Embed Size (px)
Citation preview
/
FEATURING Apex // Arthur Cox // Dillion Eustace // Maples & Calder // Quintillion // SS&C GlobeOp // SuMi TRUST Global Asset Services
TECHNOLOGY A significant investment in technological solutions
REGULATION The impending arrival of Ucits V
VISIONClear goals for international success
I R E L A N D 2 0 1 6WEEKHFM
S P E C I A L R E P O R T
H F M W E E K . CO M 3
I N T R O D U C T I O N
Published by Pageant Media Ltd LONDONThird Floor, Thavies Inn House, 3-4 Holborn Circus, London, EC1N 2HAT +44 (0) 20 7832 6500
NEW YORK 200 Park Avenue South Suite 1603, NY 10003T +1 646 891 2110
REPORT EDITOR Tom SimpsonT: +44 (0) 20 7832 6535 [email protected]
HFMWEEK HEAD OF CONTENT Paul McMillan T: +1 646 891 2118 [email protected]
HEAD OF PRODUCTION Claudia Honerjager
SUB-EDITORS Luke Tuchscherer, Mary Cooch, Alice Burton, Charlotte Romeyer
GROUP COMMERCIAL MANAGER Lucy Churchill T: +44 (0) 20 7832 6615 [email protected]
HEAD OF BUSINESS DEVELOPMENT AMERICAS Tara Nolan T: +1 (646) 891 [email protected]
PUBLISHING ACCOUNT MANAGERSAlex Roper T: +44 (0) 20 7832 [email protected] Butroid +44 (0)207 832 6613 [email protected] Alexandra Bethanis +44 (0)207 832 6618 [email protected]
CONTENT SALES Tel: +44 (0) 20 7832 6511 [email protected]
CEO Charlie Kerr
HFMWeek is published weekly by
Pageant Media Ltd ISSN 1748-5894
Printed by The Manson Group
© 2016 all rights reserved. No part of
this publication may be reproduced
or used without the prior permission
from the publisher
he past 12 months has seen considerable momentum for the funds industry in Ireland, as we continue to strengthen our current position as one of the world’s leading fund domiciles. We remain Europe's leading onshore hedge fund jurisdiction and have seen growth in several fund types and structures.
As of year-end 2015, total assets under administration in Ireland stood at €3.86trn, from over 6,200 authorised funds, with Ireland administering a 40% share of the world’s hedge funds. In 2015, there was €31bn in net inflows into
Qualifying Investor Alternative Investment Funds (QIAIFs) and a 16% increase in assets during the year. This notable growth has been driven by a number of factors.
Specifically, we’ve seen a strong uptake in the Icav corporate structure, which launched in March 2015, continuing to allow global fund managers access to European investors. This was led by US-based fund manager Permal Group, which was the first firm to launch an Icav, with a suite of Irish domiciled funds. In September, new redomiciliation legislation also saw UBS Hedge Fund Solutions become the first investment manager to redomicile a Cayman fund as an Icav in Ireland.
As an industry we have continued to build an extensive network of relationships with fund managers in the US, UK, Europe and Asia with strong business and cultural links. From a regulatory perspective, the global industry recognises that the CBI is highly capable in understanding fund manager priorities and in providing sensible and practical regulation when it comes to alternative fund strategies.
Over the next year, we’re working on a number of wider market developments and regulatory changes. We expect to see a gradual shift away from offshore fund jurisdictions to onshore, regulated Europe and Ireland expects to attract most of these managers. Thus far, the majority of Icavs have been new fund launches, with only a small number being conversions from existing plcs. Throughout the year, we expect to see a greater number of conversions and most new fund launches using a corporate structure will likely use the Icav.
Irish Funds also has extensive work planned as we seek to enhance Ireland’s private equity product offering. With this in mind, we are assessing the Investment Limited Partnership Act and considering ways in which we can increase its efficiency, while also looking to attract private equity fund managers.
An additional area of interest for Ireland and certainly from a long-term perspective, is the Capital Markets Union (CMU). The CMU has been designed in an attempt to ensure greater harmony across financial regulation in the EU and to increase efficiency and consistency across its capital markets. If successful, the CMU will make it simpler and more efficient for institutions to invest in alternative assets and in turn better manage their long-term liabilities.
Looking ahead, we’ll be continuing our work and further developing the foundations we’ve built over the past 25 years as the official trade body representing the international funds industry in Ireland.
Pat Lardner is CEO of Irish Funds, the representative body for the international investment fund community in Ireland. Pat has worked in the investment management industry for over 20 years, is a past council member of the Irish Association of Pension Funds and former director of the Irish Association of Investment Managers.
TI R E L A N D 2 0 1 6
4 H F M W E E K . CO M
I R E L A N D 2 0 1 6 C O N T E N T S
FUND MANAGEMENT
IRELAND’S FUND EVOLUTIONColin Keane of SS&C highlights the immense changes which Ireland’s fund industry has been subject to and offers his predictions on the future of Ireland
FUND MANAGEMENT
IRELAND SETS NEW STANDARDS IN FUND GOVERNANCEAdam Donoghue and Aaron Mulcahy of Maples and Calder examine how a more streamlined and meaningful corporate governance regime will impact Irish funds and management companies
ALTERNATIVE INVESTMENT SERVICES
PROSPEROUS FUTUREKen Somerville, head of business development for Quintillion, explores the background of Ireland’s thriving financial sector and how it looks set to expand even more
ADMINISTRATION SERVICES
ELTIF: A NEW FUND PRODUCT FOR THE LONG-TERM?Dara Harrington and Andrew O’Connor of Arthur Cox discuss the key features of the new European long-term investment fund
ADMINISTRATION SERVICES
GROWTH AND CHALLENGES OF FUND ADMINISTRATION IN IRELANDCharles Bathurst, sales consultant for SuMi TRUST Global Asset Services, reflects on the key drivers that have continued to shape the Irish Asset Servicing industry. He also highlights the impact of AIFMD and Ucits V on the Irish Fund Administration industry/depositary market and offers thoughts on the immediate future
06
09
11
13
15
Built on years of experience with
foundations in our award-winning
services and leading technology,
our guidance can help drive your
portfolio’s performance in the right
direction. It’s not evolution, just the
basics done better.
Yours. Ours. US.
Your vision. Our goal.
Global Hedge Fund Administration Made Simple
Fund Administration &
Middle Office Services
Investor Services
Risk & Regulatory Services
Conversion & Launch Services
Tax & Audit Services
quintillion.com+353 1 523 8003
6 H F M W E E K . CO M
I R E L A N D 2 0 1 6
COLIN KEANE OF SS&C HIGHLIGHTS THE IMMENSE CHANGES WHICH IRELAND’S FUND INDUSTRY HAS BEEN SUBJECT TO AND OFFERS HIS PREDICTIONS ON THE FUTURE OF IRELAND
IRELAND’S FUND EVOLUTION
Colin Keane is the country head of SS&C Ireland and leads its European Managed Account Platform division. He has over 16 years’ experience in the fund administration industry. Colin specialises in European regulated investment vehicles and recently completed a research masters on the impact of regulation on returns across offshore and European Alternative Investment Funds, and Ucits platforms.
HFMWeek (HFM): What is the outlook for the funds industry in Ireland?Colin Keane (CK): Th e Irish funds industry continues to thrive, staying strong in both domestic and off shore Alternative Investment Funds (AIFs). Funds continue to grow at exponential rates with assets doubling to €3.6trn in the past fi ve years.
In response to low interest rates and volatile market conditions, investment products and strategies seek to off er absolute returns to investors. Institutional capital continues to increase, and alternative Ucits and 40 Act funds have grown signifi cantly in recent years. Even tradi-tional strategies that follow relative returns deploy tacti-cal diversifi cation to mitigate market risk, and derivatives are commonly used by managers. Since the G20 com-mitment to transparency in the derivatives market, fund managers face increased regulatory scrutiny.
