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MFS Investment management launches UK buy and maintain credit strategy

Wed, 11/17/2021 - 05:02
MFS Investment management launches UK buy and maintain credit strategy Submitted 17/11/2021 - 10:02am

With extensive experience working with UK pension funds and insurers, and having gained a deep understanding of their investment challenges, MFS Investment Management (MFS) has added to its global fixed income capabilities by launching a UK buy and maintain credit strategy.

The strategy aims to achieve long-term returns through low turnover and the sustainable capture of credit risk premium.
 
Kelly Tran, head of UK and Ireland institutional sales, says: "We have seen the increased demand for buy and maintain portfolios from UK DB schemes and insurance companies. Generally, these strategies are used as a component in one of two distinct investment approaches, the first aimed at self-sufficiency on the part of schemes working towards buy-in or buy-out, the second an approach in which insurance firms manage the assets' post–risk transfer transactions. 
 
"In a period of low yields and high uncertainty, the strategy has three advantages. First, it has the potential to deliver investors more certainty on returns, which may offer considerable comfort in the current changing inflationary environment. Second, while offering similar returns as a broader universe of bonds, the strategy aims to mitigate the downgrade and default experience in the portfolio. Third, lower turnover means trading costs will be lower and the savings can be passed on to the client directly."
 
While buy and maintain strategies have been available in the United Kingdom for a number of years, there can be a marked difference in how managers deliver on the approach.
  
Owen Murfin, institutional portfolio manager, says: "One thing that has surprised me is the varying levels of diversification among different managers. Diversification is key to risk management and portfolio construction, but nowhere is this more important than in buy and maintain portfolios. Yield optimisation is a significant consideration, but it should never come at the expense of prudent diversification across a range of factors.
 
"We begin by defining the client's portfolio objectives and constraints. Then we employ quantitative models that limit our exposure to country, sector, name and ESG risks to avoid too much exposure to areas like energy and cyclical risk. For example, our names can make up only so much of a sector and be only so heavily weighted. As well as helping to optimise the portfolio, we think this makes it more diversified and is the prudent course," he concludes.
 
Important investment trends can be reflected in a buy and maintain strategy, including the growth of environmental, social and governance (ESG) investing, including a growing focus on carbon neutrality.

This is particularly relevant given that new climate change governance and disclosure requirements contained within the Pension Schemes Act 2021 came into force in October this year. Many asset owners in the UK have made their climate pledge, and MFS has published its own climate manifesto and joined the Net Zero Asset Managers Initiative.
 
Tran says: "Buy and maintain strategies tend to be built to meet the bespoke requirements of each scheme or insurance firm. As part of building client portfolios, ESG factors are assessed in the context of overall credit risk in the analysis process. Clients are able to include or exclude ESG preferences and have the opportunity to engage with companies to influence change over the long term. We are committed to helping them on their sustainable investing journey while staying true to our philosophy of creating value responsibly."
 
The strategy is run by a team of four portfolio managers (see below). The firm has managed fixed income portfolios for more than 50 years, and all the firm's equity, fixed income and multi-asset funds are supported by our global research platform, through which MFS oversees USD684.3 billion in assets under management, of which USD82 billion is fixed income, as of 31 October 2021.

MFS is keen to meet each client's individual requirements and to provide as much certainty about future returns as possible, so we have made the strategy available to UK institutional investors via a bespoke segregated account.

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IQ-EQ acquires US outsourced compliance provider Greyline Partners

Wed, 11/17/2021 - 04:55
IQ-EQ acquires US outsourced compliance provider Greyline Partners Submitted 17/11/2021 - 9:55am

IQ-EQ, an Astorg portfolio company, has acquired Greyline Partners (Greyline), a US provider of governance and regulatory compliance solutions for PE, VC, hedge funds and investors. 

Greyline is a fast-growing business with a strong commercial and cultural fit for IQ-EQ’s expanding operations in the US. Today, IQ-EQ U.S. employs 500-plus people with plans to significantly grow this number in 2022 thanks to its strong business performance in the US market. The combination of IQ-EQ and Greyline firmly positions IQ-EQ as the leading provider of outsourced business services to the alternative asset industry. This latest acquisition follows the successful acquisitions of Constellation Advisers and Concord Trust Company earlier this year.  
 
Founded in 2016, Greyline is a partner led compliance services business headed up by Managing Partner, Matt Okolita employing 56 people across its six offices located in San Francisco, Dallas, New York, Chicago, Boston and London. Also part of Greyline is GCM Advisory, an outsourced CFO, Finance and Accounting business launched earlier this year. 
 
The Greyline team provide a range of services including: 
 
• Regulatory Compliance 
• Management Consulting and Governance 
• Outsourced Operations and middle office services 
• Outsourced Finance, Accounting and back office services 
 
This acquisition firmly positions IQ-EQ as the leading provider of outsourced business services to the alternative asset industry in the US. Greyline’s diversified client base, including wealth advisory and broker dealer clients, perfectly complements IQ-EQ’s shared client focus on alternative asset managers and investors. A shared entrepreneurial approach coupled with a strong focus on providing high levels of client service and an emphasis on training and investment in their people positions the newly combined entity as the provider of choice for alternative asset managers. 
 
On announcing this acquisition, Group Executive Chairman Serge Krancenblum, says: “On behalf of IQ-EQ Group I’m delighted to welcome the Greyline Partners team to our expanding business. We quickly recognised in Greyline Partners a business that shares our high touch service standards and successfully services its clients regulatory, operational and governance needs through dynamic, high-quality consulting and innovative use of technology. 

"We liked what we saw and set our sights on making them part of our US ambitions. The acquisition of Greyline Partners marks another key milestone in our U.S. growth strategy and brings with it significant potential to combine our collective expertise for the benefit of our clients and our employees not just in the US but group wide.”   
 
Mark Fordyce, IQ-EQ Regional CEO, The Americas, adds: “Welcoming Matt and the Greyline Partners team to IQ-EQ is something we’re incredibly excited about as it further strengthens IQ-EQ as the leading outsourced service provider to the alternative asset industry. With a range of complementary services, a shared common culture, a highly experienced team and a reputation for delivering high touch white-glove tech enabled services to our clients we have created an unmatched regulatory and compliance business here in the US. 

"For our combined team of 500-plus talented individuals this latest acquisition promises unrivalled opportunities, personal development and training as part of an entrepreneurial and highly driven team. We have ambitious plans for the future and having the Greyline Partners team join us fits very well into these plans.”  
 
Matt Okolita, Managing Partner, Greyline Partners, LLC, adds: “This acquisition allows us to continue on our journey of building the premier outsourced business services platform and grants our clients access to a hugely increased range of services across the global markets. As Greyline Partners, LLC we’ve focused on developing a culture and product that has led to tremendous success and now it’s time to achieve even more as part of IQ-EQ Group.”  

