FEATURING AQMetrics // Arkk Comliance // Goldman Sachs // Lyxor // Schroders // Sparkasse Bank Malta

LIQUIDITY Diversification is key

TECHNOLOGY An increasingly vital factor

OPPORTUNITY Innovators look to alternative Ucits

MARKETING INTO EUROPE 2 0 1 6

WEEKHFMS P E C I A L R E P O R T

Lyxor’s Alternative UCITS Platform is the result of more than 18 years of analyzing and selecting the best hedge funds in the industry, taking into account the pedigree of the manager, the performance engines, the operational structure and the risk monitoring process.

PIONEER IN FUND SELECTION SINCE 1998

*Source: TOP 10 UCITS Platform by HFM Week (Jan. 2016); Figures as of December 31st, 2015.

Canyon1 Event Driven, Credit

Capricorn2 Long/Short EquityEmerging Markets

Winton3 CTA Diversifi ed

Lyxor4

CTA

Tiedemann6

Merger Arbitrage

THIS COMMUNICATION IS FOR PROFESSIONAL CLIENTS ONLY AND IS NOT DIRECTED AT RETAIL CLIENTS. Not all advisory or management services are available in all jurisdictions due to regulatory restrictions. None of the hedge fund experts mentioned herein (“HF”) take any responsibility for the accuracy or completeness of the contents of this document any representations made herein, or for the fi nancial performance of their own strategies. Lyxor Asset Management (Lyxor AM) and each HF disclaims any liability for any direct, indirect, consequential or other losses or damages, including loss of profi ts, incurred by you or by any third party that may arise from any reliance on this document. Each HF is neither responsible for or involved in the marketing, distribution or sales of the Fund nor for compliance with any marketing or promotion laws, rules, or regulations; and no third party is authorised to make any statement about any of the relevant HF’s respective products or services in connection with any such marketing or sales. Lyxor Asset Management, Société par actions simplifi ée, having its registered offi ce at Tours Société Générale, 17 cours Valmy, 92800 Puteaux (France), 418 862 215 RCS Nanterre, is authorised and regulated by the Autorité des marchés fi nanciers (AMF). This communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorised by the Financial Conduct Authority in the UK under Registration Number 435658.

1 Canyon Capital Advisors LLC, 2 Capricorn Capital Partners UK Limited, 3 Winton Capital Management Limited, 4 Lyxor Asset Management, 5 Och-Ziff Capital Managment Group LLC, 6 Tiedemann Investment Group Advisors LLC, 7 Chenavari Investment Managers.

Och-Ziff5

Long/Short Equity USSpecial Situations

BEST ALTERNATIVE MANAGERS IN RISK-CONTROLLED UCITS FORMAT

ONE OF THE FASTEST GROWING PLATFORM UCITS WITH MORE THAN $2BN AUM*

Visit lyxor.com or contact solutions@lyxor.com

Chenavari7 European Long/ShortCredit

T H E P O W E R T O P E R F O R M

ETFs & INDEXING • ACTIVE INVESTMENT STRATEGIES • INVESTMENT PARTNERS

H F M W E E K . CO M 3

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

imply put, marketing a fund in Europe is anything but straightforward. Reporting obligations and the increasing availability and scrutiny of the disclosure of data dissuade managers from the space, while Ucits and AIFMD continue to play integral parts in any ultimate decision.

Technology remains central to the process. The incoming Mifid II and its requirement for a substantial increase in transparency highlights the need for technological solutions. Partnering with third-party vendors could become a necessity, and, for the innovative asset manager, digital technology presents a competitive edge.

Despite misconceptions, liquid alternative strategies are an opportunity. A broad range of traditional hedge fund investors are turning to liquid alternatives in a search for diversification to withstand a variety of market conditions.

The industry-leading figures who have contributed to this HFMWeek Marketing into Europe Report 2016 investigate the importance of understanding the devil in the detail. This report seeks to provide a thorough and insightful examination of critical legislation and regulation.

Tom SimpsonReport editor

S

REPORT EDITOR Tom Simpson T: +44 (0) 20 7832 6535 t.simpson@pageantmedia.com HFMWEEK HEAD OF CONTENT Paul McMillan T: +1 646 891 2118 p.mcmillan@pageantmedia.com HEAD OF PRODUCTION Claudia Honerjager SUB-EDITORS Luke Tuchscherer, Alice Burton, Charlotte Romeyer ASSOCIATE PUBLISHER Lucy Churchill T: +44 (0) 20 7832 6615 l.churchill@hfmweek.com PUBLISHING ACCOUNT MANAGERS Alex Roper T: +44 (0) 20 7832 6594 a.roper@hfmweek.com; David Butroid +44 (0)207 832 6613 d.butroid@hfmweek.com; Alexandra Bethanis T +44 (0) 20 7832 6618 a.bethanis@hfmweek.com THE MEMBERSHIP TEAM +44 (0) 20 7832 6511 membership@hfmweek.com CIRCULATION MANAGER Fay Muddle T: +44 (0) 20 7832 6524 f.muddle@pageantmedia.com 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

I N T R O D U C T I O NM A R K E T I N G I N T O E U R O P E 2 0 1 6

4 H F M W E E K . CO M

M A R K E T I N G I N T O E U R O P E 2 0 1 6 C O N T E N T S

INVESTMENT BANKING

AN EVER-GROWING INDUSTRY Neha Jain and Laura Elliott of Goldman Sachs talk to HFMWeek about the challenges of marketing an alternatives fund to European investors and how the offering at Goldman Sachs has evolved in that context

REGULATION

A CHANGING MALTADanièle Cop of Sparkasse Bank Malta discusses the implementation of Ucits V and the amendments to the rules governing custodians in Malta

LIQUID ALTERNATIVES

INSIDE LIQUID ALTERNATIVES Andrew Dreaneen, head of Schroder GAIA Product and Business Development, examines the benefits of liquid alternatives

TECHNOLOGY

TECHNOLOGY IS THE KEY TO SUCCESS Kieron O’Brien, of AQMetrics, explains the increasing importance of technology when marketing a fund into Europe

FUND SERVICES

KNOWING ALTERNATIVE UCITSDaniele Spada, of Lyxor, speaks to HFMWeek about the alternative Ucits market and what vital trends will have the most impact to its development

REPORTING OBLIGATIONS

MEETING REPORTING OBLIGATIONS Nick Baldwin, director at Arkk Compliance, highlights the importance of meeting reporting obligations and the potential consequences for those who don’t

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I N V E S T M E N T B A N K I N G

H F M W E E K . CO M 5

M A R K E T I N G I N T O E U R O P E 2 0 1 6

Neha Jain is an executive director in Goldman Sachs’ Global Fund Solutions business, and is responsible for distribution of all fund-related content into Europe and Asia. She focuses on liquid alternatives including hedge fund content and internal rules-based strategies sold to both institutional and private client asset pools. Neha joined Goldman Sachs in 2010, and has been involved in a variety of distribution oriented roles for over a decade.

HFMWeek (HFM): What are the challenges in mar-keting an alternative fund to European investors?Neha Jain (NJ): While alternative assets in Europe are growing twice as fast as the broader hedge fund indus-try since 2008, post-crisis regulatory changes have sig-nifi cantly altered the marketing of these alternative funds. Depending on the asset class, li-quidity profi le and types of instru-ments traded, a fund can be mar-keted as a registered Ucits fund, non-registered Ucits fund, a Euro-pean AIF or a non-EU AIF.

