visit

• DPs attend fund board meetings

• AIFMD Annex IV reporting

• Review Depository report

(if quarterly)

• Review MLRO report

• Review administrator report

• Review investment manager report

- Operating risk and incidents

- Counterparty exposures

- Valuation and pricing policy

• Cash and position reconciliation

monitoring

• Total Expense Ratio (TER)

oversight and review

• Review of Depositary report

(if monthly)

Dependent on fund NAV cycle

• NAV performance monitoring

• Hedge performance monitoring

Annual tasksLaunch processFour-phase approach

Phases Description Time

Quarterly tasks

Monthly tasks

Periodic tasks

Onboarding timeline Oversight model – ‘A year in the life’

Prelaunch01 2 weeks

Agreement of commercial terms and key ManCo functions

Design02 2 weeks

Service Design: Information exchange between existing stakeholders and AMX to determine detailed requirements

Build03 1–2 months

Legal: AMX provides template ManCo agreement and reviews other agreements for any required updates; works with fund counsel to update fund prospectus

Regulatory: AMX liaises with CBI where needed e.g. fund passporting, and sets up regulatory reporting

Oversight: AMX sets up information flow from fund administrator and completes due diligence on the fund in line with CBI expectations

Launch04 1 week

ManCo and fund board approvals;final regulatory approvals/filings

Contact AMX:

Managers@theAMX.comtheAMX.com

For (1) Professional Clients only, who are also non-US persons (US persons are not able to invest in AMX funds whose

securities, if any, have not been registered under the Securities Act of 1933, and may not be offered or sold in the US

absent registration or an applicable exemption from registration) and (2) current and potential investment managers of

AMX funds. For general information purposes only. AMX does not provide investment, legal, accounting, tax or other

professional advice. The information is provided on a non-reliance basis; and no representation or warranty is made as to

its accuracy or completeness. The Asset Management Exchange and AMX are trading names of The Asset Management

Exchange (Ireland) Limited (registered in Ireland, No. 632258; authorised and regulated by the Central Bank of Ireland),

The Asset Management Exchange (UK) Limited (registered in England, No. 11555138; authorised and regulated by the

Financial Conduct Authority No. 823316) and The Asset Management Exchange (IP Co.) Limited (registered in England,

No. 11686713). Copyright © 2020 AMX. All rights reserved.

2020-083AMX