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QuantCube launches real-time GDP Canada Nowcast

Wed, 11/17/2021 - 04:33
QuantCube launches real-time GDP Canada Nowcast Submitted 17/11/2021 - 9:33am

Alternative data specialist QuantCube Technology has launched the the QuantCube real-time GDP Canada Nowcast giving investment firms and hedge funds real-time insight, based on alternative data sources, on whether an event or trend happening in the US economy is affecting Canada. 

The latest GDP indicator is part of a series of expansions to its GDP Nowcasts for the main global economies: the US, China, the UK, Japan, and the Eurozone, including France, Germany, Spain, and Italy.
 
The QuantCube Canada GDP Nowcast enables users to see whether an event or trend happening in the US economy is affecting Canada’s economy, with insights delivered daily. QuantCube GDP Nowcasts are real-time indicators quantifying current economic growth trends at a country level. QuantCube does this by dynamically processing multiple subcomponents of GDP nowcasting and establishing patterns from robust observations.
 
QuantCube’s GDP Nowcasts demonstrate—in real-time—economic growth over a 12-month period at the country level by tracking and aggregating each component of the GDP.

“With its close relationship to the US, Canada is an important country to track, especially given its status as a significant producer and exporter of fossil fuels,” says QuantCube CEO, Thanh-Long Huynh. “Tracking Canada’s GDP is essential for any fund involving mining, oil and gas extraction, construction, and manufacturing to wholesale trade and transportation and warehousing. Investment professionals can gain a significant competitive edge by getting valuable information ahead of anyone else, before the publication of official GDP data, to generate greater Alpha.”
 
For every country, QuantCube uses different proxies that track the most important parts of the variance of GDP. To compute each subcomponent of the GDP, multiple layers of analytics and pre-processing are necessary to extract an accurate proxy from the massive flow of alternative datasets. QuantCube’s GDP Nowcasts for current-quarter growth rates are updated daily, a capability achieved via QuantCube’s Data Infrastructure, which can process massive amounts of data in real-time.
 
The real-time GDP Canada Nowcast indicator is available to view through the QuantCube Macroeconomic Intelligence Platform (MIP). Alongside country GDP nowcasts, the platform also provides real-time information on various indicators from tourism and global trade to inflation and other key macro-economic variables.

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GMEX launches interoperable trading and post-trade hub bridging access between traditional and digital asset markets

Wed, 11/17/2021 - 04:32
GMEX launches interoperable trading and post-trade hub bridging access between traditional and digital asset markets Submitted 17/11/2021 - 9:32am

GMEX MultiHub Limited (GMEX), a new business unit of the GMEX Group, has launched Digital MultiHub (MultiHub), a global cloud-enabled trading and post-trade digital market infrastructure platform which facilitates third-party trading and post-trade services across traditional and digital asset markets. 

Delivered through a Platform-as-a-Service, microservices distribution model, MultiHub enables capital markets participants to gain simple access to regulated digital assets and market infrastructure.
 
Digital assets are becoming increasingly relevant in capital markets portfolios. According to recent research from Fidelity Digital Assets, 84% of US and European institutional investors are interested in purchasing institutional investment products that hold digital assets. However, a lack of standards, platform interoperability and time to market challenges remain across multiple blockchains and traditional infrastructure. MultiHub addresses this fragmentation, providing the growing global market of institutional participants with a faster and safe clearing and settlement solution for hybrid digital and traditional trading.
 
MultiHub provides global access to turnkey digital asset exchange, custody, and governance solutions. The platform facilitates credit allocation and checking, collateral management and margin trading, order routing, netting and settlement across multiple trading venues, custodians and participants. 

To develop MultiHub, GMEX worked with AWS and with Luxoft as a development partner, to implement and deploy the MultiHub platform powered by AWS Cloud and core ledger technology. AWS and GMEX jointly developed the business case, and together created a go-to-market plan to help GMEX grow their business.

Other initial partners and customers include: Trustology, a UK FCA registered digital asset custodian incubated and backed by ConsenSys and also backed by Two Sigma Ventures; GCEX, a regulated UK based traditional and digital assets broker; SECDEX Group, a Seychelles licensed securities, commodities and derivatives exchange; and Arabian Bourse, an Abu Dhabi Global Market based crypto asset exchange and custodian. They are all part of a continuously expanding capital markets infrastructure ecosystem of partners, backers, and customers. These companies provide access to some of the fastest growing regulated digital asset markets and regions.
 
GMEX chose to build MultiHub on AWS Cloud so that it could benefit from a diverse array of tools and harness reliable, scalable and highly secure infrastructure. Using AWS also ensures that the solution is flexible, easy to access and cost effective.
 
GMEX Group CEO, Hirander Misra, says: “MultiHub is a unique multi-asset network of networks service that enables cross-venue, cross-participant trading, clearing and settlement of both traditional and digital assets with a single point of connectivity for both industries, which negates the need to integrate across venues. This complements our mission to cost-effectively drive the accelerated institutional take-up of digital assets by making it easier to trade, clear, settle and pledge them alongside traditional assets, heralding the new age of Exchange 4.0.”
 
“This marks a significant move in capital markets. The GMEX MultiHub will drive digital transformation within the space and at the same time allows for accelerated execution and custody for institutional players as they get into or scale their digital assets activity,” says Alex Batlin, Founder & CEO of London-based digital assets custodian Trustology, which has brought its scalable on-chain and on-exchange capabilities to GMEX MultiHub on AWS Marketplace. 
 
Lars Holst, CEO of GCEX, a digital assets broker, adds: “I am now able to have a broader range of customers access our execution capabilities more efficiently and am able to convert that gain in velocity to an increase in liquidity confidence for our partners and their customers within the GMEX MultiHub community.”
 
Anoop Nannra, Global Blockchain Lead at AWS, says: “The portability of digital assets has become an increasing challenge impacting trading and volumes.” He adds: “GMEX MultiHub makes it easier for customers to access, trade and settle digital assets with a reduced carbon footprint, compared to trades that use the blockchain. This is because digital assets can be pledged by custodians without moving onto a blockchain. That alone means that the carbon created by the trade is far reduced when compared to trades that use the blockchain which is compute intensive.”
 
Hugh Richards, MD, Products & Solutions, Luxoft, adds: “As institutions increasingly adopt digital assets as part of their digital transformation agenda, the need for hybrid (both traditional and digital) settlement and custody solutions is required to simplify this adoption. Luxoft is pleased to be the development support partner for GMEX MultiHub, responding to the increasing demand for such decentralised trading solutions.”

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Bitstamp expands digital asset offering with Copper.co Partnership

Wed, 11/17/2021 - 04:31
Bitstamp expands digital asset offering with Copper.co Partnership Submitted 17/11/2021 - 9:31am

Cryptocurrency exchange Bitstamp has added Copper.co, the institutional gateway to digital asset investing, as an additional custody provider. 