Each of these regulatory wrap-pers come with additional service providers, governance structures and risk management requirements. Ucits funds require a custody ar-rangement, and short exposures to be taken via swap, hence counter-party arrangements are important to understand and set-up correctly. Under AIFMD for instance, safe-keeping, cash management and oversight have come to the fore, which necessitates the appointment of a depository. Th e picture is further impacted by the demand-supply dy-namic, which can diff er dramatically depending on the juris-diction and the client type within Europe.

Laura Elliott (LE): Our hedge fund clients have been keen to participate in this growth story and gather assets from Europe. In many cases they are looking for a partner who can manage the launch process for a regulated fund, and assist them in asset-raising. We view our platform as a collaboration with our hedge fund clients and hence give

the manager control over the brand and growth of the fund, while of-fering template documentations and functioning fund structure which enables quicker time to market. On the distribution side, our key focus is generating direct, strong, long-term relationships be-tween the manager and underlying investors.

HFM: How has your alternatives off ering evolved in response to the changing regulatory land-scape in Europe?NJ: We have aspired to be a best-

in-class provider of alternative solutions, since our incep-tion in 2004. Th is was in response to our clients demand-ing high-quality, cost-effi cient investments implemented in transparent, liquid and appropriately regulated wrap-pers. Th e platform has evolved signifi cantly over the last

NEHA JAIN AND LAURA ELLIOTT OF GOLDMAN SACHS TALK TO HFMWEEK ABOUT THE CHALLENGES OF MARKETING AN ALTERNATIVES FUND TO EUROPEAN INVESTORS AND HOW THE OFFERING AT GOLDMAN SACHS HAS EVOLVED IN THAT CONTEXT

AN EVER-GROWING INDUSTRY

WE HAVE ASPIRED TO BE A BEST-IN-CLASS

PROVIDER OF ALTERNATIVE SOLUTIONS, SINCE OUR

INCEPTION IN 2004

”

I N V E S T M E N T B A N K I N G

6 H F M W E E K . CO M

M A R K E T I N G I N T O E U R O P E 2 0 1 6

decade and currently off ers a broad spectrum of investable products ranging from internally developed rule based strategies and external hedge fund content off ered in mul-tiple formats; Ucits, AIFMD compliant SIFs and QAIFs and Cayman funds.

LE: Our aim is to build a broad, cross-asset alternatives plat-form that allows access to hedge fund managers, systematic strategies, managed risk premia and other illiquid alternative investments in a transparent, liquid and cost-effi cient for-mat. We believe that by having a broad and fl exible product range we can create the right mix of investment opportuni-ties to meet the diverse needs of the clients that we service. As the race for returns intensifi ed, we are cognisant of the ever-changing regulatory landscape and pressure on costs and fees. Our key focus is effi cient implementation, varied access and targeted cross-border distribution.

HFM: How has investor interaction informed your re-sponse to these regulatory changes?NJ: Our approach to investors in the alternatives market is solution-driven. We are looking to investors for guid-ance on what they would like to see in a regulated format and work towards creating products that fi t client portfo-lios. We believe that the sustained success of the platform will be driven by the quality of the products we off er: the calibre of the hedge fund managers we can att ract, and the merit of our systematic strategies. Th is is where we aim to diff erentiate ourselves.

Entering the Ucits market in 2007 was a natural evolu-tion of our off ering, and in line with our long-term vision for the alternative investment market. Our early Ucits products were entirely systematic (i.e. rule-based) as our clients looked to capture risk premia across asset classes in a transparent and low-cost implementation. More re-cently, we are developing a range of externally managed risk premia strategies in the Ucits wrapper, as clients are seeking increasing fi duciary oversight in the kind of prod-ucts they choose to invest in.

LE: Furthermore, as AIFMD begins to take hold across Europe, we are seeing managers of illiquid assets strug-gling with cross-border distribution issues in Europe. We expect a greater proportion of US and Asian hedge fund, private equity/debt managers to shift towards launching AIFMD-compliant vehicles to tap this investor base. Hav-ing provided an AIFMD compliant solution to our existing investors, we are familiar with the various service provid-ers and requirements around governance, reporting and cross-border distribution of these funds.

HFM: What key industry trends will be of the most signifi cance to the process of marketing an alternative fund to Europe over the next 24 months?LE: Propelled by regulatory requirements and a rising de-mand for liquid alternatives, we believe that the industry is at the threshold of expansion – across styles, geographies and investor types. We are increasingly seeing more US and Asian managers asking about Ucits. While this market has been dominated by equity long/short strategies so far, we expect to see strategies such as discretionary macro and credit enter the Ucits market in the next year.

We believe that AIFMD and Ucits are complementary brands, which have the ability to co-exist in the European marketplace, as they serve diff erent needs. Th e AIFMD off ering is likely to lean much more towards classic alter-natives products – less liquid hedge funds, private equity/credit, and real estate funds, while the Ucits off ering will grow to accommodate liquid strategies from alternative and traditional asset classes.

NJ: We are also seeing many more of institutional investors gravitating towards investing in a regulated format and we expect this trend to continue over the coming years. With changes in regulations for distributors across Europe, we expect a renewed focus on Ucits funds from this client base as well. We think that Ucits is well-poised to be a bigger and more credible brand for liquid alternatives, as more quality managers and diversifi ed strategies enter this space.

Laura Elliott is an executive director in Goldman Sachs’ Global Fund Solutions business and is responsible for the development and management of the Ucits HF platform, which includes product strategy, manager selection and due diligence. Prior to this, she was responsible for managing the third-party manager platform, across onshore (Ucits) and offshore funds. She joined Goldman Sachs in 2004 and has over 10 years of experience in a variety of roles within the hedge fund industry.

T R U S T E D H E R I T A G E A D V A N C E D T H I N K I N G

Important information. For professional investors or advisers only. *Source: Schroders, as at 31 December 2015. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Issued in April 2016 by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registered number 1893220 England. Authorised and regulated by the Financial Conduct Authority. w48833

virtuoso rangeAccess our growing

In today’s volatile times, building robust, diversified portfolios is as important as ever.Schroder GAIA offers investors access to leading hedge fund managers from around the world within a UCITS framework. Our suite of funds spans a diverse range of asset classes and strategies, including:

– Equity & credit long/short

– Trend-following

– Event-driven

– Catastrophe bonds

With $6bn* already invested, our specialist in-house manager solutions team is constantly on the hunt for the most compelling hedge fund strategies.

To find out more, visit www.schroders.com/gaia

8 H F M W E E K . CO M

M A R K E T I N G I N T O E U R O P E 2 0 1 6

Danièle Cop is head of legal at Sparkasse Bank Malta, a Maltese bank which specialises in wealth management, private banking and custody services for collective investment schemes.

Ucits V (Directive 2014/91/EU, amend-ing the Ucits Directive 2009/65/EC) must have been one of the items high on the 2016 agenda of the regulator, profes-sional advisors, managers and custodi-ans of Ucits in Malta, probably among a

number of other acronyms such as CRS, MAD II/MAR, SFTR, etc. Th e transition is in full swing now that Ucits V has been transposed into Maltese law through a new set of regulations governing custodians and changes to the Investment Services Rules issued by the Malta Financial Services Authority have been made. As usual with the im-plementation of EU law, there seem to be more questions than answers as work on Ucits V compliance progresses.

