Fixed&TERManagement& - Fund-X · 2 TERMonitoring! Fund!Accruals!Monitoring! Fund!Invoices!Monitoring!and! Controls! Fund!Invoices!Administraon! FundsBudgeng! OnHGoing!Charges!Monitoring!

Fixed TER Management Product Introduc+on

Luxembourg, 26/08/2014

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TER Monitoring

Fund Accruals Monitoring

Fund Invoices Monitoring and Controls

Fund Invoices Administra+on

Funds Budge+ng

On-‐Going Charges Monitoring

Fund Expenses Monitoring and

Controls

Tax Administra+on

Support

‘Aberdeen’ Reclaims

DTT

GDR’s

Other

Our Services – Overall View

Simula+on

Monitoring Consul+ng

Setup

Business Consul+ng

Fund Administra+on

Custody Transfer Agency and Trailer Fees

Project Management

Focus of this Document

Our Services

Fixed TER Management

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Simula8on

Monitoring Consul8ng

Setup


Our Services – A Focus on Fixed TER Management and Consul+ng

ü Define if your organisa+on is in a posi+on to maximise the advantages of a Fixed TER scheme;

ü Define the levels of Fixed TER that would best fit your organisa+on strategic intents;

ü Simulate the implementa+on of a Fixed TER scheme in our books; ü Monitor your Fixed TER scheme financial posi+ons on a con+nuous basis.

Fund-‐X is the Luxembourg market leader in Fixed TER setup and monitoring. Our services would allow you to:

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Simula8on


Setup


Our Services – A Focus on Fixed TER Management and Consul+ng What is a Fixed TER?

Fixed TER = Management Fees + Fixed Level of Expenses – where ‘Fixed Level of Expenses’ = ‘A pre-‐defined (PRIOR to the beginning of a given fiscal year) amount of annual basis points of the AUM, charged at share class level, aiming at paying for all ‘Administra+on’, ‘Custody’ and ‘Other Expenses’ (and some+mes ‘Taxe d’Abonnement’) to be incurred’.

The defini+on and setup of a Fixed Service Fee leads to a fix, defined in advance TER where Fixed TER = Management Fees + Fixed Service Fees

Defini+on of a ‘Fixed TER’

scheme

55% of the Lux Market

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* Source for Fund Expenses Accoun+ng Methodologies: Promoters Prospectuses

13%

32%

55%

Capped TER – 13% of the market

A Maximum TER is announced before the start of the year. . If the actual TER is lower, the shareholder pays the lager. If the actual TER is higher than the capped TER, the Promoter pays the difference.

Direct Expenses TER – 32% of the market

The exact TER is calculated aier the end of the year and the shareholder pays for what has been incurred by the fund.

Fixed TER – 55% of the market

A Fixed TER is announced before the start of the year.

Since 2010, the most frequent Fund Expenses accoun+ng methodology in Luxembourg – Focus of this Chapter

Expenses Methodology in use by Top 30 Promoters by percentage Of AUM in Luxembourg*

Our Services – A Focus on Fixed TER Management and Consul+ng The 3 Different ways of Managing TER’s in Luxembourg

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Fixed TER schemes implementation has dramatically increased over the last years …

4 5 6 7 9

13

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011

Nbr

of T

op 3

0 P

rom

oter

s by

AuM

in F

ixed

TE

R

Number of Top 30 Promoters by AUM in Luxembourg using Fixed TER as their TER Methodology* - 2006 - 2011 evolution

Our Services – A Focus on Fixed TER Management and Consul+ng Fixed TER Luxembourg Market Penetra+on and Evolu+on

* For all or part of their SICAV’s/FCP’s – Source for Fund Expenses Accoun+ng Methodologies: Promoters Prospectuses

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Business Area Item Today without Fixed TER Tomorrow with Fixed TER

Fund Administra8on Invoices Processing The Fund Administrator is in-‐charge of the Fund Invoices Processing.

The Man Co is in-‐charge of the Fund Invoices Processing. This advantage, combined to the previous one, means less work for the Administrator and sets the ground for contract renego+a+on.