Copper’s leading crypto custody solution will allow Bitstamp to offer a new set of digital assets to its customers around the world, starting with Cardano (ADA), now the world’s sixth largest cryptocurrency. Bitstamp’s customers in Europe will be able to start trading Cardano this Friday. 
 
This partnership demonstrates Bitstamp’s commitment to global expansion and marks the continued growth of its customer-centric offerings. As demand increases, Bitstamp continues to provide its users access to the ever expanding market.
 
With multi-award-winning custody, and an Aon brokered crime insurance policy, Copper is a reliable and mature partner to Bitstamp, offering the industry gold-standard in digital asset engagement. Copper’s secure custody uses Multi-Party Computation technology. With MPC, key shards are formed simultaneously and in isolation, one shard each is entrusted to the client, their trusted third party, and Copper. These shards allow transactions to be signed online without the risk of private key exposure because there is no longer one private key. This largely eliminates the risk of key exposure in online transactions. Over 400 institutions already custody their cryptoassets with Copper, which supports circa 450 different tokens.
 
“Partnering with the most trusted providers in the industry allows us to better fulfill our obligation of providing the most reliable products and services,” says Julian Sawyer, Global CEO of Bitstamp. “By expanding our custodial services through Copper, we will be able to continue to offer secure access to more digital assets.” 
 
“At a time when we are seeing a surge in institutional adoption of digital assets, we’re proud to be collaborating with Bitstamp, which is committed to best-in-class service”, says Dmitry Tokarev, CEO of Copper. “Our multi-award-winning crypto custody provides secure access to the world’s most important digital assets and we are pleased Copper’s technology was chosen to broaden the range of digital assets Bitstamp can offer its customers.”
 
This partnership is a continuation of Bitstamp’s commitment to expansion. In July, Bitstamp announced a partnership with Paragon International Insurance Brokers to add an extra layer of security to users' digital assets. In October, the exchange partnered with ZEBEDEE to allow gamers the ability to utilise Bitcoin as part of the gaming ecosystem.

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Variety Capital launches Irish UCITS investment platform

Wed, 11/17/2021 - 04:25
Variety Capital launches Irish UCITS investment platform Submitted 17/11/2021 - 9:25am

Variety Capital has opened an Irish domiciled UCITS investment platform with a fund managed by CKC Capital, an experienced US credit investment team. 

The fund has launched with investments from UK and European institutional investors.

The fund aims to replicate the performance of CKC Capital LLC’s flagship fund, CKC Credit Opportunity Master Fund Ltd, launched in 2013 which follows the same strategy and has returned positive performance for 102 out of 103 months since inception.

Graham Loughridge, CEO of Variety Capital, says: “I am very pleased to have launched the Variety Capital ICAV with CKC Capital managing our first fund, the Variety CKC Credit Opportunity Fund. The purpose of our ICAV is to provide non-US institutional investors with access to leading US investment managers, and to do so with the transparency and liquidity that is prescribed by the UCITS regulations. This is demonstrated by offering investors access to CKC Capital, a truly elite US fund manager that runs one of the world’s best credit funds as measured by risk-adjusted returns.

"We launched our ICAV investment platform as we know that the vast majority of non-US institutional allocators only invest in UCITS funds and many good UCITS funds are either closed to investors, or soft-closed with limited capacity. With over USD15 trillion in assets, UCITS is the “gold standard” in asset management globally but due to the investment restrictions that protect investors, allocators face material challenges in sourcing alpha for their portfolios.

"We therefore decided to build an investment platform and partner with outstanding investment managers who demonstrate proven track records and liquid strategies that can be managed within the UCITS regulations. We conducted research on over 4,000 funds from which only six met the necessary criteria. That process has resulted in us launching our first UCITS sub-fund with CKC Capital."

Managed by Co-Founders KC Baer and Chris Yanney, the CKC Credit Opportunity strategy has demonstrated best in class risk-adjusted credit returns. The track record of the flagship fund is particularly impressive as it has been produced with nominal beta and with low correlations to both fixed income and equity markets. Given inflationary pressures, the current short duration approach of the Variety CKC Credit Opportunity Fund aims to provide institutional investors with a very timely and compelling diversification in their fixed income holdings.

CKC provides some of the most discerning and circumspect US institutional investors with the potential to benefit from outstanding risk-adjusted returns and downside protection. I am delighted that non-US institutional investors now have access to this source of returns and alpha on the Variety Capital UCITS investment platform on a daily-dealing basis.

Baer and Yanney say: “Our primary goal every day is to serve our investors by delivering outstanding risk-adjusted returns. With just one down month in the flagship fund (CKC Credit Opportunity Master Fund, Ltd – Institutional Share Class) of -0.42 per cent in eight-plus years, an annualised return of 7.4 per cent achieved with a volatility of 1.9 per cent, we believe that our investment team is achieving that goal. We aim to generate significant alpha within a highly liquid strategy that combines active trading, expert security selection with vigilant risk and duration management.  

"Institutional investors might find this an opportune strategy given recent inflation data and the risks and volatility in most fixed income portfolios.

"We are delighted that we are now in partnership with Variety Capital and managing assets for European institutional investors on the Variety Capital UCITS platform.”

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XP acquires minority stake in Vista Capital

Tue, 11/16/2021 - 12:13
XP acquires minority stake in Vista Capital Submitted 16/11/2021 - 5:13pm

XP Inc, a provider of low-fee financial products and services in Brazil, has acquired a minority stake in Vista Capital, one of the main independent equity and hedge funds managers in Brazil, with over BRZ4.5 billion in Assets Under Management (AUM). 

This transaction reinforces XP’s strategy to develop the most complete ecosystem of managers and distributors in Brazil.

Additionally, the development of independent asset managers meets XP's strategy by contributing to an increase in secondary market liquidity, helping to democratise investment products to more Brazilians.

Vista has a solid performance track record in hedge funds and equity funds, with its flagship fund Vista Multiestratégia FIC FIM yielding 444 per cent since inception and net of fees, against 68 per cent of its benchmark. Both teams expect that, along with Vista’s ability to further develop new products, it can grow its AUM, and benefit both the asset manager and our funds platform.

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Oaktree closes Opportunities Fund XI at USD16bn

Tue, 11/16/2021 - 12:05
Oaktree closes Opportunities Fund XI at USD16bn Submitted 16/11/2021 - 5:05pm

Oaktree Capital Management (Oaktree) has held the final close of Oaktree Opportunities Fund XI and its related vehicles (Opps XI), with total capital commitments of USD15.9 billion. 

Opps XI is Oaktree’s largest fund to date, exceeding its original target of USD15 billion.
 
To date, the Fund has invested or committed to invest approximately 70 per cent of its capital in an attractive mix of opportunities that are diversified across geographies, sectors and asset classes. This swift pace of investment has been made possible by the strategy’s all-weather, broad, and flexible investment charter that allows the Opportunities group to consider the most attractive public and private investments worldwide. 

