Hedgeweek Interviews
Parameta Solutions launches FX Evaluated Pricing solution
Parameta Solutions has launched a new FX Evaluated Pricing (FEP) solution, which allows businesses who deal with FX instruments to make more accurate and timely decisions regarding price discovery, portfolio valuation, risk management and regulatory compliance.
The FEP solution will initially deliver observable pricing for G10 currency pairs, and cover linear instruments as well as FX Options. Parameta Solutions plans to extend coverage to additional currency pairs in the future.
FEP is built on Parameta Solutions’ proprietary data model where indicative marks generated by broking partners at TP ICAP are enriched with trade data and market quotes coming from trading across the firm. The price creation process follows a strict logic based on expected dispersion and quality control measures. The data is subject to rigorous and market leading data quality processes, where global operations staff monitor and maintain the output using a combination of automated and manual control processes with the ultimate goal of creating a transparent and reliable dataset.
“The new FEP solution follows the launch of the Bond Evaluated Pricing in June 2020, and is built using the same principles: data quality, consistency, and transparency. As the leading provider of OTC market data globally, we are uniquely placed to compile, analyse and present complex derivatives data - even in less liquid markets. Highly detailed transparency enables clients to access observable pricing in the FX markets, which is critical for price discovery and valuation of portfolios. The input granularity is useful for traders and portfolio managers and will allow them to make more confident trading and risk related decisions. The transparency fields help clients meet reporting obligations for regulations such as IFRS 13, ASC 820, Prudential Valuation, FRTB, and relevant local directives,” says Irina Orlova, Senior Product Manager at Parameta Solutions.
TP ICAP takes into account all available market information to establish mid pricing for every security hourly, with bid and ask prices provided where possible. Clients benefit from observable pricing, timely delivery and choice on how to access the data, be it through a direct connection or the cloud.
Switching to the current year basis – the impact on sole traders, Partnerships and LLPs
PARTNER FEATURE
Stephen Kenny (pictured) from Blick Rothenberg’s Financial Services team reviews HM Revenue & Customs’ (HMRC) recent announcement on moving the accounting year end for unincorporated businesses.
What has been announced?
HMRC has announced that unincorporated business (sole traders and Partnerships, including Limited Liability Partnerships) will move from the accounting year basis to the current year basis.
This is expected to apply from 2023/24, with 2022/23 as a transitional year.
What does this mean?
At present, businesses are taxed on the profit of the accounting year ending in the tax year ie, if a Partnership prepares its accounts to 31 December in the 2023/24 tax year, the members will be taxed on the profits made in the year to 31 December 2023.
Under the current year basis everyone will be taxed on the profits made in the 2023/24 tax year, meaning they would be taxed on 9/12 of the profits for the year ended 31 December 2023 and 3/12 of the profits for the year ended 31 December 2024.
Businesses who already make their accounts up to the 31 March or 5 April will not be affected by this change.
Is this good or bad?
HMRC’s position is this is a simplification of the tax system.
Some 93 per cent of sole traders and 67 per cent of partnerships draw their accounts up to the tax year (or 31 March), and as such a transition to the current year basis would have no impact for them.
It would eliminate the problem of overlap profits. This is where a business has a different year-end to the tax year and some profits are taxed both in the year of commencement and a subsequent tax year.
Overlap profits can be an issue for Partners joining existing profitable Partnerships. With the current year basis, no future overlap profits would be generated. Existing businesses with overlap profits would be eligible for relief during the transition year.
HMRC also expect that many affected businesses will choose to change their accounting date to 31 March to avoid further issues.
However, this will not be possible for a number of businesses who have chosen different year ends for commercial reasons, including:
- UK Partnerships that are part of international businesses (for example, UK offices of US law firms)
- Private Equity/Venture Capital/Asset Managers who have their year-end aligned with their funds’ year-end
For businesses that do not change their year-end, they will be required to apportion the profit from relevant accounting periods to the tax year.
This will create new and recurring administrative burdens for businesses with non-tax year accounting dates. While HMRC consider apportionment a simple, arithmetical process, this will not always be the case. Where apportionment wouldn’t give an accurate result, an alternative basis could be used if it is used reasonably and consistently.
Where a business has a 31 December year-end, they are unlikely to have finalised their accounts in time to file their tax return. This means that there are going to need to be estimates and returns filed on a provisional basis and amending the tax return once the figures are finalised. This will be an ongoing additional burden on the taxpayer. Businesses with December year-ends may want to consider if it better to use actual figures rather than apportionment.
