AIFMD segregation power lies with depository banks

Prime brokers forced to comply and change models, says lawyer

Jacqui Hatfield, partner, Reed Smith

The fact that Esma is forcing segregation of alternative investment fund (AIF) assets from non-AIF assets is not surprising, especially given the AIFMD language requiring the identification of assets of AIFs at the sub-custodian level. The segregation will be welcomed by depositories who have liability for the assets held with sub-custodians, but no effective control over them. Esma is consulting on two options, both of which require segregation of AIF assets