Today, private opportunities offer a compelling risk/reward profile, and the Fund has invested in these in several attractive ways, including: (i) providing capital solutions, negotiated on an exclusive basis, to borrowers whose access to funding is limited; (ii) investing in out-of-favour industries; and (iii) creating platforms with superior management teams capable of exploiting undervalued, niche, or dislocation-driven opportunities.
 
Opportunistic credit has been a core investment focus for Oaktree since its inception over 25 years ago, when the firm was a pioneer in distressed debt investing. Formerly known as “Distressed Opportunities,” the Global Opportunities strategy officially changed its name to better reflect how its investment style has evolved and expanded over almost three decades. Its mandate has broadened to include more geographies, and its approach has become increasingly flexible. Consequently, the strategy’s most recent vintages sought to capitalise on opportunities in markets that look very different from those present 25 years ago.
 
“Oaktree has a long track record of navigating and investing through economic cycles. This latest oversubscribed fund is further validation of our investors’ confidence in our team,” says Bruce Karsh, Co-Chairman and Chief Investment Officer of Oaktree and Portfolio Manager of the Global Opportunities strategy. “We’re grateful to our investors who believe in the value and potential of this investment strategy at Oaktree.”
 
Robert O'Leary, Co-Portfolio Manager and Head of North America for the Global Opportunities strategy, adds: “Investing through many cycles requires the flexibility to transact in a variety of situations. Our strong deployment activity over the last 16 months demonstrates Oaktree’s ability to quickly execute and provide solutions across the capital structure in a diverse and swiftly evolving opportunity set.”
 
“We’re proud to have built a truly global team that is well positioned to capitalise on a wide array of investment opportunities in the most important economic regions around the world,” says Pedro Urquidi, Co-Portfolio Manager and Head of Global ex-North America for the Global Opportunities strategy. 

Urquidi relocated to Hong Kong in early 2019 to focus and further capitalise on the important and highly scalable long-term investment opportunity in Asia.

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Alternative and multi-asset managers behind the curve on diversity engagement

Tue, 11/16/2021 - 10:18
Alternative and multi-asset managers behind the curve on diversity engagement Submitted 16/11/2021 - 3:18pm

Credit and equity managers are leading the charge in regard to the consideration of diversity metrics when researching potential investments, Redington research has found.

Almost all asset managers across all asset classes appear to be recognising the importance of diversity within their own investment teams. Yet despite this, Redington’s Sustainable Investment Survey found that most asset managers across real assets, private debt, LDI and multi-asset funds are not considering diversity metrics such as gender when researching potential investments.

Of the 112 asset managers Redington surveyed, representing over USD10 trillion in AuM, the vast majority (94 per cent) believe that diverse teams have a positive and real impact on their investment processes. No managers disagreed with the statement, with the remainder saying they ‘neither agree or disagree’.

However, when asked whether they perform diversity assessments as part of their investment due diligence, credit and equity asset managers were the only ones to have over half of respondents say they consider aspects such as race or gender.

Looking specifically at gender, 68 per cent of credit managers say they consider this, alongside 58 per cent of equity managers. This compares to 44 per cent of private debt managers, 39 per cent of multi-asset managers and only 24 per cent of real asset managers.

On average across all strategies surveyed, 50 per cent say they consider gender (compared with 47 per cent in Redington’s 2020 survey), 37 per cent race (up from 19 per cent in 2020), 38 per cent professional experience and 27 per cent age. 9 per cent of managers on average say they considered sexuality as part of the due diligence process, including 15 per cent of credit managers.

Real asset managers scored consistently low across all metrics. Alongside gender at 24 per cent, the next highest metrics being assessed were professional experience (19 per cent), education (14 per cent), age (10 per cent) and race (5 per cent).

Nick Samuels, Head of Manager Research at Redington, says this could be partly explained by the type of assets invested in by this group of managers, with the quality of the land or building likely to take precedence over people.

Redington also questioned asset managers on the diversity of their own investment teams. Though only three quarters of surveyed strategies shared the gender breakdown of their investment team, Redington found that, despite a number of firms stating they consider gender diversity as part of their investment due diligence, investment teams average 78 per cent men. In the UK, this compares to a financial and insurance services industry population of 59 per cent men.

Samuels comments: “If managers believe these areas are important to assess when looking at a new investment, why is this not also reflected within their own organisation and processes? The same can be said for the ethnic diversity of teams that include race when researching new investment opportunities.”

Only 39 per cent of surveyed strategies shared accurate ethnicity information on their investment teams. While limited, Redington said the results did not suggest as much diversity as it would have expected, with white employees making up an average of 68 per cent of investment teams.

Despite these figures, 50 per cent of surveyed managers believed that their current team represented the diversity demographics of the country and region within which their firm operates. However, when reviewed in more detail, specifically from a gender diversity perspective, Redington did not find investment teams to be representative of the core regions in which most asset managers operate. 

Sarah Miller, Vice President at Redington, comments: “It’s clear that the industry acknowledges the crucial role that diverse teams can play in being successful. Yet our research suggests that the 50 per cent of managers who believe their teams do reflect the diversity of their population  cannot provide the evidence to back it up, and that most managers have a lot more to do to genuinely deliver on this ambition. 

“Driving a more inclusive and diverse investment industry requires greater transparency, disclosure and action. This is not only required for us to evolve and progress as an industry; it’s increasingly expected of us by our clients, too.

“But change isn’t helped by managers telling a more positive story about themselves and the diversity of their teams than is warranted by the data. What’s needed is honesty about the reality of the current situation; only then can we identify and tackle issues in order to make real progress.”

Redington recognises the limitations of some data sets such as gender and ethnicity pay gap reporting, both in regard to protecting employee anonymity and in sample size. However, it believes that it can still play a role in creating a dialogue and retaining focus around these issues.

The firm says that it will continue to collect this data from its managers, while also refining how it uses this to understand whether and how progress is being made.

Samuels adds: “We continue to review and define how we assess inclusion and diversity at each stage of our manager research and selection process. From the data, we recognise that there is no short-term solution and that progress will likely be slow. A key focus for us is to engage with managers to provoke change by asking challenging questions.

“Data can only tell us part of the story, though, and it’s how we use those quantitative points of reference to engage on the input factors that can help to effectively change future outcomes. What we’re looking for are long-term commitments from managers, combined with a high level of industry collaboration.

“For example, many, if not all, firms are seeking to address the historical gender imbalance within our industry by ensuring a more balanced graduate recruitment cohort and being more thoughtful about how they retain talent. Whilst this will drive long-term change, it won’t radically improve short-term numbers. Progress will require patience.”

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SBAI publishes guide to operational due diligence of crypto assets

Tue, 11/16/2021 - 04:44
SBAI publishes guide to operational due diligence of crypto assets Submitted 16/11/2021 - 9:44am

SBAI, a global alliance of alternative investment managers and allocators and custodian of the Alternative Investments Standards, has released a new Toolbox memo providing guidance on completing operational due diligence on crypto assets. The memo can be found in the SBAI Toolbox for Crypto Assets.