The 2013 transposition of European Market Infra-structure Regulation (EMIR) into Irish law increases regulatory responsibility for investment managers. Timely confirmation, portfolio reconciliation, dispute resolution, and transaction reporting are a few of the obligations imposed by EMIR. In 2016, EMIR will bring mandatory central clearing and the widely dis-cussed collateral margin requirement for non-cleared OTC derivatives.
HFM: How is the role of the fund administrator changing? CK: Th ere are signifi cant synergies between the fund manager’s growing regulatory obligations and the ser-vice off ering of the very best fund administrators. For instance, transaction reporting to trade repositories requires aggregation of data from multiple sources, rec-onciliation, and reporting. By leveraging middle offi ce technology and process expertise held by administrators, managers can overcome the data, governance, control, and transparency challenges posed by transaction report-ing requirements. Early indications that brokers would assist fund managers have proven unfounded in the case of EMIR, with many clearing brokers distancing them-selves from the reporting requirements.
Th e regulatory services group at SS&C GlobeOp has grown signifi cantly in recent years, with more than 70 highly skilled professionals in the group today, and continued growth expected in 2016. Our Annex IV solu-tion currently covers 19 EU jurisdictions and client fi l-ings have been completed in 15. Our regulatory services model operates eff ectively either as part of a broader
service off ering, or as a standalone solution, with data taken from multiple sources.
HFM: What has made the regulatory services at SS&C so successful? CK: SS&C understands requirements and data normali-sation; expertly engages with clients, industry groups, and regulators; continually invests in proprietary tech-nology that provides full process transparency and in-sight
While most managers have been able to meet the An-nex IV requirements, the sophistication of the solutions are varied. As a result, it is expected that many fund man-agers will reassess their regulatory reporting processes in 2016. Deployment of multiple systems and data ware-housing to support diff erent regulations is costly and ineffi cient and many will look to the leading outsourced solutions to save money and increase effi ciency.
HFM: Is there an ideal outsourcing model that man-agers should follow?CK: Th ere is no ‘one-size-fi ts-all’ blueprint when it comes to outsourcing. Managers must evaluate what best suits their operational risk management approach, whether that be full or component outsourcing. For example, one SS&C GlobeOp client opted for a fully outsourced mod-el instead of building out a large internal operations team. Th e SS&C GlobeOp service blends seamlessly into the client’s operation, with signifi cant integration on both sides and the SS&C task management solution provides oversight of the entire process.
Other managers prefer to receive a particular solu-tion or service on a standalone basis. The middle and back office solutions from SS&C are used by asset man-agers, insurance companies and even a sell-side bank which, if required, can connect directly with third-party administrators.
Outsourcing must be cost eff ective to provide value to the manager, and the cost associated with regulation has signifi cant impact on returns. Cost pressures (e.g. money spent on technology and human expertise) are felt across the market and all managers are looking to become more effi cient and reduce the costs they pass on to investors.
The desire to increase efficiency also drives organi-sations to outsource. SS&C GlobeOp is continually focused on the digitisation of its operational and valu-ation processes. For example, SS&C has automated the entire NAV lifecycle, from the OMS delivery and rec-onciliation interface, through to valuations. The SS&C
F U N D M A N A G E M E N T
H F M W E E K . CO M 7
proprietary platform, eNav, completely digitises work-books, making reliance on Excel a thing of the past. Exception management is a crucial component to com-plete and accurate reporting. Data is available to SS&C clients through both the SS&C GlobeOp portal and on mobility apps.
HFM: How is SS&C GlobeOp positioned to meet the growing demands on administrators?CK: Data is fundamental to the service provided by fund administrators and technology drives data management. Some fund administrators have proactively partnered with fi ntech companies to bridge the internal technology gap and meet client demands. Other administrators who were late to react now face the consequences as the gap between their service off ering and that of their competi-tors – and the expectations of their clients – grow.
SS&C GlobeOp has a distinct advantage: its parent company, SS&C Technologies, is a NASDAQ-listed fi -nancial technology company. As such, SS&C GlobeOp owns all of its technology and develops it directly in line with clients’ requirements, supported by a signifi cant percentage of SS&C’s soft ware revenues. Data normalisa-tion and complete, transparent and secure reporting are core to the SS&C GlobeOp off ering.
HFM: What are the wider trends happening in Ire-land?CK: Data integrity and security is a key industry focus. As a technology company, SS&C has a large, dedicated cyber security team and a strong culture of awareness
and vigilance. Cyber threats are a continual focus for all employees.
Another area of interest this year is investor data. Th e adoption of the Common Reporting Standards (CRS) and the Foreign Account Tax Compliance Act (FATCA), have prompted questions around the collection and storage of investor information. Faxes seem an archaic approach to modern traders and investment managers, but they remain prevalent in investor services for alterna-tives funds. E-Investor by SS&C GlobeOp is an online subscription service that combines signifi cant fl exibility for each subscription document and the ability to gather FATCA and CRS investor data.
Th ere have been a number of iterations of Central Bank of Ireland’s Fund Management Company Eff ective-ness criteria since the original 16 management functions were released in the AIF rulebook in 2014 and it remains very topical in the market. Since Consultation Paper 86 and the last iteration in November 2015, the managerial functions have consolidated into six core areas: regula-tory compliance, fund risk management, operational risk management, investment management, capital and fi nancial management and distribution.
SS&C GlobeOp leveraged its existing technology to develop an online task management system that provides digital oversight. Each managerial function has its regula-tory requirements embedded into its online checklist to ensure compliance. Time and owner stamps provide full transparency into each outstanding task and where the responsibility for completion resides, as well as an audit trail of historical actions.
IRELAND
Colm Geary [email protected]
LONDON
Charles Bathurst [email protected]
TOKYO
Hiroyuki Takano [email protected]
“SuMi TRUST” is the international marketing name of the Sumitomo Mitsui Trust Group and its affiliated companies
SuMi TRUST Global Asset Services brings over 20 years experience of working with international asset managers to meet their individual requirements, which, combined with the financial strength and client service culture that you would expect from Japan’s oldest and largest Trust Bank, is your ideal partner to expand your business.
We deliver a robust and flexible set of administration, depositary and custody services, for both regulated and non-regulated structures, irrespective of asset class including full Irish depositary to support both AIFMD and UCITS V.
Global Asset Service Experience and Expertise
www.sumitrustgas.com
For further information please contact:
F U N D M A N A G E M E N T
H F M W E E K . CO M 9
I R E L A N D 2 0 1 6
Adam Donoghue is a partner in the Investment Funds Group in Maples and Calder’s Dublin office. He has broad experience advising on the establishment, authorisation and operation of various types of Irish regulated Ucits and AIFs, with particular focus on the alternatives space.
One positive legacy of the fi nancial crisis (and the Madoff and Weavering scandals) is a heightened global focus on corporate governance and oversight of delegates by fund boards. In particular, the increase in the numbers of pension funds, insurers and
other institutional investors allocating to alternative funds over the last fi ve years has resulted in greater scrutiny on the adequacy of investor protection measures and robust-ness of fund governance.
Ireland was already ahead of the curve in this respect, in-troducing a well-regarded industry corporate governance code in 2011, along with the fi tness and probity regime im-posed by the Central Bank of Ireland (CBI) for directors and other control functions of Irish funds.
However, the Ucits and AIFMD frameworks have sub-stantially increased the regulatory obligations to be dis-charged by Irish funds. Over the last 18 months, the CBI therefore carried out a root-and-branch review of the Irish governance model, through a series of thematic inspec-tions and industry consultations. Th e main output of that review is the CBI’s paper on fund management company boards (the paper), incorporating feedback on its consul-tation paper on fund management company eff ectiveness and guidance on a range of governance matt ers.