UCITS V – THE DEVILISH DETAILSOne of the objectives of Ucits V was to align the provisions regarding depositaries of Ucits with those of AIFMD. At fi rst glance, the new depositary rules for Ucits appear quite similar to those of AIFMD, but there are a number of important diff erences. One of the most obvious depar-tures from AIFMD is that the depositary of a Ucits can-not transfer the liability for loss of fi nancial instruments to the sub-custodian. However, some of the divergences are less obvious and may lie in subtle variances in word-ing. To use the same example of the depositary’s liability: while AIFMD states that the depositary is liable to the AIF or to the investors of the AIF, Ucits V stipulates that the depositary is liable to the Ucits, and to the unit-holders of the Ucits, for the loss or fi nancial instruments and other losses resulting from the depositary’s negligent or inten-tional failure to properly fulfi l its obligations under the Directive. Th is seems to have been a deliberate decision of the EU legislator, since it is indicated that every investor in a Ucits should be able to invoke claims relating to the liability of the depositary directly or indirectly through the management company or the Ucits. Th is is irrespective of the legal form of the Ucits (corporate or contractual) or the legal nature of the relationship between the depositary, the management company and the unit-holders, but the right of unit-holders to invoke depositary liability should not lead to a duplication of redress or to unequal treatment of the unit-holders.

While the AIFM is ultimately responsible for compli-ance with AIFMD rules, it is the Ucits (if it takes the form of an investment company), which is subject to the obli-gations regarding depositaries under the Ucits Directive. Possibly, this might explain why certain provisions of the AIFMD concerning AIFMs were not replicated in Ucits V for management companies, such as, for instance, the detailed rules on valuation policies and procedures. Nev-ertheless, valuation is a function of portfolio management

and the depositary still has to verify that valuation poli-cies and procedures are established, implemented and reviewed.

Also, notable for their absence are rules regarding prime brokers in Ucits V. Th e depositary rules of AIFMD forced a fundamental re-thinking of the relationship between the fund, the depositary and the prime broker. Th is will natu-rally also be the case for Ucits, even more so as Ucits V is more prescriptive than AIFMD when it comes to the “re-use” of assets. In fact, the “reuse” of assets by the depositary or a sub-custodian (which could be an entity providing prime brokerage services) for own account is prohibited, and subject to strict conditions if assets are “reused” for the account of the Ucits. Th e term “reuse” is widely defi ned as comprising any transaction of assets held in custody in-cluding, but not limited to, transferring, pledging, selling and lending.

Furthermore, the due diligence requirements in respect of delegates (and sub-delegates) under Ucits V go beyond those applicable under AIFMD. For example, if the depos-itary appoints a delegate for the performance of safekeep-ing functions outside the EEA, it has to obtain indepen-dent legal advice on the enforceability of the contractual arrangement with the delegate under the applicable insol-vency law and case law of the country where the delegate is located. Curiously, the term “located” is used instead of “established”, which begs the question whether legal advice is required when the depositary deals with a third country branch of an EEA institution or an EEA branch of a third country institution, with the added complication that the insolvency laws of both the country of the branch and the head offi ce could be triggered.

On the point of delegation, it is worth noting that Ucits V replicates the segregation obligation which was initially adopted under the AIFMD and echoes the unfortunate use of the expression “mutatis mutandis” in rendering pro-visions related to delegation and segregation applicable to sub-delegation. In the meantime, the industry is still await-ing Esma’s guidance on asset segregation under AIFMD, following a consultation launched back in December 2014. Whatever the outcome may be, the interpretational issues, operational diffi culties and risks of opening and maintain-ing separate omnibus accounts for AIFs, Ucits and other types of clients for depositaries and their delegates are very real and it remains diffi cult to see how the segregation re-quirements are reasonably justifi ed to achieve their aim: investor protection.

THE ELUSIVE “TRANSITIONAL ARRANGEMENTS”In its Q&A on Ucits, Esma indicated rather simplistically that, while Ucits depositary contracts should be revised promptly in accordance with any transitional arrangements

DANIÈLE COP OF SPARKASSE BANK MALTA DISCUSSES THE IMPLEMENTATION OF UCITS V AND THE AMENDMENTS TO THE RULES GOVERNING CUSTODIANS IN MALTA

A CHANGING MALTA

R E G U L AT I O N

H F M W E E K . CO M 9

outlined in the delegated acts, the provisions of a contract which set out the parties’ agreement on depositary liability, and which conflict with the Ucits V depositary liability provisions, will be void with effect from 18 March 2016 and the Ucits V depositary liability provisions will apply instead. This seems odd, considering that the Level 2 del-egated regulation detailing the depositary obliga-tions will only apply from 13 October 2016, and does not seem to set out any transitional arrange-ments.

From the Ucits’ perspective, KIIDs and prospec-tuses will need to be updated in due course. Fairly detailed information concerning the depositary will need to be given in the prospectus, including a description of any safekeeping functions delegated by the depositary, the list of delegates and sub-del-egates and any conflicts of interest that may arise from such a delegation, and a statement to the ef-fect that up-to-date information on this point will be made available to investors on request. Esma has indicated that the Ucits will be allowed to add the relevant information to the prospectus at the next occasion it is revised for another purpose or in any event by 18 March 2017 at the latest.

REGULATION OF CUSTODIANS IN MALTAIn Malta, custodians of collective investment schemes are licensed and regulated by the MFSA under the Investment Services Act. The provisions of Ucits V were transposed into Maltese subsidiary legislation, sticking to the word-ing used in the Directive quite faithfully. A new set of

regulations was published at the beginning of April 2016, the Investment Services Act (Custodians of Collective Investment Scheme) Regulations, which concern all custodians of collective invest-ment schemes and contain specific provisions that apply depending on the type of fund serviced by the custodian.

Understandably, the Maltese rules and regula-tions for the implementation of AIFMD and Ucits V do not address the interpretation issues posed by these Directives, some of which have been men-tioned above. But it must be said that the Maltese legislator and the MFSA took the opportunity to clarify and improve some of the local rules regard-ing the holding and control of assets by custodians of collective investment schemes. For instance, the regulations include new provisions on the conse-quences of termination of the depositary or cus-tody agreement, which seek to offer a solution to situations of deadlock, when the agreement is ter-minated but the fund’s assets cannot be transferred or no succeeding custodian is appointed.

While many unanswered questions continue to surround EU law related to depositaries, and national competent authorities such at the MFSA become increas-ingly dependent on guidance from Esma and the Euro-pean Commission, one thing is certain: legal and compli-ance staff, practitioners and industry associations of funds and their service providers have their work cut out to find workable solutions in line with the exceedingly detailed and complex body of rules promulgated at national and EU level. 

NOTABLE FOR THEIR ABSENCE ARE RULES REGARDING PRIME

BROKERS, AIFMD FORCED A FUNDAMENTAL

RE-THINKING OF THE RELATIONSHIP BETWEEN

THE FUND, THE DEPOSITARY AND THE PRIME BROKER

”

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M A R K E T I N G I N T O E U R O P E 2 0 1 6

H F M W E E K . CO M 11

Andrew Dreaneen is head of Schroder GAIA Product and Business Development and responsible for business development of the Schroder GAIA hedge fund platform. Previously, Andrew was head of Product Development for a number of Schroders Ucits and alternative fund ranges. His career commenced in 1998 in New Zealand in alternative investment boutique, FMG.

HFMWeek (HFM): What is the main role of liquid alternatives within investors’ portfolios?Andrew Dreaneen (AD): Since liquid alternatives can cover a broad range of strategies and asset classes, the role they play can depend on how you defi ne them. For example, broader defi nitions of liquid alternatives may include 130-30 funds, even though they aren’t re-ally hedge fund strategies as such, while others may only include strategies more familiar to off shore hedge fund investors, such as long/short or absolute return. But, ul-timately, it boils down to a fundamental thinking of the balance between risk and return. Off ering diversifi ed re-turn streams, reduced volatility and decorrelation char-acteristics, investors are recognising the value of blend-ing liquid alternatives within a balanced portfolio, with the aim of enhancing risk-adjusted returns.

