Fund administration

Sophia Grene

Perhaps it is inevitable that companies continue to perform their core business even after they have spectacularly messed up, but sometimes it does take your breath away.

The temptation to tell ratings agency Moody’s about the beam in its own eye is almost irresistible. Yesterday it downgraded the operational rating of some funds because:

… Marathon’s investment and liquidity risk monitoring processes, although very strong, could be enhanced by incorporating additional shocks into a global stress test. In Moody’s view, such additional stress testing would have strengthened Marathon’s ability to cope with the market dislocation over the past year. Moody’s noted that the quality of all of the funds’ other major operational areas, such as valuation, operations, corporate functions and service providers continue to be viewed as excellent. Moody’s believes the valuation processes and back office operations have functioned particularly well during the recent periods of great market stress.

Moody’s is one of the companies currently being sued for alleged ‘negligent misrepresentation’ in its ratings of special investment vehicles, and part of an industry sector widely blamed for having failed to understand the cumulative impact of the risks it was rating.

The pot is calling the kettle black. And in this case, the pot is the sooty item and the kettle only a little tarnished.

Pauline Skypala

Linzi Stoppard from Fuse

Party on: Linzi Stoppard from Fuse

The party atmosphere was definitely lacking in Monaco this year for Fund Forum. Numbers were down and the usual lavish entertainment had been credit crunched. Still, the organisers professed themselves pleased with the turnout, and with the numbers of chief execs who turned up to sit on panels or address the conference.
Some providers were still doing things in style, but they were mostly the asset servicing arms of the banks. I enjoyed an evening at a swanky hotel by the sea courtesy of BNY Mellon, including a performance by electric violin duo Fuse. It was just right for Monaco!

Pauline Skypala

numbers are significantly down on previous years

Fund Forum in Monaco: numbers are significantly down on previous years

Anecdotal evidence has it that attendance at Fund Forum in Monaco this week is significantly lower than in previous years. Some say numbers have halved. Last time I came, two years ago, it was certainly much busier. But what is lacking in quantity is made up for in quality, apparently – the CEOs are here in force.

So are the service providers. I shared a cab from the airport with a woman from SimCorp, have met today with BNY Mellon and JPMorgan, and turned down meetings with Liquidnet, Clearstream and Swift ( I prefer to focus on fund managers at a fund management conference).

There are plenty of issues to occupy the service providers. One that came up at a session today was the question of depositary bank responsibility. The European Commission has raised the possibility of making depositaries stand as guarantors for fund assets, making restitution to investors if money goes astray. This is in response to the issues raised by the Madoff affair, which in Europe focused on a few Ucits funds that invested with Madoff and awarded the sub custody of assets to Madoff as well, so the money disappeared.

One view I have heard is that there is no point even discussing the outcome of such a move as it won’t happen: the regulators are not crazy enough to expect anyone to stay in the business if they have to provide a blank cheque.

Perhaps they are right. But listening to the debate at the session I attended, it seems there is no clear view in the industry of what needs to be done to clear up the grey area in the Ucits rules the Madoff area highlighted. Is it an issue just for Luxembourg and Dublin or a wider one for Ucits?

Threatening to make major changes to the responsibilities of depositary banks has at least started a debate on the issue.

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.


Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.

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