As the paper applies to a broad range of Irish regulated entities (Ucits management companies, AIFMs, self-managed Ucits and internally-managed AIFs, collectively ManCos), we summarise below the key implications for managers of Irish fund structures.
STREAMLINING OF KEY MANAGERIAL FUNCTIONSPreviously, the CBI required every ManCo to demonstrate how it discharged a range of key managerial functions: 10 for Ucits management companies/self-managed Ucits, and 16 for AIFMs/internally-managed AIFs. In a welcome de-velopment, the paper provides for the reduction and align-ment of those parallel but oft en-overlapping requirements into six key managerial functions: regulatory compliance, fund risk management, operational risk management, in-vestment management, capital and fi nancial management and distribution. Th e CBI’s rationale is to make it easier for ManCos to organise their oversight of delegates in a clear
and effi cient manner without duplicating activities or lines of responsibility. Granular detail on the scope of these new functions is still being fi nalised by the CBI, with additional guidance expected in the coming months.
ORGANISATIONAL EFFECTIVENESSTh e paper introduces a new ‘organisational eff ectiveness’ role, to be fulfi lled by an independent director who may not carry out any of the six key managerial functions. Th e role involves ongoing monitoring of how the ManCo is or-ganised (including considering board composition).
INCREASED FOCUS ON ‘DESIGNATED PERSONS’One key theme throughout the paper is the CBI’s empha-sis on the importance of the role of the ‘designated person’ in the discharge of managerial functions. Th e designated person role should now be treated as entirely distinct from the role of a director (including separate lett ers of appoint-ment). Directors are involved in controlling and directing the ManCo, whereas designated persons perform the day-to-day specifi c managerial function(s) which they have been assigned and escalate issues identifi ed in accordance with the ManCo’s escalation procedure. Th e paper en-courages ManCos to ensure that their designated persons have the requisite skills, experience, support and resources available to them to discharge the role. While the CBI will continue to permit a director to also assume managerial functions, it clarifi es/ warns that in that case, “he or she is consenting to becoming involved in the fund management company on a day-to-day basis”.
Th e paper recognises that ManCos may use a number of diff erent resource models (including the use of designated directors, designated persons, employees and secondees) and that there is no ‘one-size-fi ts-all’ approach to resourc-ing. Nevertheless, given the paper’s expectations that man-agerial functions require ‘day-to-day’ involvement, we have already seen a clear trend of directors of Irish ManCos de-coupling their additional designated person roles. In some cases, the result has been the appointment of additional promoter/manager-related directors who have the special-ist skills (oft en investment management or risk manage-ment) and can commit the time needed to carry out those functions on a day-to-day basis. Th e more common trend,
IRELAND SETS NEW STANDARDS IN FUND GOVERNANCE
ADAM DONOGHUE AND AARON MULCAHY OF MAPLES AND CALDER EXAMINE HOW A MORE STREAMLINED AND MEANINGFUL CORPORATE GOVERNANCE REGIME WILL IMPACT IRISH FUNDS AND MANAGEMENT COMPANIES
Aaron Mulcahy is a senior associate in the Investment Funds Group in Maples and Calder’s Dublin office. He advises on a wide variety of legal and regulatory issues associated with the establishment and operation of Ucits and AIFs in Ireland.
F U N D M A N A G E M E N T
1 0 H F M W E E K . CO M
I R E L A N D 2 0 1 6
OVER THE LAST 18 MONTHS, THE CBI CARRIED OUT A ROOT-AND-BRANCH
REVIEW OF THE IRISH GOVERNANCE MODEL, THROUGH A SERIES OF
THEMATIC INSPECTIONS AND INDUSTRY CONSULTATIONS
”
however, has been to engage third-party professional firms to provide designated person services on a secondment basis, creating a distinct second rank of ‘substance’ beneath the ManCo board.
DIRECTORS’ TIME COMMITMENTSFinally, and in parallel to CP86, the CBI carried out a separate themed review to consider the im-pact on Irish fund governance of a small number of individuals holding multiple directorships. The resulting guidance on directors’ time commit-ments provides that the CBI will treat any direc-tor who has more than 20 directorships, combined with a high aggregate number of professional time commitments (more than 2,000 hours), as a risk indicator warranting further consideration. Man-Cos will need to review current board composi-tion, document directors’ aggregate annual time commitments and be satisfied that each director can commit sufficient time to his/ her role.
TIMEFRAMEThe new rules apply immediately to any new Man-Cos (those authorised since 1 November 2015). For any ManCos existing prior to that date, the CBI has committed to publish further draft guidance by the end of Q1 2016, following which existing ManCos will have at least a six-month transitional period. Realisti-cally, therefore, existing boards will have until Q3 or Q4 of this year to effect any necessary changes and amend their AIFM programme of activities/Ucits business plans to the extent relevant.
BENEFIT OR BURDEN?So are these enhancements a net positive or negative for the Irish industry? One unavoidable downside is the ad-ditional time that managers will need to devote at the fund set-up stage in selecting a balanced mixture of ap-propriately qualified directors, and which directors and/or outsourced designated persons will need to devote to dis-charging the day-to-day managerial functions. For existing funds, extra one-off work may also be required to come into compliance (for example a gap analysis and possible restructure of existing board arrangements).
However, this is countered by a few clear positives. Firstly, the steps taken to reduce concentration of fund director-ships in the industry should result in a wider and more di-versified community of directors (in theory having more
time to commit to their individual roles). We expect that the CBI’s more granular guidance on its expectations regarding delegate oversight and the effective discharge of the manage-rial functions will also create new standards of best practice
and uniformity across the industry, which can only serve to enhance investor protection and corre-spondingly boost Ireland’s brand as a fund domicile.
Secondly, there is no doubt that the CBI’s distil-lation of six streamlined AIFM/Ucits managerial functions removes the scope for duplication and allows for greater operational and reporting clar-ity and certainty. This alignment of requirements will make it easier for managers to establish Irish Ucits/AIFM dual-authorised ‘super-mancos’, as it removes the need for distinct (yet frequently over-lapping) AIFM programme of activities and Ucits business plan documents and allows for a single unified framework for both regimes.
Finally, it adds meaningful operational substance to the delegation model employed by most Irish funds. AIFMD and Ucits regimes both prohibit an authorised AIFM/Ucits management company from delegating functions to such an extent that it is a mere ‘letterbox entity’. Owing to the ambiguity of what constitutes a letterbox entity, and the vary-
ing standards of AIFMD implementation across Europe, it is likely that the scheduled review of the AIFMD regime in 2017 will include consideration of the extent of delegation across the industry.
Of course, the CBI’s existing requirements as regards retained substance, delegation oversight and clear report-ing channels already fully comply with the letter and spirit of the Ucits and AIFMD regimes. However, by (a) putting more substantive flesh on the bones of what effective over-sight and control of delegates must mean in practice and (b) indirectly injecting further substance into Irish Man-Cos (by effectively requiring either additional hands-on executive directors or the use of professional outsourced day-to-day ‘designated person’ support), the CBI has un-doubtedly reinforced the prevailing Irish model ahead of any wider European regulatory review.
In conclusion, any short-term inconvenience to adapt into compliance with the new rules will be outweighed by the clear benefits of a more robust, meaningful and efficient corporate governance framework. In light of the recent global, institutional investor-driven focus on governance, that can only add to Ireland’s appeal as a domicile.
A LT E R N AT I V E I N V E S T M E N T S E R V I C E S
H F M W E E K . CO M 11
I R E L A N D 2 0 1 6
HFMWeek (HFM): What are the key advantages of operating as an Icav and how does the Icav appeal to hedge fund managers?Ken Somerville (KS): Th e two leading fund locations in Europe are Ireland and Luxem-bourg. For a US manager there is a closer affi nity with Ireland, due to a range of cultural reasons, al-though there is still a signifi cant challenge when establishing in any jurisdiction outside of the US. Ireland has consolidated its ad-vantage with the new Irish Collec-tive Asset-management Vehicle (Icav).