Crypto assets were once the purview of retail investors, but more recently the asset class has gained attention from institutional allocators and alternative asset managers. There are dedicated crypto funds specialising in digital assets, however some more traditional hedge fund managers are now allocating to this asset class.

Institutional allocators conduct operational due diligence (ODD) on the underlying managers and funds that they invest in, including on elements such as counterparties, valuation, and conflicts of interest. Crypto assets operate using different infrastructure than more traditional asset classes, therefore any ODD must take account of certain risks that are more prominent within this asset class.

Steven D’Mello, Partner, Operational Due Diligence – Albourne Partners, says: “ODD of crypto assets requires a more in-depth look into certain operational risks. The infrastructure is still in its infancy, and whilst it is becoming more institutionalised, careful attention needs to be paid. This memo from the SBAI continues its work on improving industry outcomes by providing a valuable toolkit for allocators to understand where the risks might be different from more traditional asset classes and provide guidance on the types of questions that should be asked in due diligence processes.”

Sebastian Bea, President of One River Digital – One River Asset Management, says: “Trading crypto assets requires that responsible practices and control processes are in place the same as for any other asset class. This SBAI Toolbox memo gives guidance to asset managers on crypto specific questions that may be asked during due diligence and is also an important resource for asset managers to ensure they have robust controls in place for the risks specific to crypto assets and therefore maintaining high standards throughout the alternative investment industry.”

Maria Long, Research and Content Director of the SBAI, says: “Our mission is to solve for better and improve industry outcomes. We believe that responsible practices, robust controls, and efficient and transparent due diligence processes are vital to these outcomes. This Toolbox memo provides guidance for asset managers on the controls that should be in place and assists  allocators with their due diligence processes.”  

This toolkit was produced with input from both allocators and asset managers. The SBAI community is made up of over 150 asset managers representing over USD2 trillion in AUM and over 90 institutional investors overseeing USD4 trillion in assets.

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CAIS appoints Head of Data

Tue, 11/16/2021 - 04:19
CAIS appoints Head of Data Submitted 16/11/2021 - 9:19am

Alternative investment platform CAIS has appointed George Davies, PhD, as its new Head of Data. Based in the Company’s New York office, Davies will report to Shane Williams, Chief Technology Officer.

“We are delighted to welcome George to this newly created position,” says Williams. “George’s track record working with data to enhance areas such as risk management, trade modelling, and pricing will complement our efforts to employ CAIS’ own data for trend spotting, creating personalised experiences for advisors, delivering meaningful engagements for managers, and informing business decisions.”

Davies has worked with technology platforms across wealth advisory, asset management, and trading for more than 20 years. He most recently served as Vice President of Data for personal finance technology platform SmartAsset, where he managed the company’s data engineering and data science teams while scaling system architecture. Davies also served as Chief Data Officer for fintech companies TraverseIQ and iSentium, and as a Quantitative Analyst for UBP Asset Management, ART Advisors, and Scotia Capital Markets. He earned his PhD in Astrophysics from Queen’s University.

“Having worked with a variety of financial technology companies throughout my career, I was immediately attracted to CAIS’ entrepreneurial mindset and the transformational impact this company is having across the financial advisory and asset management communities,” says Davies. “I look forward to working with Shane and the team as they continue to increase access and education around alternative asset classes for advisors, so they can help their clients realise supplemental income and higher returns.”

In this role, George will be managing teams that develop predictive analytics and machine learning across all business functions, seeking to enhance outcomes for all constituents within the CAIS community.

“George’s hiring reflects our efforts to attract quality talent from all areas of financial services,” says Matt Brown, Founder and CEO. “With a Head of Data in place, we will deepen our efforts to extract valuable insights from the front and back ends of our platform, which should lead to greater outcomes for the wealth management ecosystem that we serve.”

Transaction volumes on the CAIS platform were 74 per cent higher in the third quarter of 2021 compared to the prior year. The number of advisors on the CAIS platform also grew 89 percent year-over-year. Due to this increase in demand, CAIS has added 85 employees across all areas of the organisation within that same time frame.

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RM Labs, Eventus, Notabene form partnership to deliver one-stop compliance solution for digital asset ecosystem

Tue, 11/16/2021 - 04:12
RM Labs, Eventus, Notabene form partnership to deliver one-stop compliance solution for digital asset ecosystem Submitted 16/11/2021 - 9:12am

Three specialists in the global digital asset regulatory and compliance space have formed a partnership to create a one-stop solution for firms across the digital asset ecosystem, solving for cryptocurrency anti-money laundering (AML), trade surveillance, as well as Travel Rule compliance for Virtual Asset Service Providers (VASPs).

TRM Labs, a blockchain analytics provider, Eventus Systems, global provider of digital asset trade surveillance solutions, and end-to-end Travel Rule solution provider Notabene have formed “Project TEN,” which will provide the marketplace with a comprehensive offering to address a host of risk management and compliance challenges facing firms in the digital asset space.
 
With the launch of Project TEN, crypto-native firms as well as traditional financial institutions moving into virtual assets will benefit from a joint service designed to help maximise the efficiency of regulatory compliance operations. The offering will feature Eventus’ trade surveillance and market risk applications; TRM Labs’ transaction monitoring, wallet screening and forensics tools; and Notabene’s counterparty risk management and Travel Rule compliance software.
 
Esteban Castaño, Co-founder and CEO of TRM Labs, says: “Organisations operating in the crypto space are tasked with managing a complex regulatory landscape in a rapidly evolving market. Project TEN helps organisations address this complexity by bringing distinct areas of risk management expertise into one comprehensive offering.”
 
Eventus CEO Travis Schwab says: “We’re delighted to join forces with two other market leaders in the global digital asset space to introduce efficiencies and make lives easier for crypto firms striving to hold themselves to the highest standards, both to attract investment flows and meet regulatory obligations. Powered in part by our Validus trade surveillance platform, the Project TEN partnership offers a compelling solution to a wide cross-section of participants, including traditional financial institutions looking to enter the digital asset space while ensuring they have the same robust processes in place that they apply to other asset classes.”
 
Pelle Brændgaard, CEO of Notabene, says: “There are many distinct tasks that must be addressed by any institution offering digital asset services. Project TEN creates a comprehensive compliance solution for firms across the rapidly growing global digital asset space. Partnerships are critical as many complex components must work together to manage overall compliance risk. We’re thrilled to embed our privacy-preserving Travel Rule solution into Project TEN, the first comprehensive offering allowing institutional clients to enter the crypto space in a regulatory-compliant manner.”

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Bitnomial launches margined, physically settled bitcoin futures in the US

Tue, 11/16/2021 - 04:11
Bitnomial launches margined, physically settled bitcoin futures in the US Submitted 16/11/2021 - 9:11am

Bitnomial, a US cryptocurrency derivatives exchange company, has launched US-based, physically settled bitcoin futures with 35 per cent margin, a significant milestone and a first for a de novo exchange. 