Interestingly, although liquid alternatives, in large part, tend to cater for the retail investor market, we are now seeing growing interest from traditional hedge fund investors and institutional investors, provided that the liquid version’s underlying strategy is consistent with the off shore parent strategy. We are seeing a lot of insti-tutional investors look at the Ucits version and in some cases, the Ucits version has proved an att ractive proposi-tion as they can be much larger than the off shore version.

If an institutional investor wants to write out a $100m or $200m ticket, they may oft en prefer to be in a $2bn fund rather than a $300m fund. So, the market is evolving and it’s playing into all types of investors today.

HFM: What do liquid alternatives off er in the cur-rent market environment?AD: Given heightened volatility, low interest rates and elevated equity market valuations, we are seeing that a broad range of investors are turning to liquid alternatives in search of genuine diversifi cation and the ability to mit-igate the impact of large market corrections.

If we look at the S&P 500, for example, from 2009 to 2010 and 2012 to 2014, these periods saw roughly 75% to 91% of stocks in the S&P 500 go up. Th ose were great years to be in the market, but last year we saw a big re-versal with only 45% of stocks higher. In January and February of this year, we had a very large number of stocks down and we still see litt le sign of a stable macro-economic environment materialising.

Given this uncertainty, investors are recognising the need to avoid playing the beta game and are looking to alternative strategies to help build a well-diversifi ed portfolio that is able to withstand a variety of market conditions.

ANDREW DREANEEN, HEAD OF SCHRODER GAIA PRODUCT AND BUSINESS DEVELOPMENT, EXAMINES THE BENEFITS OF LIQUID ALTERNATIVES

INSIDE LIQUID ALTERNATIVES

1 2 H F M W E E K . CO M

L I Q U I D A LT E R N AT I V E S

HFM: What areas of liquid alternatives have seen growth in recent years? What are the reasons for this?AD: As I’ve mentioned, the period between 2009 and 2014 were, for the most part, particularly bullish years. So liquid alternative strategies that were more highly correlated to the market or more directional in nature, such as long-biased equity or 130-30 strategies, proved particularly popular. These strategies looked to maximise participation in rising markets, providing a more equity-type return with perhaps less volatility.

However, given the current environment we have seen a shift in demand to more low-net, less directional strategies that don’t seek to provide a high beta or follow broader market directions. These types of strat-egies, such as market-neutral or relative value, aim to generate alpha based on the relative per-formance of one stock or market against another, or may even look to benefit from corporate trans-actions like M&As. These strategies rely on the individual skill of the manager and their stock-picking ability rather than seeking to play a broad market rally. This is where we’ve seen growing demand and particularly when it comes to pric-ing. Many liquid alternative strategies have fees comparable to offshore hedge funds, although, investors are shying away from paying these types of costs for a strategy that is highly correlated to the market.

HFM: Are there any misconceptions of liquid alter-natives?AD: It’s often misconstrued that hedge fund strategies offered in a mutual fund format are designed to perform well in all environments. However, it’s important to understand that certain alternative strategies are more directional or seek to participate in rising markets and therefore go up when markets go up. On the flipside, this infers that they will also fall when markets fall, demon-strating a moderate to high correlation to the market. So investors should understand that liquid alternatives are not a homogenous asset class. Within long/short equity, for example, strategies such as long-biased, short-biased or market-neutral can have very different risk/return pro-files. Similarly, the return expectations between a quanti-tative and fundamental approach can also differ greatly.

Furthermore, investors shouldn’t automatically as-sume that the liquid version reflects the same as the off-shore parent strategy. In some cases managers may create a strategy that is differentiated from the offshore version. Therefore you shouldn’t necessarily rely on the offshore strategy’s track record as a basis of how the liquid version may perform. Investors should analyse the offering care-fully and understand what to expect from the strategy in different market environments.

I mentioned earlier that liquid alternative strategies can have fees comparable to offshore hedge funds. Inves-tors should be mindful that they’re paying for genuine

manager skill rather than for a manager who has ridden the wave of buoyant markets. Since alternative strategies are expected to derive a large component of, often prom-ised, additional returns through active management, manager skill plays a crucial role. Investors should look for managers with a transparent, repeatable investment process and a long and proven track record of delivering consistent alpha across a variety of market conditions. A proven edge is vital.

HFM: What is Schroders’ experience in managing liquid alternatives? AD: At Schroders, we manage a broad range of liquid alternative strategies across a variety of different asset

classes, while our global Ucits platform, Schroder GAIA, provides investors with access to leading, externally-managed hedge funds, such as equity and credit long/short, event-driven, trend-fol-lowing and catastrophe bonds. We’ve also re-cently extended this platform into the non-Ucits arena, through Schroder GAIA II. In doing so, we are able to offer investors a more diverse suite of liquid alternative strategies, some of which may not naturally fit within the Ucits format and are most effective outside of such a framework. For example, we recently launched a distressed secu-rities strategy on the platform.

I’ve mentioned the importance of investors un-derstanding exactly what they’re buying when it comes to alternatives and it’s no different for us.

Manager selection is critical and at Schroders we are ex-tremely vigilant with the managers we partner with and conduct deep due diligence. Only through this process are we able to find the most compelling strategies for our clients that can help them build robust portfolios fit to withstand a range of different market environments.

Important Information: The views and opinions contained herein are those of Andrew Dreaneen, and may not necessarily represent views expressed or reflected in other Schroders com-munications, strategies or funds. This document is intended to be for information purposes only and it is not intended as pro-motional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any finan-cial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its complete-ness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual invest-ment and/or strategic decisions. Past performance is not a reli-able indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Issued by Schroder Investment Management Limited, 31, Gresham Street, EC2V 7QA, who is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored.

THE MARKET IS EVOLVING AND IT’S

PLAYING INTO ALL TYPES OF INVESTORS TODAY

”

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1 4 H F M W E E K . CO M

M A R K E T I N G I N T O E U R O P E 2 0 1 6

Kieron O’Brien has spent almost 20 years in the financial markets. Prior to joining AQMetrics, he worked on market surveillance, data analytics and IR services projects at a leading European Exchange and ran the sales effort for an Irish and Canadian cloud and business intelligence boutique. Before his venture in RegTech, he was managing director of Rosenblatt Securities in Europe. During his tenure, he was responsible for developing the Rosenblatt in Europe where he consulted with money managers on topics including market structure, technology solutions and strategic trading assessments.

HFMWeek (HFM): How signifi cant is technology to a fund manager looking to market into Europe? What areas are key? Kieron O’Brien (KO): At AQMetrics, we believe that technology plays a critical role for fund managers looking to market into Europe in the future. Risk management is a key area in technological advancement. In the Ucits world, whether you are running VaR on a Ucits fund or screening for investment breaches pre-trade, it is only through the systematic approach with technology that you can be sure they know their risk and are compliant. In regards to AIFMD, technology is the key to ensuring that each nuance particular to individual jurisdictions is understood and applied at fi ling time. Furthermore, with Mifi d II on the horizon, the spe-cifi c requirements to each Euro-pean country’s regulator can real-ly only be eff ectively met through the use of technology.

HFM: How do technology re-lated regulations impact funds looking to market into Europe? KO: Th e Alternative Invest-ment Fund Managers Directive (AIFMD), which came into eff ect in July 2014 across Europe, is al-ready causing diffi culties for asset managers. For each alternative fund, asset managers are required to submit more than 300 data fi elds, including the main instruments traded, investment strategies, markets where a fund traded, and principal ex-posures and concentrations. Additionally, certain juris-dictions require specifi c fi ling procedures, ranging from fi le encryption for BaFIN in Germany, to Swedish and Dutch language versions of the reports for Dutch and Swedish regulators. It is truly only through technology that funds marketing in multiple jurisdictions in Europe can rest assured that they are ready to meet each jurisdic-tional requirement.