Th e Icav comes with the key benefi t of having ‘check the box’ status making it a transparent investment for US tax purposes. Th is key advantage has immedi-ate obvious appeal to US investors despite being an off shore vehicle. With an Icav, a US man-ager can operate an off shore investment vehicle within their own tax code. Th ey can also do this with a ready ex-
pectation that their fund will be in a position to provide US taxable investors with the appropriate form 1065/K1 reporting.
Th e format of the Icav is hugely important to US man-agers as they can use it immediately to produce their own tax return. Th ose additional features of the Icav have made it a spectacularly att rac-tive solution for managers who wish to have a vehicle that isn’t tame and that has broad appeal in Europe and the United States. In the past nine months all of this has made it the go-to solution for US managers.
HFM: How have growth strate-gies developed and what have been the key factors in this advancement?KS: In the post-credit crunch envi-ronment the range of direct lending,
loan and credit strategies has grown exponentially. We are both a fund administrator and a loan administrator, thus within Quintillion/US Bank we off er two components
KEN SOMERVILLE, HEAD OF BUSINESS DEVELOPMENT FOR QUINTILLION, EXPLORES THE BACKGROUNDOF IRELAND’S THRIVING FINANCIAL SECTOR AND HOW IT LOOKS SET TO EXPAND EVEN MORE
Ken Somerville serves as head of business development for Quintillion, an indirect wholly owned subsidiary of US Bancorp. Ken joined Quintillion as a founder in 2006 and has served in his business development role since then, managing the sales and marketing for efforts for Quintillion’s alternative investment services.
PROSPEROUS FUTURE
INVESTOR INFLUENCEBECAME CENTRAL TO FUND OPERATIONS VERY QUICKLY AS THE DUST SETTLED INIRELAND DURING 2009
”
A LT E R N AT I V E I N V E S T M E N T S E R V I C E S
1 2 H F M W E E K . CO M
I R E L A N D 2 0 1 6
that are particularly useful to loan portfolio managers. Th e fund administration unit takes responsibility for investor services and NAV calculation, while our corporate trust unit provides a comprehensive range of loan services.
By providing all of the back-offi ce support and services around the loans in a funds portfolio, the manager remains free to focus on the core responsibility of portfolio man-agement. Th ese services combined are not universally of-fered by administrators and as a result we have seen a huge amount of activity in the space.
Th e lack of availability of credit via traditional lenders has created opportunities for investment funds and we are absolutely observing that. Some of that eff ect is due to the Icav structure being particularly conducive to US inves-tors coming on board, but for us, the combination of both corporate trust based loan servicing and hedge fund ad-ministration under one roof allowing clients to outsource basically everything beyond the investment strategy to us, is pivotal.
HFM: Can you highlight what obstacles US hedge fund managers face when branching out to Europe?KS: Th e fi rst and most basic obstacle is the prospect of operating in an unfamiliar environment. Th is is the standard challenge for anybody seeking to open an offi ce or investment fund outside of their traditional space. It is the same with European managers seeking to expand in the US. Th ere is also an enhanced compliance challenge driven by local legislation as there are a number of regula-tory requirements for funds in Ireland that don’t exist in the rest of the world. Funds are required to appoint a depositary (historically a Trustee & Custodian), in addition to the standard suite of service providers. Even off shore funds with either European managers or investors are now required to have what is known as a depositary lite solution. Sett ing up also requires the creation of the Ireland or Luxembourg-based vehicle. Th ere is also the requirement to establish a European management company, either directly or by joining a licenced European platform.
Th e second obstacle is cost, both of the set up process, plus the ongoing costs of the depositary carried as fund overheads. Due to this, there is a distinct sense that the economic operating size for a fund is now signifi cantly higher in Europe than in other locations. $75m is a solid start fi gure or early stage capital fi gure for an off shore jurisdiction. Today, it’s probably twice that in Ireland meaning that the critical mass for funds is $150m. If there is a more signifi cant barrier that poses more dif-fi culty than the rest, it is certainly cost.
HFM: What type of continued infl uence does due diligence have on administration operations? KS: Investor infl uence became central to fund operations very quickly as the dust sett led in Ireland during 2009. In-vestors eff ectively beat regulators to the start line in im-posing change and today exercise a dominant position of infl uence over how funds operate and how they conduct themselves. Th ey have been and continue to be far more immediately eff ective at infl uencing the daily operation
of funds than the regulator. For example, with AIFMD one of the key requirements of the legislation was to cre-ate a concept of the depositary lite and apply it across the board. Th at has been the key change post-fi nancial crisis for hedge funds in this part of the world, with a number of additional responsibilities for depositaries and for manag-ers with respect to regulatory reporting.
However, there is a wholesale expectation on the part of investors about how every facet of the management company and fund is constructed and operated and this
is continually under consideration. Th is includes who the service providers are, what range of work is outsourced and what frequency of NAV is pro-duced, plus the transparency with which reporting was made available. Investors have exercised their infl uence in a way that has a far more in-depth and ongoing eff ect on how managers conduct them-selves and as a by-product of that, how we, the service providers conduct ourselves.
HFM: How has Ireland’s fi nancial market grown in your time in the industry and how diff erent is it to its competitors? KS: Th e core team at Quintillion have managed several operations together over the past 20 years. We have some very experienced colleagues who have been here for a long time, some of whom be-gan their fund services careers as early 1995 when the fi nancial sector in Ireland was in its infancy.
Today, there are over 10,000 direct employees in the same location here in Ireland and interna-
tional fi nancial services have spread countrywide. During that time, Ireland became so popular as a go-to location for hedge funds services that fi nancial services legislation had to be altered to re-categorise the whole island as a dedi-cated fi nancial services centre (it originally applied only a small part of the Dublin docklands).
Presently, you can fi nd top tier fi nancial services compa-nies throughout the major cities and towns across Ireland and the country is now in a dominant position relative to other locations.
Th e growth has been so grand that the industry is now actively pursued as a career for university graduates, either in the fi nance or accounting space. Th ese academic qualifi -cations are pursued with a view to joining international fi -nancial services whist remaining in Ireland. We are in a po-sition to off er serious fi nancial services careers to the best quality graduates here in Ireland and that is absolutely un-recognisable as an environment relative to 20 years ago.
CRUNCH ENVIRONMENT THE RANGE OF DIRECTLENDING, LOAN AND
CREDIT STRATEGIES HASGROWN EXPONENTIALLY
”
A D M I N I S T R AT I O N S E R V I C E S
H F M W E E K . CO M 13
I R E L A N D 2 0 1 6
The European Long-Term Investment Fund (Eltif) is a new type of regulated investment fund designed for investors wishing to invest in long-term investment opportunities in companies and projects that need long-term capital.
By allowing for the creation of Eltifs, the European Union’s stated aim is to increase the pool of capital available for long-term investment in the EU economy and to help stimulate employment and economic growth by tackling barriers to such long-term investment.
In Ireland, the regulation governing the operation of El-tifs (the Eltif Regulation) came into force on 9 December 2015 and the Central Bank of Ireland is now accepting ap-plications for alternative investment funds (AIFs) to be authorised as Eltifs. In light of these developments and the possible treatment of Eltifs under Solvency II for insurance investors, it is timely for fund managers to consider whether the Eltif off ers a new structure to att ract long-term capital. Th is article considers the key regulatory requirements and advantages of the Eltif.
STATUS OF THE ELTIF AND ITS MANAGER UNDER AIFMDOnly authorised EU AIFs may be authorised as Eltifs and Eltifs may only be managed by an EU authorised alterna-tive investment fund manager (AIFM). Eltif managers will therefore be required to comply with the requirements ap-plicable to AIFMD as well as the obligations applicable un-der the Eltif Regulation.
