A process that will be completed by the end of this week. From then on, it will depend on whether it is definitively registered as a depositary, foreseeably in two or three weeks, and then the management of these CIIs can be resumed.
Image author: Moyan_Brenn, Flickr, Creative Commons
Significant progress has been made in recent weeks in the process of reactivating the trading of funds and SICAV managed by Banco Madrid. At all times, the priority of Cecacank, the provisional depositary appointed by the Spanish National Securities Market Commission (CNMV), is to bring forward the unblocking of the operational function of the funds (buying and selling assets) and allow the management of these vehicles, which has been paralysed since the intervention by the CNMV on 16 March 2015, to resume.
This does not imply the reactivation of transactions for unitholders, i.e. transfers, subscriptions or redemptions. For this to happen, as reflected by the supervisor itself in its practical guide issued for investors with positions in the fund manager's CIIs, Renta 4 must be definitively appointed as the fund manager of these vehicles, once all its conditions have been accepted. Among them, that Cecabank should be the designated depositary. This situation would allow the corresponding commercial network to be activated so that investors can place their redemption orders, the CNMV indicated.
Transfer of positions
Until then, Cecabank has already begun the process of transferring all the positions under the custody of RBC (fixed-income securities, securities...) from the 22 funds of Banco Madrid Gestión de Activos, which total €934 million.These assets represent the most important part of the portfolios, but there are also other positions in options and futures (under the custody of Altura Markets) or in other third party funds (through Allfunds Bank) where the unblocking process has also been initiated. In principle, there should not be any problems with the latter, unless otherwise specified by the originating institution.
The unblocking of positions in current accounts and deposits (assets that cannot be held in custody) with third parties has also commenced. However, for liquidity positions in Banco Madrid assets, it has not been possible to initiate this process. In the latter case, all indications are that these assets will not be transferred, as the insolvency administrators of Banco Madrid have denied the request by the fund manager to unblock these assets.
Therefore, for those vehicles with a large liquidity position, which could represent around 15%-22% of the fund manager's total equity, a special purpose subfund will be created (see here what a side pocket or special purpose subfund is). If the position were irrelevant, this investment could be directly valued at zero and no side pocket would then be created. Unitholders in the special purpose subfunds to be created will have to wait for these assets to be recognised, either in the insolvency report, which could be published within the next six months; or for the insolvency administrators to decide over the next few months to return some of this liquidity in a timely manner.
In the case of SICAV, the same process is being followed for those vehicles in which the General Shareholders' Meeting has appointed Cecabank as depositary. The equity in SICAVs totals approximately 600 million.
Once the process of transferring the assets is completed this week and Cecabank is officially registered as depositary, presumably within two or three weeks, if all the conditions are met, the fund manager (Banco Madrid Gestión de Activos until Renta 4 Gestora is finally appointed) will be able to resume managing these vehicles, i.e. buying and selling assets. This would mean the completion of the second phase and the readiness for the third and most eagerly awaited phase, the opportunity to execute redemptions or transfers.