Furthermore, complying with Mifi d II legislation will require a signifi cant level of new streams of data to be produced in a variety of diff erent reports to diff erent agencies and/or divisions of such agencies. It goes with-out saying, technology is the only means to mitigate the risk of duplication of eff ort by asset managers and in turn reduce the human capital costs.

In addition to specifi c country and product-based regu-lations, funds marketing into Europe also need to be mind-ful of the cyber-security and data security laws in Europe.

HFM: Does technology hinder or aid funds looking to market into Europe? How? KO: Without technology, European regulatory report-

ing becomes a mammoth task. For example, for the many alterna-tive funds operating across vari-ous countries and jurisdictions in Europe, these funds may have up to 40 diff erent reports to fi le on a quarterly basis, as compared to those domiciled in the US, where reports are consistent across states and therefore not diff erentiated.

Moreover, technology creates effi ciencies, which, in turn, create bett er profi t margins, thus making funds more att ractive to investors. Technology aids funds to stand out from the crowd in Europe. We all know that investors, both retail

and institutional are more risk savvy than ever before and the funds that can show robo-advisory, robo-risk and robo-compliance management are those that will att ract the investors in Europe.

HFM: Are there any misconceptions about technol-ogy within the industry? Why do these exist? KO: Technology changes the very nature of asset man-agement transactions; however, this is already occurring with the dawn of robo-advisors. Although robo-advisors

WITHOUT TECHNOLOGY, EUROPEAN REGULATORY REPORTING BECOMES A

MAMMOTH TASK

”

KIERON O’BRIEN, OF AQMETRICS, EXPLAINS THE INCREASING IMPORTANCE OF TECHNOLOGY WHEN MARKETING A FUND INTO EUROPE

TECHNOLOGY IS THE KEY TO SUCCESS

T E C H N O L O G Y

H F M W E E K . CO M 15

cause mistrust among traditional asset managers, it is proof that technology should not be feared and automa-tion can bring great value in terms of efficiencies.

Asset management has historically been a very hands-on industry built on a foundation of relationships, net-works and trust. Many firms have been cautious about investment in technology solutions because of cost and the uncertainty of future proofing any investment – the knock on effect is inevitable, i.e. vendors such as AQMet-rics will find ways of alleviating these fears by offering on-demand pay as you go options, which ensure tight cost management and deliver future proofing through the very nature of their highly interactive, more transparent and low cost upfront investment models.

Technology complexity and cost are misconceptions within the industry. For years, consultants and specialists have been creating a myth of complexity around the de-livery of software into the industry. We recognised this at AQMetrics on day one and decided to simplify the tech-nology offerings to the industry by creating a one-stop shop that offers simple, effective and efficient software as a service, thus lessening the need for costly consultants and experts.

HFM: Are many funds technology dependent, do they have a choice?

KO: Funds are not technology dependent; technology is the new norm for funds. Funds don’t have a choice. With the emergency of robo-advisors, robo-risk and robo-compliance, the firms that don’t embrace technology will be facing a challenge to thrive in the future.

HFM: What key industry trends will be of the most importance to funds marketing in Europe within the next 18 months? KO: Mifid II and the requirement for transparency leads to the greater need for technology solutions and a greater dependency on third-party data vendors. This will lead to a trend towards collaboration. Innovative as-set managers partnering with software vendors to build digital capabilities into an existing platform, will gain an advantage over those that are not. For asset manag-ers, digital technology is a competitive advantage to win market share across the various countries in Europe. It is simply not feasible to know your risk and always be com-pliant across Europe without embracing digital technol-ogy. The European regulatory nuances across countries means that computer-driven solutions using algorithmic risk assessments and automatic compliance reporting according to jurisdictions will continue to be one of the most important industry trends for funds marketing in Europe. 

1 6 H F M W E E K . CO M

M A R K E T I N G I N T O E U R O P E 2 0 1 6

KNOWING ALTERNATIVE UCITS

F U N D S E R V I C E S

H F M W E E K . CO M 17

Daniele Spada is head of managed account platform at Lyxor, where he is in charge of the development and management of the platform, including hedge fund and mutual fund selection, due diligence, and customised infrastructure services. He joined Lyxor in 2007, is a director of a number of investment funds managed by Lyxor and was appointed to his current position in 2014.

HFMWeek (HFM): Can you provide a general update on the alternative Ucits industry?Daniele Spada (DS): Firstly, and most importantly, there is a strong demand and an even stronger appe-tite for alternative Ucits. In terms of evidence, recent figures released by Morningstar highlight the success which the last two years have borne witness to and em-phasises asset growth.

This year, despite a rather slow beginning, the fig-ures suggest that an emerging positive trend looks set to continue. January and February of 2016 saw a relatively low number of inflows, but March certainly shook off any New Year fragilities and volatility. Initially, during this low ebb, in-vestors were simply wondering what the next step would be and were retaining the level of cash before deciding what kind of investment to make in the volatile markets. With more than €3.5bn of assets in the Ucits space, March serves as confirmation that a strong interest for alternative Ucits remains. A change in inves-tor attitude has birthed a hunt for Ucits alter-natives that offer more volatility control and greater risk management.

At Lyxor, in terms of growth, we are in line with the industry, and in some respects, see even more. Take our Ucits platform for ex-ample, there was a growth rate in AuMs in 2015 that was slightly higher than the industry, which grew by roughly 30%. And, in terms of assets under manage-ment, we have now reached $2bn overall with our eight funds in the Ucits range.

The proof is evident and it is clear that a strong de-mand remains. In regards of the future, a correlation between our statistics and industry-wide figures indi-cate that the trend exists, and we expect it to continue.

HFM: The Ucits format was not created entirely for hedge funds and is more appropriate for less sophisticated investors. How do you explain such appetite for Ucits hedge funds when taking this into consideration?DS: Primarily, Ucits is not a regulation comprised only for hedge fund investments. Ucits and alterna-tive Ucits have, and answer to, the same regulation. So, why are we experiencing such a big success?

The answer happens to be contained within the question. Investors are searching for true alternatives, but in a form which is both well-known and well-respected by their boards, risk managers and clients alike. Thus, proposing an “alternative” way of invest-ing in the same asset classes than the Ucits long-only funds, but following the same regulation, is hugely reassuring for them. Moreover, this regulation and

these type of funds are already validated and there is no requirement to gain specific internal approval to invest in alternative Ucits. This success explains why more and more hedge fund managers want to pro-pose their strategies in a Ucits format, directly or via a platform like Lyxor. Recognisability is the key in the acceptance of this format by institutions and private clients.

HFM: How do you see the Ucits industry develop-ing? What key industry trends will be of the most significance?DS: Firstly, I believe that the industry is developing rather impressively. This is mainly due to the current market context and given the fact that, on the equity side, valuations are rich in the majority of the equity markets and that the current volatile market can last for a while.

In regards to fixed income, it is supremely difficult to anticipate that further profit can be made. Any decision maker will have to look beyond the standard long-only investments. In-evitably, there will be an increasing need for al-ternative sources of return and a search for less correlated and alpha-driven investments. And, for those who will be conducting this search, alternative Ucits will be the solution. Alterna-tive Ucits is here to stay and we envisage it to remain for the foreseeable future.