MARKETING PASSPORT FOR RETAIL INVESTORSUnlike other AIFs within the scope of AIFMD which may only be marketed on a passported basis to professional in-vestors, the Eltif will benefi t from a marketing passport that enables it to be marketed to retail investors across the EU. Th erefore, the Eltif off ers certain of the marketing advan-tages available to Ucits when it comes to pan-European sales to retail investors.
However, the marketing passport is not one that operates in an ‘execution only’ environment. Th e Eltif Regulation provides that:• Th e AIFM will be required to establish a specifi c internal
process to assess whether the Eltif is suitable for market-ing to retail investors
• When directly marketing an Eltif to a retail investor, the AIFM must carry out an assessment as to whether invest-ment in the Eltif is suitable for the investor
• An AIFM may only market directly to investors where it has been authorised to provide the MiFID services of
portfolio management and investment advice in addition to the ‘core’ AIFM functions
• Where the portfolio of the investor is less than €500,000, the AIFM or the relevant distributor must ensure that the investor does not invest more than 10% of its fi nancial in-strument portfolio in Eltifs and that the initial minimum amount invested in one or more Eltifs is €10,000
• An Eltif that is marketed to retail investors must have a key information document (KID) which will set out the important features of the fund
• Unlike other funds within the scope of AIFMD, the de-positary shall not be permitt ed to discharge itself of liabil-ity in the event of a loss of fi nancial instruments held in custody by a sub-custodian and cannot exclude or limit by agreement its liability where the Eltif is marketed to retail investors
• Unlike other funds within the scope of AIFMD, the rules or instrument of incorporation of an Eltif marketed to re-tail investors may not provide for preferential treatment or specifi c economic benefi ts for individual investors or groups of investors
• Retail investors must be permitt ed to cancel their sub-scription and receive a refund of the subscription amount without penalty until at least two weeks aft er the date of their subscription
WHAT CAN ELTIFS INVEST IN?Eltifs must focus on alternative investments that fall within a defi ned category of long-term asset classes whose success-ful development requires a long-term commitment from investors. Specifi cally, an Eltif must invest at least 70% of its capital in the following: • Equity, quasi-equity or debt instruments that have been
issued by a ‘qualifying portfolio undertaking’ (broadly speaking, unlisted companies or listed companies with market capitalisation of less than €500m)
• Loans granted by the Eltif to a qualifying portfolio under-taking
• Units of other Eltifs, European Venture Capital Funds (EuVECAs) and European Social Entrepreneurship Funds (EuSEFs)
• Real assets with a value of at least €10m. A ‘real asset’ means any asset that has value due to its substance and properties and may provide returns, including infrastruc-ture and other assets that give rise to economic or social benefi t, such as education, counselling, research and de-velopment and including commercial property or hous-ing only where they are integral to, or an ancillary element of, a long-term investment project that contributes to the
DARA HARRINGTON AND ANDREW O’CONNOR OF ARTHUR COX DISCUSS THE KEY FEATURESOF THE NEW EUROPEAN LONG-TERM INVESTMENT FUND
Andrew O’Connor is an associate in the Asset Management and Investment Funds Group at Arthur Cox. He advises on the legal and regulatory issues associated with the establishment and ongoing operation of investment funds in Ireland.
Dara Harrington is a partner in the Asset Management and Investment Funds Group at Arthur Cox. He has acted in a wide range of transactions advising, investment managers, QIFs/QIAIFs, Icavs, funds of funds, closed-ended funds, hedge funds and private equity funds.
ELTIF: A NEW FUND PRODUCT FOR THE LONG-TERM?
A D M I N I S T R AT I O N S E R V I C E S
1 4 H F M W E E K . CO M
I R E L A N D 2 0 1 6
EU objective of smart, sustainable and inclusive growth. Th is defi nition of ‘real assets’ could operate as a signifi -cant limit on the types of real estate investments that an Eltif could make
An Eltif will have up to fi ve years (or half the life of the Eltif, whichever is shorter) to meet this 70% investment threshold.
In the interest of effi cient cash fl ow management and to allow managers of Eltifs a certain degree of fl exibility, an Eltif may also invest up to 30% of its assets in assets which qualify as eligible assets under the Ucits regime.
INVESTMENT AND BORROWING RESTRICTIONSAn Eltif is subject to certain investment and borrowing re-strictions, including:• It may not invest more than 10% of its capital in instru-
ments of, or loans, to any single issuer• It may not invest more than 10% of its capital in a single
real asset• Th e 10% fi gure referred to in the two bullets above can
be raised to 20% if the aggregate value of assets held in qualifying portfolio undertakings and individual real as-sets in which it invests more than 10% of its capital does not exceed 40% of the value of its capital
• It may not engage in short-selling• It may only use derivatives to manage risk and not for in-
vestment purposes• It may not invest directly or indirectly in commodities• It may not invest more than 10% of its assets in any single,
or 20% in the aggregate in, Eltifs, EuVECAs or EuSEFs• It is subject to a borrowing limit of up to 30% of its assets
REDEMPTIONS, DISTRIBUTIONS AND THE LIFE OF THE ELTIFTh e life of the Eltif must be suffi cient in length to cover the life-cycle of the individual assets of the Eltif. Investors in El-tifs will not, in general, be permitt ed to withdraw their in-vestment until the specifi ed end date of life of the Eltif. Th is end date must be clearly disclosed to investors in the Eltif ’s prospectus or constitutional document, which may provide
for the right to temporarily extend the life of the Eltif.However, in order to incentivise investors, Eltifs can off er
early redemption rights to its investors under certain condi-tions. For example, the overall amount of redemptions must be limited to a percentage of the Eltif ’s investments which qualify as eligible assets under the Ucits regime. If redemp-tion requests exceed this limit then redemptions will be pro-cessed on a pro rata basis.
Th e Eltif may distribute to investors any proceeds that are generated by its assets unless the proceeds are required for future commitments of the Eltif.
NEXT STEP – TECHNICAL STANDARDSAs part of the implementation of the Eltif Regulation, ESMA issued a consultation paper entitled “Draft regula-tory technical standards under the Eltif Regulation”, which closed on 14 October 2015. In its consultation paper, ESMA outlined its proposals covering: • Th e circumstances in which the use of derivatives is per-
mitt ed• Th e circumstances in which the life of an Eltif is consid-
ered suffi cient in length to cover the life-cycle of each of the individual assets of the Eltif
• Th e facilities available to investors to make subscriptions and redemptions and to obtain information which the El-tif is required to provide
• ESMA has not yet fi nalised these technical standards
Th e ability to market an Eltif on a passported basis to retail investors across the EU off ers a real advantage over other types of alternative investment funds. However, the Eltif is subject to signifi cant limitations in terms of the types of as-sets that it may invest in and the diversifi cation limits that apply. Also, policies and procedures will need to be put in place to confi rm the appropriateness of the Eltif for invest-ment by retail investors. It will be interesting to see whether the potential benefi ts from a marketing perspective are con-sidered by managers to be worth the additional investment constraints and compliance burdens.
THE ELTIF WILL BENEFITFROM A MARKETING
PASSPORT THAT ENABLESIT TO BE MARKETEDTO RETAIL INVESTORS
ACROSS THE EU
”
A D M I N I S T R AT I O N S E R V I C E S
H F M W E E K . CO M 15
I R E L A N D 2 0 1 6
Charles Bathurst, sales consultant to SuMi TRUST Global Asset Services graduated from the Royal Military Academy Sandhurst in 1974, serving as an officer in the British Army before leaving to take a position in the UK engineering industry with GKN. During his career, Charles has been responsible for initiating and managing to profitability new businesses, multiple product launches and building distribution channels in more than 40 countries globally.
