What is a depositary? — the mandatory safekeeping and oversight entity (EU funds)
A depositary is the independent entity — typically a bank — that every EU AIF and every UCITS must appoint to hold and watch the fund's assets. It performs three functions: safekeeping (custody of financial instruments, record-verification of everything else), cash-flow monitoring, and oversight of the fund's dealings — subscriptions, redemptions, valuation, income application. The requirement sits in Article 21 AIFMD and, for UCITS, in the regime aligned by UCITS V (Directive 2014/91/EU).
The teeth are in the liability rule: for financial instruments held in custody, the depositary is strictly liable — if they are lost, it must return identical instruments or the corresponding amount without undue delay, unless it proves the loss arose from an external event beyond its reasonable control (Art 21(12)). An AIF depositary can contractually discharge that liability to a sub-custodian in defined conditions; a UCITS depositary cannot — no discharge, ever. Delegation of custody is allowed; delegation of the liability, for UCITS, is not.
The default rule is that the depositary sits in the fund's home member state. AIFMD II (Directive (EU) 2024/927, applying from 16 April 2026) loosened this at the edges: national regulators may allow a cross-border depositary appointment case by case where the home market lacks supply, and central securities depositories acting in certain capacities are treated as part of the custody chain.
The practical gotcha: the depositary is the big structural cost divider between regimes — a Luxembourg RAIF or Irish QIAIF must carry one, a Jersey JPF or Guernsey PIF needs none — and under NPPR some host states re-import "depositary-lite" duties anyway. Price it per distribution plan, not per domicile brochure.
Where this appears on FundRegTracker
- NAV error correction across domiciles — in the UK the depositary is the materiality threshold
- Where to domicile a private fund — who requires a depositary and who doesn't
- AIFMD II implementation tracker — the cross-border depositary changes