At Lyxor, we scour the globe for talented managers with true “hedge fund” skills and spend a significant amount of internal resourc-es to propose strategies that are underrepre-sented in the Ucits universe. We propose strat-egies and managers that are aligned with the

current market context. The vast majority of meetings that we conduct with investors surround a small num-ber of simple questions; i) how can I replace (usually partially) my long-only exposure in Europe or in the global equity markets with a long/short equity fund or ii) do you have specific long/short equity market neutral funds. There is a constant pursuit of talented managers that we would like to provide a platform for. Our analysts research specific skill sets throughout the hedge fund world and to date, we have a couple of ad-vanced discussions that should enable us to welcome at least two additional managers by the end of the year. Investors are looking for strategies with less direction-ality, different sources of alpha, less volatile returns, all packaged in a regulated, transparent and risk con-trolled framework, the Ucits format.

In terms of remaining a market-leader, we pride our-selves on our history. Lyxor is widely acknowledged in uncovering talented managers in the offshore world and proposing them through transparent and risk controlled managed accounts. Behind the scenes, our powerful group of engineers and solution providers are able to convert hedge fund strategies, even some complex and innovative ones, into a Ucits format. From time to time, it is important to innovate in ap-peal to the masses, who, above all else, may just want to see something a little different.

THERE IS A VAST AMOUNT OF ATTENTION PLACED ON

TRUE ALTERNATIVES TO LONG-ONLY INVESTMENTS

”

DANIELE SPADA, OF LYXOR, SPEAKS TO HFMWEEK ABOUT THE ALTERNATIVE UCITS MARKET AND WHAT VITAL TRENDS WILL HAVE THE MOST IMPACT TO ITS DEVELOPMENT

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R E P O R T I N G O B L I G AT I O N S

H F M W E E K . CO M 19

M A R K E T I N G I N T O E U R O P E 2 0 1 6

Nick Baldwin is a director at Arkk Compliance. Nick started his career as a Big Four chartered accountant before joining Arkk in 2010. He is a regulatory reporting and technology expert and currently leads engagement teams for Arkk’s AIFMD filing clients.

HFMWeek (HFM): Are enough fund managers pre-pared to meet reporting obligations?Nick Baldwin (NB): So far, our experience in 2016 has been that few fund managers still struggle to meet their AIFMD submission deadlines. Filing periods remain tight and data sourcing can still be challenging – but these are not the new challenges they were in 2014 when we fi rst helped fi lers make their Annex IV returns. Most compliance teams are used to their reporting cycles by now.

Th e most common issues that we encounter these days concern the quality of reporting. An Annex IV return can comfortably clear the validation checks of any national authority gateway and still contain glaring inaccuracies, inconsistencies and omissions. To-wards the end of 2015 we started to hear of more direct-communi-cations from some regulators con-cerning accuracy and complete-ness of AIFMD returns, and in some cases, requests for resubmis-sions. HFMWeek revealed back in January that the UK FCA was in-vestigating 67 AIFMs for regula-tory breaches, and in terms of pre-paredness, it is this increased level of scrutiny for which fund manag-ers may be less well-prepared.

HFM: Do reporting obliga-tions deter prospective fund managers from marketing in Europe? Why?NB: Cost of compliance will always be a factor when making the decision to market, but we don’t see a lot of evidence of the AIFMD transparency obligations being pivotal in this. Successful fund managers will naturally think strategy fi rst and most compliance teams are fairly resilient to new reporting requirements.

Th e exceptions, as you might expect, are those non-EEA fi rms with lower AUMs wishing to market into the Union. We assist some fi rms from North America and Asia who

don’t have large compliance teams and acknowledge that they would fi nd it diffi cult to report under multiple National Private Placement Regimes without outsourc-ing some of the eff ort. Th ese are the fi lers that are most excited about the proposed extensions of AIFMD pass-porting to non-EEA fi nancial centres since the relative compliance cost savings could make quite a diff erence.

HFM: What will happen to fund managers who do not meet reporting obligations?NB: We know that what can happen is very serious in-deed. At a supranational level, the Directive spells out the requirement for member states to impose penalties on responsible persons and allow public disclosure of

punishments for infractions. At a national level diff erent regimes are enshrined in law but the common message is that ultimately penal-ties can be very severe.

What managers really want to know, however, is what the short-term eff ects of poor-quality reporting look like. Competent authorities are consistent in their initial approach that it is preferable to correct and assist fi lers rather than hand down punishments. We have yet to encounter a fi ler that has been formally admonished for AIFMD non-compliance, but we have helped a number of fund man-

agers make resubmissions of old Annex IV returns at the request of their regulator. For compliance teams that are under pressure to maximise effi ciency this can be punish-ment in itself.

To date, the cases we have seen of regulators contacting fi lers directly are relatively sporadic, but the trend is that they are increasingly frequent and broadening in their re-quests. We are always keen to impress upon managers the benefi ts of addressing quality issues as early as possible – correcting inaccurate or incomplete returns becomes

WHAT MANAGERS REALLY WANT TO KNOW, HOWEVER, IS WHAT THE SHORT-TERM EFFECTS OF POOR-QUALITY REPORTING

LOOK LIKE

”

NICK BALDWIN, DIRECTOR AT ARKK COMPLIANCE, HIGHLIGHTS THE IMPORTANCE OF MEETING REPORTING OBLIGATIONS AND THE POTENTIAL CONSEQUENCES FOR THOSE WHO DON’T

MEETING REPORTING OBLIGATIONS

R E P O R T I N G O B L I G AT I O N S

2 0 H F M W E E K . CO M

M A R K E T I N G I N T O E U R O P E 2 0 1 6

harder the older they get, and regulators are more likely to accommodate filers that are pro-active in requesting revisions.

HFM: How can managers retain ownership of their reporting while outsourcing to a third-party provider?NB: Outsourcing providers have a responsibility to en-sure fund managers understand their disclosure and do not simply sign it off, but finding sufficient time during filing periods to ensure this always happens can be dif-ficult. The best approach we have found for Annex IV reporting is to meet with the client during a quieter time at the start of an engagement and agree on the method-ologies and assumptions to be employed in preparation of the live returns. This also allows time to address any regulatory knowledge gaps so the individual signing off the returns understands what they are reviewing.

Something else that we find important is accommodat-ing filer preferences when it comes to making live Annex IV submissions. The electronic filing stage is where third-party specialists can add a lot of value to the reporting process, but the function needs to be undertaken within the rules and in a way that suits the filer. This could mean carrying out filings at the client premises, using shared online workspaces, or simply talking the filer through the process over the phone.

HFM: Over the next five years, what current in-dustry reporting-related trends will be of the most importance to fund managers marketing in Europe?NB: The most significant trend will be the increased

availability and scrutiny of disclosure data. You may say this could be applied to most spheres of compliance, but our expectation is for AIFMD filers in particular to see a very clear upward trend in the level of transparency and interrogation of reported information over the next two to three years. We are already seeing the end of the soft-touch Annex IV phase in some authorities, and regula-tors that have invested heavily in electronic infrastruc-ture will feel some pressure to demonstrate value. At a supranational level, the appetite for greater oversight of a purportedly light-regulation industry shows little sign of abating.

In response, we expect to see the continuation of an-other current trend over the next five years – increased outsourcing of specific compliance roles to specialist firms. AIFMD reporting is a very good example of where special-ist knowledge, experience and technology can be applied effectively at key points in a reporting cycle to greatly im-prove the efficiency of a firm’s compliance function. This is particularly the case for firms required to comply with multiple regulatory authorities under National Private Placement Regimes.

The upward trends in regulation will not be welcomed by fund managers, but it should be possible to take some positives from the process of applying greater rigour to firms’ reporting processes. Many AIFMD filers have sharp-ened up their data infrastructure in response to the new requirements, and the Annex IV returns themselves often make filers look at their fund data from a different per-spective. With greater efficiency of reporting and famili-arity of the requirements, the next few years of AIFMD compliance need not be an uphill struggle. 

