No reuse of assets by depositary - UCITS V Provision: Difference between revisions

*Agent lending “[[reuse]]” is, thus, explicitly for the benefit of the fund [[principal]], in that the fund earns a positive return by doing it. The best you could say of PB-style [[rehypothecation]]  is that the fund avoids a steeper financing charge  from the Prime broker that would be implied were the [[prime broker]] not allowed to rehypothecate the assets it has financed. and in any case UCITS have fairly strict limits against leverage so generally shouldn't be financing assets in the first place.

*Likewise, the theory of [[rehypothecation]] is that it isn't [[Collateral|collateralised]], and certainly not with high-quality collateral: to the contrary, the prime broker’s right to take assets is dependent on the fund’s indebtedness to the PB, so that there is nothing to collateralise. Arguing that by effectively eliminating indebtedness is kind of like being collateralised (as long as you limit yourself to 100% of indebtedness) is, as I say, a stretch.