From 2021 to 2024, LUX CSSF carried out a thematic review on the supervision of the delegation of the portfolio management function by investment fund managers.
To monitor compliance with UCITS, AIFMD framework and protect investors’ interests.
LUX CSSF recommendations should be applied to other delegated functions, if relevant.
The procedures must clearly define who does what, when and how in the organisation of the IFM, as well as the documents retained to prove the existence of such controls.
PM procedure should at least cover the specific items in pts 477, 478 of Cir 18/698.
IFMs remain fully responsible for demonstrating that each delegate is qualified and capable of undertaking the PM Function and that they were selected with all due care.
IFMs perform their own analysis to establish written reports, under pts 461- 463, 469 of Cir 18/698; due diligence process can't rely only on questionnaires, visit memos.
Details on LUX CSSF expectations on due diligence control before signing a contract.
IFMs must verify on a regular basis that the business continuity plans (BCPs) of the delegates/subdelegates are adequate and that regular testings will be performed.
Expectations for the contingency plan's content, identification of conflicts of interest.
Rules of conduct, personal transactions should be covered by the internal audit plan.
Description of criteria to be considered in determining if the resources are sufficient.
LUX CSSF highlighted that the internal audit of IFM should include in its internal audit plan the monitoring of the delegated activities, covering all aspects of the delegations.
Effectiveness
LUX CSSF invites all IFMs to perform, at the latest by the end of Q1/2025, a comprehensive assessment of how they monitor the delegation of their PM function.
In the light of the thematic review's observation and the regulatory requirements.