In the year of transition, this could create significant additional tax liability for some, as there may be an inclusion of additional profits to ensure all profits from the tax year are accounted for. This means that there will be an acceleration in the tax payable on profits. It may also push some into a higher tax bracket.
While in the transitional year they will be able to deduct any overlap profits, this will be less helpful where business profits have increased since the individual started the business or joined the partnership.
To ease this burden, HMRC is considering an election to allow those with higher profits to spread the additional profits over up to five years. This would run the risk of these profits being subject to higher tax and National Insurance if tax rates increase. Affected business may want to consider the impact this will have on cashflow and how much they should be setting aside.
Closing thoughts
At present, these changes are not law and are subject to consultation, which ends on the 31 August and as such, there may be further changes ahead. However, HMRC seems keen to push through these changes before ‘Making Tax Digital for Income Tax Self Assessment’ becomes mandatory from April 2023. Therefore, we consider it very likely that these (or very similar) rules will be introduced.
While for the majority this will be a welcome simplification, these rules are likely to cause the most disruption for:
- businesses which are unable to change their year-end for commercial reasons, or
- international firms and those who have more difficulty estimating the profit share due to year-ends in the last quarter of the year and those who will find apportionment more difficult/unsuitable due to fluctuation/seasonal profits.
Next steps
If you have any questions about the change to the current year basis or would like to discuss how it will affect your business, please contact Stephen Kenny.
Visit Blick Rothenberg’s Financial Services sector hub to find out more.
Like this article? Sign up to our free newsletter Author Profile Related Topics ServicesLong/short credit-focused family office Geneva Capital opens to outside investors
Geneva Capital Partners, a European high-yield credit-focused family office founded by former RBS principal strategies head Steven Behr, is opening up to outside money.
Established by Behr as a family office in 2013, GCP runs a long/short high-yield opportunistic strategy trading corporate credit. The London-based firm currently has USD18.7 million in assets under management.
The firm takes a bottom-up, research-driven approach to credit investing, running a highly-diversified portfolio comprising 55 positions across Europe.
Behr’s decision to come out of retirement to manage external capital follows several years of strong performance for GCP’s strategy. The fund has outperformed its benchmark with an average annualised return of 12 per cent over the past five years, and in 2020 the fund generated a stellar annual gain of more than 29 per cent.
The new credit fund launches with target gross returns of 11 per cent, and will look to capitalise on an assortment of credit market opportunities amid expected further yield compression and more refinancing into lower coupon structures.
Prior to launching Geneva Capital, CEO and portfolio manager Behr spent more than eight years at RBS, latterly as head of its principal strategies group having also set up its USD10 billion proprietary long/short credit trading business. A financial markets veteran of more than 25 years, Behr earlier had stints at Barclays Investment Bank and Nomura in the late 1990s.
Like this article? Sign up to our free newsletter Related Topics Funds Launches & FundraisingCME Group and IHS Markit launch post-trade services company JV
CME Group and IHS Markit have launched OSTTRA, a new post-trade services company joint venture.
OSTTRA, 50/50 owned by CME Group and IHS Markit, is a provider of progressive post-trade solutions for the global OTC markets across interest rate, FX, equity and credit asset classes. It incorporates CME Group’s optimization businesses –Traiana, TriOptima, and Reset – and IHS Markit’s MarkitSERV. Headquartered in London, OSTTRA will be led by Co-CEOs Guy Rowcliffe and John Stewart.
Rowcliffe will serve as Co-CEO and Chief Commercial Officer, with oversight for leading the company’s full product portfolio and sales teams. Most recently, Rowcliffe was Global Head of Optimization Services at CME Group and Head of TriOptima and Reset. Previously, he was Head of Asia Pacific for NEX Group's post-trade and optimisation businesses.
Stewart will serve as Co-CEO and Chief Operating Officer responsible for leading business strategy, operations and technology as well overseeing corporate services and finance. He has extensive experience in institutional and investment banking including serving as global head of investment banking operations and chief data officer at UBS, and in various operations and technology roles in derivatives and securities businesses at JP Morgan.