Bitnomial's contracts allow for efficient basis trading, eliminating the need to execute bilateral trades to unwind positions, and enabling lenders and miners to hedge at scale. The launch marks the first in a suite of products, with options and other assets to be offered in the coming months.

Today’s announcement coincides with the announcement of new strategic investors including Franklin Templeton, the O'Brien Family Office, and Belvedere Strategic Capital. The new investors join current investors and participants including Jump Trading, DV Chain, Consolidated Trading, Coinbase Ventures, Digital Currency Group, Electric Capital, and Bittrex Global.

Bitnomial has partnered with brokerage firms ED&F Man Capital Markets, Marex, RJ O’Brien & Associates, and StoneX Financial to support trading for customers globally.

DV Chain and Galaxy Digital executed the first trade which was cleared by RJ O’Brien & Associates and ED&F Man Capital Markets, while Genesis has been an early and key supporter of the offering.

Garrett See, CEO of DV Chain, says: “Bitnomial’s physically delivered futures represent a turning point for institutional crypto trading. The margined and cleared products allow for professional traders to scale their activities without counterparty risk or operational inefficiencies.”

Joshua Lim, Head of Derivatives at Genesis, says: "As a derivatives block liquidity provider and early Bitnomial market participant, Genesis is excited to see the launch of additional regulated venues for trading physically settled futures products. We see Bitnomial filling a niche for basis trades on deliverable futures."

Brooks Dudley, Global Head of Digital Assets at ED&F Man Capital Markets, says: “Our firm has been at the forefront of providing clients with access to this important alternative asset class. We are therefore delighted to support this launch and look forward to further innovative products in the coming months.”

Bitnomial initially offers trading in two quarterly contracts, Bitcoin US Dollar Futures and Deci Bitcoin US Dollar Futures, sized for both institutions and individuals, and does not charge for market data or trading access.

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How hedge funds can navigate Brexit and Covid-19 trade upheaval

Mon, 11/15/2021 - 10:32
How hedge funds can navigate Brexit and Covid-19 trade upheaval Submitted 15/11/2021 - 3:32pm

The sweeping changes and far-reaching trade upheaval brought about by Brexit and Covid-19 heralds sizable investment opportunities for hedge fund managers, according to a new study by IG Prime.

The report – ‘An Analysis of Post-Brexit Economies’ – examines the impact of Brexit on international trade, gauging potential growth areas in specific sectors, and considers the broader trends unfolding from evolving international trade patterns as a result of the UK’s decision to leave the European Union.

Specifically, the report probes the UK’s main exports prior to Brexit – such as precious metals, vehicles, and pharmaceutical products – as well as the main exporters of those same products in the EU and Singapore, in order to determine which countries may be set to increase exports. It also looks at the impact of the Covid-19 impact on trade over the course of 2020.

With commodity supplies from the UK decreasing, and existing contracts coming to an end, hedge fund managers should closely monitor the potential for certain product industries to open up even more in the coming years, said IG Prime, the institutional prime brokerage unit of IG Group.

“This may mean that companies still based in Europe continue to expand, while the broader import opportunities may also result in growing numbers of start-ups in those product areas,” the report explained.

Despite the coronavirus crisis beginning to subside in some countries, IG Prime sounded a note of caution on this expansion trend, which is unfolding against a backdrop of sustained market volatility, with “even enterprising investment managers” needing to “tread carefully”.

“While of course this comes with stronger elements of commodity risk, and there may be fewer opportunities for new breakouts in established areas like petroleum and derivatives, other products like machinery may see a wealth of start-ups appearing in countries like Germany to fill the gap left by the UK.”

Similarly, the report indicated that much of Brexit’s impact has been delayed by the effects of the Covid-19 pandemic, adding that further trade will likely follow “a more complex course” than it has up to now.

As a result, hedge funds may choose to consolidate their hedging strategies while the international market’s changes remain unprecedented, “rather than pushing through the immediate risk,” with a clearer image of international trade likely to have formed by the end of 2021 as the effects of coronavirus subside and the true impact of Brexit unfolds.

Chris Beauchamp, chief market analyst at IG Group, said the UK’s vote to leave the EU in 2016 represented a “huge leap into the unknown”, adding that Covid-19 has served up an additional layer of complexity to international trade and cross border investments.

He said: “Some hedge funds who aren’t swayed by volatility may focus on shifting investments in Europe from the UK to a short-term spread across smaller economies like Croatia and Ireland. Once the effects of the pandemic subside and a clearer picture of Brexit emerges, many are likely to move back into the UK.” 

Underlining this point, the report noted certain industries – such as organic chemicals – have not experienced the same degree of Brexit-related upheaval as other sectors, since the bulk of UK trade was with the US.

“Simply moving out of Europe isn’t necessarily a barrier to the UK’s value – indeed, a change in trade agreements might bring new UK opportunities elsewhere,” the report observed.

Beauchamp added: “The combination of Brexit and Covid has unveiled opportunities for hedge funds to think about invest more broadly than before.”

Max Hayden, global head of prime brokerage sales at IG Prime, said smaller economies offer unique opportunities, but also cautioned they remain higher areas of risk. 

“Short positions may see more benefit as the larger initial gains steady out, but hedge funds and family offices looking for more steady growth would likely be better served focusing on countries with existing economic infrastructure to support the transition from UK to European trade,” Hayden observed.

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Micro E-mini Equity Index Futures and Options surpass one billion contracts traded

Mon, 11/15/2021 - 10:26
Micro E-mini Equity Index Futures and Options surpass one billion contracts traded Submitted 15/11/2021 - 3:26pm

CME Group's Micro E-mini Equity Index futures and options have surpassed one billion contracts traded across all four indices.

Micro E-mini Equity Index futures became available for trading across four US indices – S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average – in May of 2019, with Micro E-mini options available on Micro E-mini S&P 500 and Nasdaq-100 futures contracts in August of 2020. 

"At just two-and-a-half years old, Micro E-mini Equity Index futures and options have become among the most actively traded equity index products at CME Group, enabling clients to manage risk in our highly liquid markets," says Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products. "At one-tenth the size of our benchmark E-mini equity index contracts, these micro-sized futures also help traders to execute equity trading strategies more nimbly, scale index exposure up or down or hedge existing equity portfolio positions."

"The S&P 500 and the Dow Jones Industrial Average are trusted, independent and transparent gauges, which for generations have also become important barometers for US financial market performance," says Aye Soe, Global Head of Core and Multi-Asset Product Management at S&P Dow Jones Indices. "We congratulate CME Group for reaching this milestone which reinforces the ongoing strength of the S&P 500 and DJIA brands and demonstrates the crucial role of these benchmarks in offering essential insights to help investors and market participants mitigate risks and capture market return opportunities."

