Alternative Investments Working Group
Purpose
Alternative investments encompass a broad range of asset classes and investment structures that typically fall outside traditional publicly listed securities and are often characterized by limited liquidity, bespoke legal arrangements, varied valuation methodologies and non‑standardized servicing and record‑keeping models. These include – but are not limited to – private equity, private credit, private funds, real assets, infrastructure, digital and tokenized assets, derivatives, loans and other contractual or structurally complex investment instruments. Due to their diverse forms and regulatory treatments, alternative investments present distinct challenges for Securities Services providers across safekeeping, record‑keeping, valuation, operational oversight, risk management and regulatory compliance.
The purpose of the Alternative Investments WG is to provide a best‑practice framework that addresses the legal, regulatory, operational and risk considerations associated with the servicing and oversight of alternative investments. In doing so, the WG aims to enable market participants to perform their roles more effectively and consistently by:
- Assessing current market practices and infrastructure developments to understand how existing solutions support the safekeeping, administration and supervision of alternative investment assets
- Identifying legal, regulatory and operational gaps
- Proposing practical approaches, standards or recommendations to mitigate risks, enhance transparency and improve operational efficiency in the lifecycle management of alternative investments
Scope
The scope of the Alternative Investments WG is to examine and address the key legal, regulatory, operational and risk management challenges associated with the servicing and oversight of alternative investments across their full lifecycle.
In scope are the analysis of market practices, risks and controls relating to major alternative asset classes, including but not limited to private equity, private credit, private funds, real assets, digital and tokenized assets, derivatives, loans and other structurally complex or non‑standard investment instruments.
The WG will:
- Assess challenges and risks by alternative asset class and investment structure
- Evaluate their implications for safekeeping, record‑keeping, valuation, oversight and regulatory compliance
- Identify gaps in current frameworks, market infrastructure and practices
- Propose practical mitigants, best practices and recommendations to enhance consistency, transparency and operational efficiency
Out of scope are traditional asset classes and activities where established industry frameworks already adequately address these considerations.
Key Deliverables
Key deliverables will include:
Structured Best‑Practice Frameworks
Development and publication of a series of clearly articulated best‑practice frameworks addressing legal, regulatory, operational and risk management considerations across key alternative asset classes and investment structures.
Gap Identification and Practical Recommendations:
Identification of material gaps in current market infrastructure, servicing models, legal clarity and regulatory alignment enabling the provision of pragmatic recommendations or mitigants to improve transparency, governance and operational efficiency.
Key Outcomes
Key outcomes will be:
- To develop a common industry understanding of the key legal, regulatory and operational challenges associated with Alternative Investments
- To promote greater consistency in market practices, terminology and governance frameworks applicable to alternative asset classes
- To enhance awareness and management of risks related to servicing, oversight and lifecycle management of Alternative Investments
- To facilitate knowledge sharing and dialogue among market participants and, where appropriate, public stakeholders
Publications
- Watch Chris Rowland, State Street – and Executive Sponsor of ISSA’s Alternative Investments WG – explain how ISSA will look to update the current challenges in providing safekeeping and supervisory services for out-of-network assets and revise its previously published legal and practice framework -> link
- Final Report on Hidden Risks in the Securities Services Industry – A Sampling of Consequences to Custodians, Clearers and (I)CSDs (06/2012) -> PDF 577 kB
- AGC / ISSA Joint Report on Addressing Challenges in Safekeeping and Supervisory Services for Out-of-Network Assets (04/2014) -> PDF 704 kB
Working Group Co-Chairs
- John Siena, BBH
- Stuart Warner, HSBC
Executive Sponsor
- Chris Rowland, State Street Bank and Trust
Institutions Represented by Experts in the Working Group
- Bloomberg LP
- BNP Paribas S.A.
- BNY
- Brown Brothers Harriman & Co.
- Deutsche Bank AG
- GIC Private Limited
- GlobeTax Services, Inc.
- HSBC Holdings Plc
- Montran
- MYRIAD Group Technologies Ltd
- SEB Group
- State Street Corporation
- U.S. Bank, N.A.