Ireland has been subject to immense fi nancial change over the past decade and a key area of growth has been the asset servicing community, which has also had its own particular challenges since 2008. As the fund management industry has changed through funds merging or closing, invest-
ment managers looking to expand into new markets, the relentless growth of regulation and the increasing em-phasis on technology-based solutions, the Irish asset ser-vicing community has had to adapt to these challenges accordingly.
In conjunction with this, there has been signifi cant deleveraging and risk reduction by investment manag-ers and the historic providers of liquidity and fi nancing, such as the prime brokers, have reduced their market exposure. Administrators have had to respond to this changing environment, develop more bespoke solutions for clients and provide more than just a fund accounting and shareholder service. Th e period since 2010 has also seen the rapid increase of onshore Irish-regulated funds requiring administrators to adjust their accounting and NAV model to more frequent valuation periods and in many cases daily.
Th e most signifi cant change is the structure of the Irish fund administration industry as a number of global banks have moved away from direct ownership of fund adminis-tration companies, e.g. Butt erfi eld, Citibank, Credit Suisse and UBS among others. Th ere have also been a number
of banks acquiring administrators to enter the market for the fi rst time with Sumitomo Mitsui Trust Bank (SMTB), Japan’s largest Trust Bank and Asia’s largest asset manager acquiring the Global Asset Services division from Daiwa Securities in 2012. Two of the objectives of this transac-tion were to continue SMTB’s investments overseas, but more signifi cantly to provide an alternative fund admin-istration solution to its client base.
Consolidation among the smaller sub scale adminis-trators and the larger administration companies in Ire-land looks set to continue and there are forecasts that the number will further decrease from the 42 today to fewer than 20 over the next few years. Th ere is an increasing trend for asset managers to place more reliance on their administrators in terms of providing data for reporting. Th is trend is requiring a signifi cant investment in tech-nology solutions across the spectrum which has led to some fi rms withdrawing from the business. In addition, as markets still encounter bouts of nervousness, asset managers are closely monitoring the fi nancial standing of their administrators as well as their commitment to stay in business for the long term.
THE KEY ISSUE TODAYOne activity that has seen one of the most signifi cant changes in the Irish fund administration industry in recent times is the introduction of the depositary, en-shrined in the AIFMD and Ucits V directives.
GROWTH AND CHALLENGESOF FUND ADMINISTRATION
IN IRELAND
CHARLES BATHURST, SALES CONSULTANT FOR SUMI TRUST GLOBAL ASSET SERVICES, REFLECTS ON THE KEY DRIVERS THAT HAVE CONTINUED TO SHAPE THE IRISH ASSET SERVICING INDUSTRY. HE ALSO HIGHLIGHTS THE IMPACT OF AIFMD AND UCITS V ON THE IRISH FUND
ADMINISTRATION INDUSTRY/DEPOSITARY MARKET AND OFFERS THOUGHTS ON THE IMMEDIATE FUTURE
A D M I N I S T R AT I O N S E R V I C E S
1 6 H F M W E E K . CO M
I R E L A N D 2 0 1 6
The arrival of Ucits V on 18 March 2016, which had been in discussion for a number of years, but whose true detail only started to become apparent as recently as December 2015, is yet another chal-lenge as this requires significant documentation and operational change. The new Ucits V deposi-tary activity mirrors that of the AIFMD and Ucits V as it incorporates three new areas of focus: de-positary services, remuneration and sanctions.
Ucits V is impacting the funds industry in two principal ways: the role and liabilities of the depositary and the impact of remuneration guidelines for the investment manager. Many of the Irish depositaries, including SuMi TRUST, already have the systems in place for the AIFMD but the big difference under Ucits V is, because of its origins as a retail structure, the requirement for the depositary to have full liability for the loss of assets in custody with no offset to the sub cus-todian or investment manager as permitted under the AIFMD. That means that depositaries are as-suming greater risk and need to have a very strong bal-ance sheet and risk management framework in order to assume the additional risk on behalf of the Ucits funds they service.
SuMi TRUST is being actively approached to support administrators who do not have a depositary within their group to assist them with the depositary services for the AIFMD and Ucits funds they administer. SuMi TRUST now works with an increasing number of third-party ad-ministrators to provide the depositary model. This is ex-panding the SuMi TRUST footprint in Ireland and gaining recognition amongst investment managers globally, creat-ing a series of high-quality relationships. This in a sense proves the flexibility of the Irish asset servicing model with companies collaborating to provide a seamless service for fund managers.
Asset service providers need to actively provide quasi consulting services to their clients and the investment management industry at large, wherever they are domi-ciled, to identify the optimum solutions for investment managers, whether under the AIFMD or Ucits. This may also include advising on distribution. SMTB, the largest distributor of internal and third-party investment funds in Japan, working with some of the leading global asset man-agers specialised in long only and alternative investing, has extensive experience of providing this advisory model and is actively doing so with its clients.
OPPORTUNITIES IN THE NEXT 12 TO 18 MONTHS Ireland has one primary competitor in Europe – Luxembourg – and the two of them dominate the fund administration and asset servicing busi-ness, supporting managers from all over the global market. This competition provides for a healthy environment and requires the regulators in both jurisdictions to provide flexible solutions and sup-port. Naturally, they both undertake this in differ-ent ways. However, Ireland has actively marketed itself as a global centre with great success and in particular growing its relationship with the North American investment community and the UK.
The recent introduction of the Icav is proving a great success. The Icav is a great example of the Irish industry and the legislature working together to cre-ate a legal framework tailored to meet the require-ments of Irish funds while continuing to provide strong protection for investors. A key benefit of this new structure means that the establishment and amendment of funds structures/provisions are now
much more streamlined, focused and efficient.Ireland therefore looks set for ongoing growth and rec-
ognition as an innovative, forward-looking, accommodat-ing centre for global investment managers to domicile their investment funds and be supported by a well established administration and asset servicing centre, of which SuMi TRUST is one of the longest-serving providers, a leader in innovation and an integrated part of this specialist commu-nity. We look forward to the future with confidence.
SUMI TRUST OVERVIEWSuMi TRUST Global Asset Services has been delivering operational and administration support services to qual-ity institutional asset managers in Europe, the US and the Asian markets from their offices in Dublin, London, Tokyo and the Cayman Islands since 1991, including the struc-turing, administering and servicing of dedicated funds for Japanese institutional and retail investors. The SuMi TRUST offers full administration services for offshore and Irish-domiciled funds and has a long history of servicing Ucits funds, AIFMD and Ucits V depositary, custody and access to middle-office services. Our clients include long only and alternative funds and fund of funds.
For more information on the full range of services pro-vided by SuMi TRUST Global Asset Services, please contact Colm Geary in Dublin: +353 (1) 603 9998 or colm.geary@ sumitrustgas.com.
THE MOST SIGNIFICANT CHANGE IS THE STRUCTURE
OF THE IRISH FUND ADMINISTRATION INDUSTRY AS A NUMBER OF GLOBAL BANKS HAVE MOVED AWAY FROM DIRECT OWNERSHIP OF FUND ADMINISTRATION
COMPANIES
”
LEAP ABOVE THE RESTApex gives you time to focus on producing Alpha
For more information contact [email protected] www.apexfundservices.com
Partner with a global independent fund administrator with the ability to deliver solutions that drive your success.
Apex has been working with managers worldwide for over 13 years delivering a robust and tailored service allowing its clients to focus on what really matters - performance.
With 23 full service centres and an additional 10 sales
support and knowledge that you need.
