Everything you need to know about ManCos

UCITs, AIFMD and Substance explained

Since the Global Financial Crisis, legislation has been introduced in various jurisdictions requiring investment managers, in their role as fund sponsor, either to establish their own ManCo to manage the day-to-day operations of their funds, or to outsource this function to a third party. For governance, substance and economic reasons, outsourcing to a third party is growing in prominence and Maitland is ideally placed to service this model.

The traditional third party model sees portfolio management being delegated back to the investment manager, and custody to a custodian but retains the core management functions of risk management, substance requirements and oversight.

What are UCITS?

The UCITS regulatory framework creates a harmonised regime for the sale and distribution of mutual funds in the EU.

A UCITS fund can be sold across borders within the European Economic Area based on its authorisation in one member state. UCITS are also widely sold outside the EU, in Asia, Switzerland, South America and South Africa.

What is the AIFMD?

The AIFMD establishes a broad EU-wide harmonised framework for monitoring and supervising risks posed by AIFMs and the AIFs they manage. It also strengthens the internal market for alternative investment funds, be they hedge funds, private equity funds, infrastructure, real estate or other alternative funds.

The AIFMD was introduced in 2013. While it covers the management, administration and marketing of AIFs, its focus is on regulating the AIFM.

What is substance?

In its simplest form, ‘substance’ means what, where and how you do business. Establishing substance is an essential requirement to raising capital in Europe. The current regulatory focus on substance arises largely from the AIFMD which aims to avoid the use of ‘letter-box’ AIFMs. Investment fund managers wishing to show the necessary substance in terms of physical infrastructure and staff can opt to outsource substance requirements to a third-party ManCo.

Why appoint a third party ManCo?

  • Allow experts to act as a gatekeeper for your fund and assume the regulatory and compliance burden,
  • Create the substance necessary to raise capital in Europe,
  • Grow your business in Europe without the significant financial and human capital commitment (avoid significant annual running costs of UCITs, ManCo and AIFM),
  • Avail yourself of the UCITS or AIFM passport for cross-border expansion and distribution,
  • Access best-in-class IT infrastructure,
  • Access expertise in operational value add, including risk, governance and regulatory oversight; and
  • Obtain cost and tax advantages through operational support and advice.


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