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THE NEW YORK City

Employees’ Retirement System’s

(NYCERS) vote to yank $1.5bn

from hedge funds could spark

a “domino effect” of similar

redemptions from other public

pensions in the city with portfo-

lio reviews underway.

Consultants say an increas-

ingly common approach has

been developed among the city’s

five schemes, which share both

investment staff and key trus-

tees, meaning others could fol-

low NYCERS’ lead and liquidate

their hedge fund holdings.

NYCERS trustees backed the

move last Thursday by a margin

of 10 to one amid some shrill

anti-hedge fund sentiment and

questions over their value.

HFMWeek has learned the

investment committees of the

$32bn NYC Police Pension

Fund and $10bn NYC Fire

Department Pension Fund are

both carrying out “asset allo-

cation reviews” and are due to

meet next month. They had

hedge investments of $1bn and

$335m as of January 2016.

“Each [New York] fund is

currently undergoing its own

independent asset alloca-

tion review and those boards

will present their findings at

the completion of that pro-

cess,” said Eric Sumberg, a

spokesman for New York City

Comptroller Scott

Stringer, who sits on

Connected NY funds are

undertaking portfolio reviews

BY SAM DALE

03

COMMENT TIME FOR A SECOND LOOK AT YOUR PRIME BROKER?

14

New York pension’s

HF exit threatens

‘domino effect’

IT’S A FAMILY

AFFAIR

HFMWEEK WEIGHS UP THE

ADVANTAGES OF SETTING

UP A FAMILY OFFICEANALYSIS 21

LAUNCHES 11

EX-DB CREDIT HEAD PREPS EMERGING MARKETS LAUNCH

UK-based Lintel Capital backed by owners of global corporations

PEOPLE 03

JP MORGAN SET TO APPOINT QUINTILLION FOUNDER JOAN KEHOE

CEO left admin in February after decade at the helm

LEGAL 05

HEDGE FUND GIANTS LOSE BATTLE TO SCUPPER $1.9BN CDS DEAL

Objections from a range of funds dismissed as “deeply fl awed’

A number of big investors show

renewed focus on emerging

manager programmes

ANALYS IS 17

The long and the short of it

ISSUE 415 21 APRIL 2016

NURTURING THE

YOUNG ONES

s indd 1

19/04/2016 16

www.hfmweek .com

JP MORGAN HAS seen sig-

nificant drops both in its hedge

fund prime brokerage and cus-

todian banking businesses,

while other large prime brokers

such as Credit Suisse have also

seen big falls, exclusive analysis

of SEC data reveals.JPM has shed 824 hedge

funds from its custodian bank

and 136 from its prime bro-

kerage, the latest HFMWeek/

AlphaPipe Service Provider

Snapshot shows.Sources close to the bank

said the drop, revealed in ADV

forms filed by funds in Q1, is

largely due to the winding down

of the broker dealer business it

acquired from Bear Stearns.It announced in November

2014 that it was winding down

its third-party Broker Dealer

Services (BDS) arm and

Fidelity subsidiary National

Financial took on clearing ser-

vices for BDS clients.JPM acquired the unit, which

was formerly known as Bear

Stearns Securities in 2008.The number of funds using

JPM as a custodian fell by -33%

from 2,516 to 1,692. It fuelled a

$421bn, or 20% fall, in its cus-

todian RAuM from $2.1trn to

$1.7trn.Northern Trust, Wells Fargo

and First Republic Bank were

the big winners among custo-

dians, adding 310, 124 and 126 funds

Latest AlphaPipe data shows

falls for JPM and Credit SuisseBY SAM MACDONALD

03

COMMENT WILL NEW EUROPEAN STRUCTURES KNOCK CAYMAN OFF THE TOP SPOT? 14

Top custodians and primes shed

1,000 hedge funds

A PRICE WORTH PAYING?

ESMA’S CALLS FOR COMMON EU FRAMEWORK

MET WITH SCEPTICISMANALYSIS 23

LAUNCHES 11

BOAZ WEINSTEIN’S SABA LAUNCHES HIGH-YIELD STRAT

New York credit fi rm adds to its stable of fi xed income funds

PEOPLE MOVES 06

CANTAB CO-FOUNDER LEAVES AFTER 10 YEARS AT THE FIRM

Schlaikjer’s responsibilities taken over by CTO Tom Howat

LAUNCHES 10

SWISS HF BETTING ON GREEK RECOVERY

RBR Capital carve out fund focused on indebted country’s banks

Brevan Howard’s Alan Howard

among the winners at last week’s

bash. For all the photos, see page 25

The long and the short of it

ISSUE 416 28 APRIL 2016

HFM EUROPEAN PERFORMANCE AWARDS

001_003_HFM416_News.indd 1

26/04/2016 16:56

www.hfmweek .com

POOR PERFOR MANCE

AND investor redemptions have

sparked an expansion of capacity

in funds previously closed to new

investments, with industry giant

Third Point among the managers

re-opening vehicles.

Dan Loeb’s $16bn firm is

looking to extend capacity to

select investors, according to a

source familiar with the situation.

Acadian Asset Management and

AlphaGen Capital have also re-

opened respective funds in the last

quarter.

JP Morgan’s private bank plat-

form is being offered new capac-

ity at Third Point – around $40m

– following a difficult quarter for

the event-driven manager which

saw it suffer redemptions and

left it down -2.3% YTD as of 31

March.

It is not known whether Third

Point has offered additional capac-

ity to other allocators, but one

prime brokerage cap intro head

told HFMWeek that for hard-

closed funds like Loeb’s, it is com-

mon practice to have a waiting list

of vetted prospective investors to

provide “replacement capital”.

Third Point hard-closed in

2011.The development comes as

investors yanked $15bn from

hedge funds between January and

March this year, leading data pro-

viders reported last month.

Boston-based Acadian has space

in its flagship Global Leveraged

Market Neutral

(GLMN) strategy due

Funds looking for fresh assets

after outflows and poor returns

BY JASMIN LEITNER

03

COMMENT THE NEW SIGNIFICANCE OF EMPLOYEE FILING AND DISCLOSURE

14

Third Point among

HFs re-opening to

new inflows

HEDGE FUNDS

FACE LEVERAGE

CURBSFSOC COMMITTEE

INVESTIGATES RISK

AT LARGE MANAGERSANALYSIS 21

UCITS 11

GOLDMAN SACHS ONBOARDS FIRST CTA FOR UCITS PLATFORM

Teams up with pioneering managed futures fi rm Campbell & Co

REGULATION 03

FCA DRAFTS EXTRA STAFF FOR AUTHORISATION BACKLOG

Processing times increase 50% in past 12 months

LAUNCHES 05

EX-CONTRARIAN CAPITAL DUO LAUNCH EVENT-DRIVEN FUND

Neiss and Lax’s JH Lane Partners awaiting SEC approval

HFMWeek looks at the pros and

cons of choosing the sunshine state

as a hedge fund destination

The long and the short of it

ISSUE 417 12 MAY 2016

FLORIDA: MORE

THAN LOW TAXES

AND SUNSHINE?

ANALYS IS 17

10/05/2016

www.hfmweek .com

FOHF GIANT Skybridge Capital has raised concerns over certain liq-

uid alternatives strategies, claiming they pose potentially “disastrous”

risks and are destined to underper-form equivalent private funds.

Speaking at the Salt conference in Las Vegas last week, Skybridge

partner and senior portfolio man-ager Troy Gayeski, a key figure in

Anthony Scaramucci’s $12.5bn FoHF, said he had concerns about

strategies other than managed futures and long/short equity

being launched in a liquid alts ’40 Act format.“Strategies can perfectly fit in

liquid alts like CTAs or long/ short equities but those are only two out

of numerous strategies that alter-natives managers pursue,” he said.