1 8 H F M W E E K . CO M
S E R V I C E D I R E C TO R YI R E L A N D 2 0 1 6
SUBSCRIBE NOW
MORE NEW STORIES THAN ANY OTHERHEDGE FUND PUBLICATION
LIVE SEARCHES: EXCLUSIVELY TELLING YOURFUND WHERE TO FIND INVESTMENT
DAILY NEWS SUMMARIES
EXCLUSIVE DATA ON LAUNCHES AND PERFORMANCE
TOPICAL COMMENT FROM LEADINGINDUSTRY FIGURES
EXCLUSIVE RESEARCH SURVEYS
REGULATORY DEVELOPMENTS
www.hfmweek .com
BIGLARI CAPITAL CCO
and head of fund operations
Nicholas Stone has left the
firm to set up an $810m hedge
fund business, HFMWeek has
learned.
A i r a c o b r a C a p i t a l
Management is set to launch in
February with a $210m long/
short public debt strategy, the
Airacobra Credit Strategies
Fund, and a $600m multi-strat-
egy DTOM Fund. Both portfo-
lios will be run by Stone.
The DTOM fund will have a
two-year lock-up and be made
up of domestic equity, corpo-
rate bonds and bank debt and
target annual returns of 12%
with 1x leverage.
The credit strategy will have
a three-year lock-up and be
made of public corporate and
sovereign debt and will target
returns of 750 basis points over
five-year US Treasury bonds.
Airacobra Credit Strategies
Fund will have roughly 1x lev-
erage, an annual management
charge of 1.5% with a 20% per-
formance fee. The multi-strate-
gy fund will carry a 2% charge
and a 20% performance incen-
tive.Texas-based ACM takes a
macro perspective in order to
identify trends and exploit mar-
ket discrepancies and abnor-
malities. It also has
offices in Pittsburgh,
Texas-based Airacobra to
launch multi-strat and public
debt funds
BY SAM MACDONALD
03
COMMENT SEEDING INVESTMENT STRUCTURES AND US TAX CONSIDERATIONS14
Biglari CCO leaves
to set up $810m
hedge fund firm
STEVE COHEN
GIVEN TWO-YEAR
HEDGE FUND BAN
RULING PART OF SEC
SETTLEMENT NEWS 05
LAUNCHES 11
HOPLITE CAPITAL ANALYST PREPS L/S EQUITY LAUNCH
Vince Ferraro assembling team for Colliery Capital
PEOPLE MOVES 06
STU HENDEL LEAVES PALOMA AFTER LESS THAN 6 MONTHS
Veteran previously headed up PB at BAML and UBS
LAUNCHES 10
DISCOVERY ANALYST PLANS L/S EQUITY FUND
Sanoor Capital Management to launch with up to $300m
The HFMWeek team sets out some of
the key themes set to dominate the
hedge fund sector during the year
ANALYS IS 17
The long and the short of it
ISSUE 404 14 JAN 2016
P R E D I C T I O N S F O R T H E
Y E A R A H E A D
HFM404_News.indd 1
12/01/2016 17:07
CONTACT +44 (0)207 832 6511or email [email protected] to subscribe
or visit hfmweek.com for details
EVERY WEEK YOU WILL RECEIVE:
THE BEST READ IN THE HEDGE FUND INDUSTRY
www.hfmweek .com
BANK OF AMERICA Merrill
Lynch has taken the top spot
in the latest HFMWeek Ucits
Platform Top 10 study after
boosting its AuM by 19% to
$7.2bn.The latest annual survey
sees BAML’s Ucits offer-
ing, containing the likes of
Marshall Wace, AQR and Och
Ziff, replace German platform
Universal Investment, which
led the pack in the previous
two studies. Schroders takes second place
after increasing its AuM by 8.1%
to $5.9bn, as the total assets of
the 10 largest platforms jumped
8.9%, from $28.9bn to $31.4bn
between October 2014 and
October 2015. HFMWeek can also reveal
the launch of two new Ucits
platforms. The $3.9bn FoHF
firm International Asset
Management rolled out an Icav
Ucits platform in December
with the $20m seeded Incline
Global Long/Short Equity
Ucits, its first launch. It is set to
be followed by a global macro
strategy scheduled for April. London-based investor
group Tages Capital is also
understood to be launching its
own Ucits platform in the com-
ing weeks. Meanwhile, fund solutions
and governance business DMS
Offshore Investments is looking to increase
Bank’s platform surpasses $7bn;
Tages and IAM enter spaceBY SAM MACDONALD
03
COMMENT CAN MANAGERS BENEFIT FROM LUXEMBOURG’S NEW RAIF STRUCTURE? 14
BAML takes Ucits crown amid new
entrant wave
COULD OTHER HEDGE FUNDS PROVIDE YOUR FINANCING?HFMWEEK LOOKS AT P2PANALYSIS 24
INVESTMENT 08
SAN FRAN ERS HF HEAD TO OVERSEE MAIDEN INVESTMENTS
Recommendation on fi rst hedge fund manager due
REGULATION 03
EXPERTS WARN SEC PLANS WILL HIT ALT MUTUAL FUNDS HARD
New limits on derivatives usage likely to force change
PEOPLE MOVES 06
MORGAN STANLEY ALT UCITS PLATFORM HEAD DEPARTS
Stephane Berthet had been in the role since August 2011
BAML and Schroders move up a
gear as overall growth slows compared to 2014
ANALYS IS 16
The long and the short of it
ISSUE 405 28 JAN 2016
TOP 10U C I T S P L AT F O R M S
2 0 1 5
1_003_HFM405_News.indd 1
www.hfmweek .com
LEADING ALTERNATIVE
MUTUA L fund managers
are plotting a fierce fightback
against the SEC’s derivatives
proposals through extensive
lobbying and a potential legal
challenge and are even pushing
for a CFTC-regulated liquid alts
structure. Rule 18f-4, proposed in
December, would impose an
exposure-based leverage limit
of 150% and strict asset segre-
gation rules which threaten the
viability of many existing alt
mutual funds, especially those
in the managed futures space.
HFMWeek understands
hedge funds have discussed
the possibility of a procedural
challenge to the rules, claim-
ing the SEC would be exceed-
ing its authority in the way it is
looking to impose the leverage
limit. Managers also say they have
been in early-stage talks with
the CFTC about the creation
of a liquid alts structure operat-
ing outside of the ’40 Act with
similar rules to the European
Ucits regime. These talks
began before the SEC’s deriva-
tives plans were announced
but have grown in importance
since then, say managers.
SEC commissioners have
previously expressed their con-
cern about the rapid growth
of liquid alternatives,
which now total more
Managers consider legal
challenge; CFTC structure floated
BY SAM DALE
03
COMMENT COPING WITH INVESTOR DUE DILIGENCE IN THE GOOGLE AGE14
Alt mutuals fight back against SEC
derivatives plans
ARGENTINA OPENS UPMEET THE FUND WHOSE
PM BECAME ARGENTINA’S
FINANCE SECRETARY
ANALYSIS 23
LAUNCHES 11
EX-GOLDMAN ENERGY HEAD TAPS COMMODITY FINANCE GAP
Neil West is chairman of Kris Tremaine’s start-up Kimura Capital
PEOPLE MOVES 06
CREDIT SUISSE’S EMEA PRIME CO-HEAD TO LEAVE
Dougal Brech departing to pursue own interests
LAUNCHES 10
EX-BLUEMOUNTAIN DUO LAUNCH EM RELATIVE VALUE FUND
Pair are spotting price dislocation opportunities
Our research shows the latest market
share shifts across prime brokers,
admins, auditors and custodians in
the Q4 HFM/Alphapipe survey
ANALYS IS 16
The long and the short of it
ISSUE 406 4 FEB 2016
SNAPSHOT
THE
ALPHAPIPE-HFMWEEK
SERVICE PROVIDER
Q 4 : 1 5
003_HFM406_News.indd 1
www.hfmweek .com
NEA R LY SIX IN 10 man-agers are backing the UK to remain within the European Union according to an exclu-sive HFMWeek survey, which sets out in detail the sector’s views on the crucial question for the first time. The HFM survey, polling nearly 100 UK-based manag-ers, shows they would vote to remain in the EU by a clear margin of 58% to 42%. Some hedge funds have become poster boys for the campaign to leave the EU as anger over the AIFMD and regulation drives some towards favouring an exit.