"The Nasdaq-100 index represents the new industrials – companies playing an important role in our society and economy," says Sean Wasserman, Vice President and Global Head of Index & Advisor Solutions, Nasdaq. "The success of Micro E-mini Nasdaq-100 futures and options demonstrate our shared commitment with CME Group in bringing innovative products for investors to manage risk and meet their investment objectives."

"FTSE Russell congratulates CME Group on reaching a major milestone of one billion contracts traded across its Micro E-mini derivatives complex," says Ricardo Manrique, Director, Strategy, Data & Analytics, London Stock Exchange Group. "As a leader in innovation and a valued long-term partner to FTSE Russell, we are proud to have supported CME Group in this achievement since the Micro E-mini products were first launched in 2019. We look forward to continuing to work closely with CME Group on growing the Micro E-Mini Russell 2000 futures and options suite and providing investors with access to highly liquid and efficient US small cap equity risk management tools."

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EEX publishes additional 2021 sell-off dates for the national Emissions Trading System

Mon, 11/15/2021 - 10:03
EEX publishes additional 2021 sell-off dates for the national Emissions Trading System Submitted 15/11/2021 - 3:03pm

The European Energy Exchange (EEX) is extending the sell-off calendar for the national Emissions Trading System (nEHS) in coordination with the German Environment Agency to include additional dates in December 2021. 

This provides regulated companies under the nEHS with further opportunities to purchase national emission certificates (nEHS certificates, abbreviated to nEZ at the EEX) at a price of EUR25 before the end of 2021.

The additional sell-off dates for 2021 will be held on the 9, 14 and 16 December respectively with the sell-off window taking place between 9.30 am to 3.30 pm CET.

The reason for the 2021 extension is due to the fact that in the first reporting year 2021, only a specific period was originally available for the purchase of nEHS certificates.

In addition, EEX also published the calendar for the sell-off dates in 2022 in coordination with the German Environment Agency. The sell-offs will take place twice a week throughout the year. Participants will be able to purchase nEHS certificates on Tuesdays and Thursdays. The time window will be open for six hours from 9 am to 3 pm CET.

Participants can purchase nEHS certificates for the year 2022 at a fixed price of EUR30 each throughout the year during the sell-off dates for 2022. Additionally, to a limited extent, post-purchases of nEHS certificates for the year 2021 are also possible at the corresponding fixed price of EUR 25 per certificate.

However, the possibility of post-purchase is limited by law to 10 percent of the quantity already purchased by the respective participant in 2021 (Section 10 (2) sentence 3 Fuel Emissions Trading Act (BEHG)). Pursuant to Section 6 (2) of the Fuel Emissions Trading Regulation (BEHV), the reference point is the quantity of nEHS certificates held by the participant in their compliance account at the end of the calendar year (here: 31 December 2021).

nEHS certificates dated 2021 can only be surrendered for the reporting year 2021, and regulated companies must meet their surrender obligation by 30 September 2022. The last date of the sell-off with the possibility of post-purchase is 22 September 2022. nEHS certificates dated 2022 can also be surrendered for the reporting year 2021.

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CoinFLEX opens institutional access to new crypto yield offering with Copper ClearLoop

Mon, 11/15/2021 - 09:49
CoinFLEX opens institutional access to new crypto yield offering with Copper ClearLoop Submitted 15/11/2021 - 2:49pm

CoinFLEX, crypto exchange and yield platform, has partnered with Copper.co, a digital asset custodian, by integrating with ClearLoop, Copper’s unique instant settlement trading network. 

This partnership will open the gateway for institutional investors to access flexible crypto yield products, including flexUSD, accelerating the stablecoin to a USD1 billion market cap by Q1 2022.

Over 300 institutional asset managers at Copper will be able to use CoinFLEX’s interest-earning stablecoin, flexUSD, as collateral to trade on exchange while securely storing their assets offline and off the exchange. CoinFLEX’s integration with ClearLoop is paramount because it adds an extra layer of regulatory assurance for institutional traders, while enabling this segment with a wider range of crypto trading options. 

For the first time, Copper's institutional clients can access a highly liquid, easily redeemable, yieldgenerating stablecoin via the Copper platform. flexUSD is the first interest-earning stablecoin pegged 1:1 with USDC that pays holders interest every 8 hours on-chain -- meaning users can hold flexUSD in a cold wallet and still earn interest. flexUSD is currently paying 16 per cent APY and has distributed USD11 million in interest to holders in the past 12 months.

This integration aligns with CoinFLEX’s business expansion plans to enlarge institutional user adoption further, symbolising its commitment to innovate, develop, and strengthen its ecosystem, whilst enhancing liquidity within CoinFLEX. 

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Hedge fund short sellers ramp up bets against Hargreaves Lansdown

Mon, 11/15/2021 - 06:11
Hedge fund short sellers ramp up bets against Hargreaves Lansdown Submitted 15/11/2021 - 11:11am

Hedge funds are ramping up their negative positions against Hargreaves Lansdown, with the UK retail-focused investment and advisory firm now the most shorted stock among FTSE 100 names, new market data from Ortex Analytics shows.

Some 7.24 per cent of Hargreaves Lansdown’s free float shares are on loan, up from 6.52 per cent last month, with the firm also the most shorted FTSE 100 name in terms of days to cover, London-based equity research and short interest data provider Ortex has found.

Marshall Wace, the high-profile long/short equity giant set up by Sir Paul Marshall and Ian Wace in 1997, as well as Hound Partners and the Pelham Long/Short Master Fund, have all increased their bearish bets against Hargreaves Lansdown in recent weeks, according to regulatory disclosures made to the UK Financial Conduct Authority.

AQR Capital is also positioned short against the firm, whose share price has been volatile for much of 2021, taking a sharp slide earlier this month. A recent trading update in October showed Hargreaves Lansdown’s revenues dipped 1 per cent from GBP143.7 million last year to GBP142.2 million, as falling transaction volumes on its investment platform put a squeeze on commissions.

Other UK blue chip companies subject to negative wagers among hedge funds include Ocado Group, BT, Sainsbury’s and Schroders. 

Some 5.35 per cent of Ocado’s stock, and more than 4 per cent of both BT and Sainsbury’s shares, are on loan, Ortex’s data shows.

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Fees fall significantly in some ESG and impact strategy types

Mon, 11/15/2021 - 04:44
Fees fall significantly in some ESG and impact strategy types Submitted 15/11/2021 - 9:44am

A new study from bfinance, the independent investment consultancy, has revealed that institutional asset management fees have fallen significantly in a number of asset classes – particularly certain ESG or Impact strategy types. 

Pricing compression is evident in well-established strategies such as ESG Equities and Renewable Energy Infrastructure. Meanwhile, newer strategy types such as Impact Equities and ‘Article 9’ funds are offering substantial discounts versus rack rates.

This biennial survey reviews a range of asset classes and strategies, identifying notable fee reductions in certain strategy types and sub-sectors.