“Strategies like structured credit or distressed corporate credit are

impossible to put in daily liquid products without creating a signif-

icant asset liability mismatch.“How much return do you give

up by demanding daily liquidity? And how much correlation ben-

efits do you give up by being more long biased? We are pretty sure

that it is very difficult for liquid alts to generate comparable returns

over a 10-year period.”Liquid alts strategies have grown in popularity over recent years but

the latest Morningstar data shows assets have fallen more recently.

US liquid alts assets total $286bn, down over 10% compared to April

2015 when assets stood at $314bn. Performance was down

-3% over the period.

$12.5bn FoHF warns of certain strategies using daily liquidity

BY SAM DALE

03

COMMENT LESSONS FROM 40 YEARS INVESTING IN EMERGING MARKETS14

Skybridge raises concerns over liquid alts failings

LIFE AFTER BREXITWHAT ARE THE POTENTIAL IMPLICATIONS OF A ‘LEAVE’ VOTE FOR HEDGE FUNDS?

ANALYSIS 19

REDEMPTION 08

CHINA SWF ATTACKS HF PERFORMANCE AND HERDING

CIC has $30bn invested in absolute return funds bucket

LAUNCH 03

MULTI-STRAT LAUNCH FOR ALTEGRIS AND CQS

US alternatives manager teams up with multi-strat giant

PEOPLE MOVES 06

CITCO FUND SERVICES CHIEF WILLIAM KEUNEN TO RETIRE

Admin’s global director to leave after 26 years at the fi rm

HFMWeek looks at the current exposure levels of public pension

funds in states across the East Coast

The long and the short of it

ISSUE 418 19 MAY 2016

EAST COAST PENSIONS

ANALYS IS 16

2 2 H F M W E E K . CO M

S E R V I C E D I R E C TO R YM A R K E T I N G I N T O E U R O P E 2 0 1 6

Sparkasse Bank Malta PLC, Paul Mifsud, Managing Director // paul.mifsud@sparkasse-bank-malta.com// 101 Townsquare, lx-Xatt ta'Qui-si-Sana, Sliema SLM 3112 // T:(+356) 21 33 57 05 // www.sparkasse-bank-malta.com

Sparkasse Bank Malta plc forms part of the Austrian Savings Banks and the Erste Group Bank AG forming part of Austria's largest banks. From Malta the bank provides private banking and fund custody solutions. As trained private bankers, the bank strives to deliver private, personal and tailored solutions to its fund customers by offering a seamless banking, execution, settlement and custody solution from one account. Fund custody is considered a core service at Sparkasse Bank Malta plc and the bank avoids all potential conflicts by focusing entirely on what it is they are truly hired to do i.e. - safekeep-ing, record keeping, monitoring and reporting.

Arkk Compliance, Nick Baldwin ACA Managing Director // nick.baldwin@arkkcompliance.com // Tel: 0207 0362 910

Arkk Compliance is a leading technology and consultancy practice providing focused support and outsourcing services to firms impacted by European level regulatory reporting directives and regulations: we support hedge funds and their managers, those filing under the NPPR, privet equity funds, real estate funds and capital raising firms. Our expertise in regulatory reporting extends to the whole reporting cycle and our services are available for all or part of your process. Arkk’s clients spend less on tackling technology, and operation risk challenges, and are more focused on core business activities.

AQMetrics Geraldine Gibson, CEO // Dublin: +353 1 629 2607 // London: +44 207 887 2624 // Paris: +33 1 49 91 11 05

AQ Metrics offers investment managers a simple, innovative, and effective way to address regulatory risk and compliance, delivering an ultra-fast and high-quality cloud-based platform to save clients time and money. Their platform integrates pricing, risk and regulatory solutions into a single offering, helping its clients stay compliant while eliminating errors, reducing downtime, avoiding risks and minimising regulatory breaches. AQ Metrics is headquartered just outside of Dublin in Ireland, with offices in London and Paris.

Goldman Sachs International, Neha Jain, Executive Director, Securities Division // Tel: +44 (0)20 7051 3064 // email: neha.jain@gs.com // Peterborough Court | 133 Fleet Street , London EC4A 2BB, The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.

Lyxor Asset Management Group, Amber Kizilbash, Global Head of Sales and Client Strategy // amber.kizilbash@lyxor.com // Tel: +33142133131 Lyxor Asset Management Group (“Lyxor Group”) was founded in 1998 and is composed of two fully-owned subsidiaries(1)(2) of Societe Generale Group.It counts 600 professionals worldwide managing and advising $130.7bn* of assets.Lyxor Group offers customized investment management solutions based on its expertise in ETFs & Indexing, Active Investment Strategies and Multi-Management. Driven by acknowledged research, advanced risk-management and a passion for client satisfaction, Lyxor's investment specialists strive to deliver sustainable performance across all asset classes. www.lyxor.com(1) Lyxor Asset Management is approved by the «Autorité des Marchés Financiers» (French regulator) under the agreement # GP98019.(2) Lyxor International Asset Management is approved by the «Autorité des Marchés Financiers» (French regulator) under the agreement # GP04024.*Equivalent to 115.5bn - Assets under management and advisory as of end of March 2016

Schroders Andrew Dreaneen, Head of Schroder GAIA Product & Business Development // andrew.dreaneen@schroders.com // T: +44 (0)20 7658 5850 // 31 Gresham Street, London, EC2V 7QASchroders is a global asset management company with over 200 years of investment experience. We manage $466.9bn (as at 31/03/16) on behalf of institutional and retail investors, financial institutions and high net worth clients, across equities, fixed income, multi-asset, alternatives and real estate. We offer a diverse range of liquid hedge fund strategies through our global platforms, Schroder GAIA and GAIA II. These platforms combine Schroders’ strengths as an experienced and established asset manager with those of a carefully selected group of top-quality hedge fund managers with proven track records.

For Private and Corporate Banking, Wealth Management and Fund Custody, talk to Sparkasse Bank Malta plc.

Call +356 2133 5705 or email us on info@sparkasse-bank-malta.com.

Part of the Austrian Savings Banks - Banking since 1872

Sparkasse Bank Malta plc is licensed and regulated in Malta by the Malta Financial Services Authority (MFSA) to provide Banking, Investment and Custody services.

Sparkasse Bank Malta plc, 101 Townsquare, Ix-Xatt ta’ Qui-si-Sana, Sliema SLM3112, Malta

www.sparkasse-bank-malta.com

A breath of fresh air in Depositary services.

Tailored fund custody from Sparkasse Bank Malta plc.

Custody and depositary services are a core part of what we do at Sparkasse Bank Malta plc

- a service we provide to our customers through our robust infrastructure and highly trained and

experienced team of professionals. A team willing to listen and competent to act. We deliver a holistic

custody and depositary solution to AIFs, UCITS and Non-EU funds. Banking, execution, settlement,

safekeeping, monitoring and oversight solutions from one account.

By bringing together people, capital and ideas, Goldman Sachs produces solutions and results for our

clients. Our Fund Solutions team within the securities division helps clients access both unique internal

cross asset content and a select group of external alternative asset managers.

© Copyright 201 Goldman Sachs. All rights reserved. See www.gs.com/disclaimer/email-salesandtrading.html. This material is a solicitation of derivatives business

generally, only for the purposes of, and to the extent it would otherwise be subject to, CFTC Regulations 1.71 and 23.605. Goldman Sachs International (“GSI”) is

authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (“FCA”) and Prudential Regulation Authority (“PRA”) and

appears in the FCA register under number 142888. GSI is subject to the FCA and PRA rules and guidance.