But the poll’s results show a groundswell of industry sup-port for continued member-ship. Prime Minister David Cameron is believed to have been alarmed at the prospect of large hedge fund donations boosting the ‘Leave’ cam-paign.
High-prof i le managers have sided with different campaigns: Odey Capital’s Crispin Odey is favouring an exit whereas Winton Capital’s David Harding is supporting the ‘Stronger In’ campaign to remain in the union.Experts have raised concerns that a UK exit – or Brexit – could see managers locked out of the AIFMD passport and forced to close Ucits funds. Others say the UK could gain greater
Majority of managers back staying in EU, exclusive HFM industry survey revealsBY SAM DALE
03
INSIGHT FUND POLL REVEALS REGULATORY AND ORGANISATIONAL CHALLENGES 04
UK hedge funds oppose Brexit
THE BLUECREST EFFECTPAAMCO’S STEPHEN OXLEY ON WHETHER INVESTORS WILL TURN TO SMALLER MANAGERS
COMMENT 14
LAUNCHES 10
HERMES BPK CO-FOUNDER LAUNCHES ACCELERATOR FUNDVehicle launches with $125m investment from Santander pension
LAUNCHES 05
SYSTEMATICA RAISES $265M FOR NEW MULTI-STRAT FUND$9.5bn BlueCrest spinout opened Synergy on 1 January
ALLOCATION 08
SKYBRIDGE WRITES FIRST MACRO TICKETS SINCE 2009$13bn FoHF could raise strategy exposure to 10-12% in 2016
After stagnant returns, outfl ows and closures last year, a new wave of investor optimism is sweeping the resurgent strategy
ANALYS IS 19
The long and the short of it
ISSUE 407 11 FEB 2016
MOVING BACK INTO MACRO
001_003_HFM407_News.indd 1
www.hfmweek .com
EX-BRIDGEWATER
ASSOCIATES executive
Katina Stefanova is planning
to launch a multi-strategy
asset management firm called
Marto Capital later this year,
FMWeek can reveal.
k-based Stefanova
Ray Dalio’s
fore
COO of Marto Capital, join-
ing in October following stints
at operational consultancy
Seabury Group and Horizon
Equity Partners, a South Africa-
based private equity firm.
Stefanova joined $154bn
AuM Bridgewater in 2005 fol-
lowing stints at long/short
equity firm Altair Capital, IBM
and Arthur Andersen.
At Bridgewater, she started
as an investment professional
in account management and
trained in Dalio’s systematic
macro-economic investment
nd portfolio construc-
o her LinkedIn
versaw
Marto Capital expected to
launch later this year
BY ALEX CARDNO
Ex-Bridgewater
pro readies firm
BETTING ON
HEALTHCARE
A NEW APPROACH
FOR HEDGE FUND
MANAGERS ANALYSIS18
ALLOCATION08
IPERS LOOKS TO SYSTEMATIC MANAGERS FOR NEW ALLOCATION
Iowa pension offering up to $700m for new platform
CYBER SECURITY 03
SEC WARNS OVER FAILURE TO REPORT CYBER-ATTACKS
Hedge funds could face tougher enforcement penalties
PEOPLE06
QUINTILLION CEO DEPARTS
COO Linda Gorman to replace Joan Kehoe at US Bancorp admin
HFMWeek runs through some of the
latest changes in the rapidly evolving
prime brokerage landscape
ANALYS IS16
The long and the short of it
ISSUE 408 25 FEB 2016
LAW
FIR
MFU
ND
ADM
INIS
TRAT
ION
FUND
AD
MIN
ISTR
ATOR
FUND
AD
MIN
ISTR
ATOR
Quintillion, Limited, Ken Somerville, Head of Business Development // [email protected] // T +353 1 532 8003 // quintillion.com
Quintillion is a specialist Dublin based provider of fund administration to alternative investment funds. We provide back and middle offi ce services to a diverse range of fund structures, strategies and domiciles supported by class leading technologies and our expert operations group.Following our start-up or conversion process, funds are serviced by client-centric investor services and accounting teams delivering an accurate, timely andtransparent administration solution all within strict deadlines.
Arthur Cox, Dara Harrington, Partner, Asset Management and Investment Funds // [email protected] // T +353 1 618 0559 // Kevin Murphy, Partner, Asset Management and Investment Funds // [email protected] // T +353 1 618 0515
Arthur Cox is one of Ireland's largest law fi rms. We are an “all-island” law fi rm with offi ces in Dublin and Belfast. The fi rm also has offi ces in London, New York and Silicon Valley. Arthur Cox’s Asset Management and Investment Funds Group is a market leader, advising on all aspects of investment management issues and the establishment and ongoing operation of investment funds in Ireland. Established in 1990, the Group consists of a highly experienced team that produces thorough, well-rounded responses and continues to demonstrate its in-depth understanding of all types of investment funds, including UCITS, qualifying investor alternative investment funds (“QIAIFs”), hedge funds, private equity funds and property funds. The Group’s reputation for expertise and innovation is endorsed by an impressive client list which consists of many leading international fi nancial institutions, investment banks and asset management companies.
SS&C GlobeOp, Alex Kirkpatrick // T+44 (0)20 3310 3148 // [email protected] // Colin Keane // T +353 1 514 9651 // [email protected] SS&C GlobeOp® is among the largest and fastest growing fund administrators in the world. We offer the deep expertise, independence, transparency, and a comprehensive powerhouse of world-class technology that you won’t fi nd at any other service provider. We own and maintain the best technology in the industry. That’s why we can deliver the speed and agility to service any new market, instrument, asset class, or regulation in your future without having to rely on third-party technology. Contact us at www.sscglobeop.com to learn more. We are the future. We are SS&C.
SMT Fund Services (Ireland) Limited, Kazuko Takashima // [email protected] // T +44 (0) 207 826 4257
SuMi TRUST Global Asset Services has been delivering operational and administration support services to quality institutional asset managers in Europe, the US and the Asian markets from their offi ces in Dublin, London, Tokyo and the Cayman Islands since 1991, including the structuring, administering and servicing of dedicated funds for Japanese institutional and retail investors. The SuMi TRUST services encompass full administration services for both offshore and Irish domiciled funds including a long history of servicing UCITS funds, AIFMD and UCITS V depositary, custody and access to middle offi ce services. Our clients include long only and alternative funds and fund of funds.
www.arthurcox.comDUBLIN • BELFAST • LONDON • NEW YORK • SILICON VALLEYEXPECTEXCELLENCE
With Arthur Cox you can expect a leading Irish law fi rm with a global outlook. You can expect in-depth sectoral expertise that will find new solutions to secure your success. You can expect a total commitment to your business – a genuine partnership that gives you the confidence to move forward and embrace new opportunities. With Arthur Cox you can always expect excellence.
KNOWLEDGE
To learn more, contact:
KEVIN MURPHY, PARTNER, HEAD OF ASSET MANAGEMENT AND INVESTMENT FUNDS+353 1 618 0000
ASSET MANAGEMENT AND INVESTMENT FUNDS GROUP
ssctech.com/fundadministration
Fund managers can’t always see the futureBut with SS&C, they’re always prepared for it. SS&C GlobeOp® offers the expertise,
independence, transparency, and nimble, world-class technology you simply won’t
find at any other service provider. That’s why SS&C can deliver the speed and agility
to service any new instrument, asset class, market, or regulation in your future.
We are the future of fund administration. We are SS&C.
