Due Diligence Hub
Conducting due diligence on fund distributors (also known as KYD) has become absolutely essential due to rapidly-changing regulatory practices in the two main fund domiciliation centres in Europe: Luxembourg and Ireland. Consequently, fund “buyers” and their service providers – be they banks, wealth managers or platforms – are facing increasing demands. The questions asked are becoming more numerous and intrusive, and the lack of uniform practices makes the exercise extremely tedious for those with many funds in their portfolio. As for the fund managers who initiate these KYDs, they have to cope with tighter regulation and must devote more and more resources to the exercise.
A useful contribution was made recently by two professional organizations: the Investment Company Institute (ICI) in the United States and the European Asset Management Association in Europe. These two bodies have developed, in symbiosis with the industry, a standardized questionnaire to facilitate KYD, thus opening the door to global technological solutions.
On the strength of 18 years of practicing KYD, Carnegie fundservices created the Due Diligence Hub in 2020, a web-based platform that allows the various actors (fund managers, fund management companies, fund distributors and wealth managers) to exchange relevant information quickly and efficiently. This is done in the form of pre-established files with a standardized composition, in a secure and controlled environment that ensures the necessary confidentiality. Standardization makes files easier to interpret and speeds up production. Combining the questionnaires laid down by the industry’s umbrella organizations with our experience of the KYD ensures that the platform’s content complies with the latest best practice, and thus meets the needs of the various actors.
The entity targeted by KYD forms a single file, which is then shared with the multiple fund management companies that need to conduct due diligence. Fund management companies who need to initiate due diligence on multiple targets for compliance reasons can rely on a single information provider. The Due Diligence hub enables them to make document collection very efficient, relieving them of many bilateral requests and months of requests and follow-up.