The study’s key findings include a reduction in the cost of active global Equity strategies with ESG requirements, where the median fee for a EUR100 million mandate has decreased by 14 per cent since 2016. More managers have entered the space through a period of ‘ESG mainstreaming’, resulting in heightened competition for assets and a refinement in pricing. Although very new manager research suggests that there could be a modest premium for Impact and Article 9 Equity strategies, managers in these more nascent sectors are more likely to offer substantial up-front discounts even before negotiation, as they seek to build up assets.

Elsewhere in the ESG-related landscape, management fees for Renewable Energy Infrastructure (“Renewables”) strategies have fallen by 8 per cent since 2016 and performance fees have also declined—through a period when fees for Infrastructure strategies and Private Markets strategies more broadly have remained remarkably resilient.

When looking at other strategy types, US High Yield saw median fees decrease by 15 per cent since 2017, while fees for blended Emerging Market Debt strategies decrease by 10 per cent in the same period. Multi-Sector Fixed Income also saw its median fee decrease by 15 per cent since 2017.

Fund of Hedge Fund fees declined very substantially, falling by 42 per cent between 2010 and 2019, but this decline now appears to have stopped. While fees for Private Markets strategies have remained relatively resilient, a closer look at fee models does reveal some helpful changes: Direct Lending fees, for example, are now almost universally charged on invested capital only rather than on both invested and committed capital.

The research from bfinance finds that investors today can benefit from a notable erosion in fee levels for a number of ESG and impact-oriented strategies. Some ESG-related sectors are now becoming relatively mature, often characterised in pricing terms by narrower dispersion in fee quotes and more clustering around certain fee-points as well as overall price compression.

Active global equity managers that integrate ESG considerations are now quoting significantly lower fees to prospective clients than five years ago. The median fee quoted by managers on EUR100 million mandates has declined by 14 per cent since 2016, from 57bps to 50bps.

The study found that the rapid reduction in the number of active global equity strategies that do not integrate ESG considerations has negated any potential ESG pricing premium in this asset class.

There are some interesting patterns in pricing of Impact and Thematic equity strategies that investors may consider as they explore these emergent sectors and negotiate fees. For example, recent search activity in this space (Q4 2021) suggests that there may be an on-paper premium on the pricing of Article 9 strategies, with a slightly higher median and a significantly higher upper quartile fee than we observed in Article 8 strategies.

However, this area also featured some of the most aggressive discounting against those quotes, with nearly 30 per cent of the managers proposing Article 9 strategies offering an upfront discount (i.e. discount provided alongside quoted fee in first proposal). These upfront discounts are primarily available from managers whose pricing sits above the median. In these cases, managers are often seeking seed investors and competing to gain a foothold in this growing space.

There may also be a modest premium (or at least a higher median quoted fee) for Impact strategies, which explicitly target and are equipped to report on social and environmental outcomes. ‘ESG thematic’ strategies that do not meet the threshold which we would consider appropriate for an Impact strategy were, on average, a little cheaper in terms of quoted fees.

As the Renewable Energy Infrastructure sector has matured and developed, investors have benefitted from some significant fee reductions—contrasting with stable infrastructure pricing in other sectors.

The research found a modest reduction in quoted base fees for global Renewable Energy Infrastructure strategies, with the median quoted fee for a USD50 million mandate down 10bps versus 2016 (-8 per cent) and a fall of 21bps in the upper quartile (-14 per cent). The survey also saw significantly less dispersion in the fees being quoted by managers—a pattern that is characteristic of a maturing sector, where price discovery over time leads to a greater awareness of what competitors are likely to charge for similar products and a reduction in the more extreme quotes.

Importantly, performance fees and hurdle rates have also fallen. While many managers are at the 20 per cent mark on carry, we do see an increasing proportion willing to price between 10 per cent and 15 per cent. In addition, the median hurdle rate has declined to 6 per cent from 7 per cent. There is a positive correlation (albeit a weak one) between base fees and performance fees being quoted by managers: strategies with higher base fees tend, on average, to have larger performance fees as well.

The decline in fees has been accompanied by a fall in target returns, as well as a rise in the proportion of longer-term vehicles versus ten-year private equity-type fund models. The median net IRR being targeted by funds raising capital in 2021 was 8 per cent, down from 9 per cent five years before).

The fee quotes in Impact real estate are extremely diverse, reflecting the range of strategies that straddle Core to Value-Add profiles, though the study saw some base fee clustering around the 100bps and 65bps levels. Core strategies tend to be cheaper with no performance fees, while all Value-Add strategies have some form of a performance fee. For some managers, the performance fee relates to both financial and impact objectives, while for others it is purely financially focused.

Return targets are also very diverse and are not particularly strongly correlated with quoted fee levels. Managers in this sector seem unsure about how to price, and investors are unsure about what return expectations are appropriate and realistic. Some investors may have reputational concerns about targeting relatively high returns for an asset class that is, fundamentally, involved in the lives of vulnerable

population groups. This diversity can, however, be helpful for investors that are keen to ensure that they do not overpay. The large number of start-up funds in the space and the low transparency around pricing can give well-informed clients a strong hand in negotiations.

Comparison of existing fee levels against those available in a broad strategy area (eg “global equities”) can be useful as part of a fee review process. However, it may also be beneficial to seek a more detailed view and examine specific peer groups based on their structure, geography, strategy subtype and more.

Kathryn Saklatvala, Head of Investment Content at bfinance, says: “The fourth instalment of our investment manager fees series once again puts fee reductions in focus while honing in on some specific asset classes. In the light of investors’ growing interest in ESG and impact strategies, it is particularly interesting to see some very significant reductions in the fees that managers are quoting for clients. We will be keenly watching how pricing evolves for some of the more nascent sectors, such as Article 9 funds and Impact Real Estate, where there is more uncertainty around what an appropriate fee should look like.”

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BEQUANT appoints General Counsel

Mon, 11/15/2021 - 04:14
BEQUANT appoints General Counsel Submitted 15/11/2021 - 9:14am

BEQUANT, a digital asset prime brokerage and exchange, has hired Huong Hauduc as General Counsel. Hauduc will be helping BEQUANT to expedite the growth of the business across new jurisdictions and products.

Hauduc has nearly 20 years of experience in legal and regulatory matters. She qualified as a financial services regulatory lawyer at CMS Cameron McKenna has worked for firms including Allen & Overy and RJ O’Brien Ltd. In addition, Hauduc has advised on a broad range of legal matters including regulatory and compliance matters, litigation and investigations, employment matters, commercial contracts, corporate governance, M&A and data protection. She has also worked at brokerage and trading firms, focussing on derivative products.
 
Hauduc says: “I am thrilled to join the team at BEQUANT and look forward to working closely with the BEQUANT team. The digital assets space is hugely exciting and BEQUANT is at the forefront of innovation in the space.”
 
George Zarya, founder and CEO of BEQUANT, says: “Huong will help us devise our legal framework and move forward as a company. Her experience will be vital as we embark on our next chapter of growth.”

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