Fund Administra8on Accruals Calcula+on – FA

Significant number of accruals have to be booked by the Fund Administrator: Management Fees, Custody, FA, (TA), Other Expenses, Taxe d’Abonnement

Two accruals to be booked by the Fund Administrator: Management Fees and Fixed Expenses.

Compliance UCITS IV The Key Informa+on Document requested by UCITS IV will have to provide an es+mate of the total costs to be incurred by Funds. There is room for misunderstanding in the current framework as the final costs could be different from the announced costs.

The Fund expenses cost announced in the prospectus is definite (except in case of market turmoil) – it can be included in the KID without risk of miscomprehension on the Shareholder side.

Product Development Fund Crea+on -‐ Fund Expenses Defini+on

Fund Expenses need to be defined according to actual costs.

Fund Expenses can be defined at Promoter’s will as all expenses are considered as a global budget for all SICAV’s – intra-‐ and extra-‐ investment vehicles expenses mutualisa+on of expenses applies.

Product Development Fund Structuring Where to create the funds and how to structure them is always a ques+on for a Promoter.

The Fixed TER scheme, by default, is an incen+ve to create funds in Luxembourg (for non-‐US distributed funds) and preferably in a mul+-‐subfunds investment vehicle.

Sales Sales of Funds #1 Sales cannot indicate for sure what the cost of a given fund can be before the start of or during the year.

Sales can announce the definite cost of the fund before or during the year.

Sales Sales of Funds #2 Sales cannot provide Ins+tu+onal Clients with a preferred level of expenses.

Sales (through Product Development) can allow Ins+tu+onal Clients with less costs than retail.

Our Services – A Focus on Fixed TER Management and Consul+ng The Fixed TER advantages per business area (Cont’d)

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Reminder: Fixed TER A Fixed TER is FIXED throughout the year and is announced before the start of the year. Since 2010, the most frequent Fund Expenses accoun+ng methodology in Luxembourg. A clear market trend.

UCITS IV On-‐going charges For Plain Vanilla Funds, our analysis led us to the conclusion that ‘on-‐going charges’ = TER + ‘Fee Sharing Agreements’; KIID must be updated each +me that on-‐going-‐charges vary by +/-‐ 5%.

Fixed TER schemes can be implemented in a goal to mi+gate the risk of on-‐going charges varia+on (+/-‐ 5%).

UCITS IV On-‐going charges and Fixed TER For Plain Vanilla Funds, our analysis led us to the conclusion that ‘on-‐going charges’ = TER + ‘Fee Sharing Agreements’; KIID must be updated each +me that on-‐going-‐charges vary by +/-‐ 5%.

Fixed TER is a significant advantage in the frame of UCITS IV on-‐going charges:

Implemen+ng Fixed TER allows Clients to: ü  Heavily decrease the risk

of on-‐going charges varia+on by +/-‐ 5%;

ü  Avoid the usage of es+mates in the frame of on-‐going charges calcula+on;

ü  Increase significantly ‘Product Development’ flexibility;

ü  Other advantages.

Our Services – A Focus on Fixed TER Management and Consul+ng UCITS IV ‘On-‐Going Charges’ – The Fixed TER advantage

UCITS IV On-‐going charges Components high level es8mate

Fee sharing 10%

Fixed TER does not move;

UCITS IV On-‐going charges Components high level es8mate

Fee sharing 10%

Current TER – varies in 8me; 90%

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Fund-‐X S.A. Stephane Corremans Managing Director 6d, Route de Trèves – EBBC Building D L-‐2633 Luxembourg/Senningerberg Phone: +352 263472-‐44 Fax: +352 263472-‐88 Mobile: +352 621 371869 E-‐Mail: scorremans@fund-‐x.com

Contact details

www.fund-‐x.com

Simula+on


Setup


Documents

Fixed&TERManagement& - Fund-X · 2 TERMonitoring! Fund!Accruals!Monitoring! Fund!Invoices!Monitoring!and! Controls! Fund!Invoices!Administraon! FundsBudgeng! OnHGoing!Charges!Monitoring!