“These complementary businesses provide clients with enhanced platforms and services for global OTC markets,” says Terry Duffy, CME Group Chairman and Chief Executive Officer. “The combined force of the product suite ensures a streamlined post-trade ecosystem that will help clients drive even greater efficiencies. As the demands for automation continue to transform the post-trade landscape, OSTTRA will be at the forefront of helping market participants build a secure and sustainable market infrastructure.”
“OSTTRA brings together the people, processes and networks to solve the market’s most pressing problems through innovating, integrating and optimising the post-trade workflow,” adds Lance Uggla, Chairman and CEO of IHS Markit. “John, Guy and the team have the experience and vision to meet the increasingly complex post-trade challenges of today and address the operational needs of the future.”
The terms of the deal included a USD113 million equalisation payment from IHS Markit to CME Group to achieve 50/50 ownership and shared control in the joint venture. Further financial terms were not disclosed.
“Dig deeper”: Why Syz Capital is looking beyond hedge funds and private equity in hunt for uncorrelated returns
Investors must look beyond hedge funds and private equity in their quest for uncorrelated returns, according to Marc Syz (pictured), co-founder and managing partner at Syz Capital, who believes niche assets – such as litigation finance and life settlements – can offer investors improved portfolio diversification.
Syz said the ongoing Covid-19 pandemic has “plunged us into a situation of ongoing uncertainty”, in turn fueling investor demand for uncorrelated assets to help stave off volatility.
“Correlations are rising between fixed income and equities, stock prices look overheated, and fixed income investors are beginning to protect themselves against the potential of further spikes in inflation,” he observed in a market commentary this week.
“Against a backdrop warped by mass global stimulus, investors are naturally pivoting to what they believe are uncorrelated solutions on an unprecedented scale.”
But he warned it is now becoming increasingly necessary for investors to search beyond the typical hedge fund and private equity products to generate uncorrelated returns in their portfolios.
“Certain hedge fund, market neutral and risk parity strategies call themselves ‘uncorrelated’, but in the case of an exogenous shock, such as the Covid-19 pandemic, or the Greensill Capital collapse earlier this year, the majority of these assets also suffered – albeit to a lesser degree.”
Established by Marc Syz in 2018, Syz Capital aims to provide private clients exposure to hard-to-access, niche investments often reserved to institutional allocators, spanning hedge funds, direct private equity, special situations, uncorrelated strategies. The alternatives-focused firm manages more than CHF1.5 billion (USD1.63 billion) in assets across a range of liquid and illiquid alternatives.
In the note, Syz pointed to assets such as litigation finance, royalties, and life settlements, which he said offer allocators little to no correlation to broader market or macro movements.
Music or pharmaceutical royalties, for instance, face risks stemming from changing music tastes or demand for drugs, rather than market volatility, while litigation finance returns hinge on a broad set of case-by-case idiosyncratic factors – the size and type of action, and the resources of the defendant and claimant, for instance.
As more mainstream investors and pension funds pile into alternatives, certain uncorrelated strategies will see more take-up from the mainstream.
“While it will become harder for uncorrelated strategies to produce high risk-adjusted returns with more capital competing for the same products, there remains an enormous advantage to investing in uncorrelated assets from a risk diversification perspective.”
However, he also cautioned that many investors often “confuse correlation with risk”, noting that while uncorrelated assets are not exposed to broader market or macro volatility, and are “resistant to exogenous shocks and market cyclicality”, they are not immune to other types of risk.
“Holding too many of the same uncorrelated assets can also concentrate risk,” Syz said. “Only by constructing a diversified portfolio, which contains a balance of traditional and uncorrelated asset classes, can investors truly reduce risk.”
He added: “Uncorrelated assets – to different degrees – are a useful tool for portfolio diversification, but to unearth truly uncorrelated returns, which are immune to market turbulence, investors need to be prepared to dig deeper into niche alternative investments, while remaining nimble and flexible.”
Like this article? Sign up to our free newsletter Related Topics Comment InvestmentsThe CLO market remains robust, but questions persist about its long-term outlook
In an endless hunt for yield, fund managers are eyeing the CLO market as an attractive opportunity – and it is easier than ever for them to access it.
When the pandemic first hit early last year, financial markets plunged amid unprecedented turmoil.
But despite the chaos all around, one niche area of the securitised debt market remained remarkably robust throughout.
Ever since, collateralised loan obligations (CLOs) – instruments backed by corporate loans – have held up well and remain a popular choice for asset managers seeking to diversify their portfolios.
With a CLO, the investor receives scheduled debt payments from the underlying loans, assuming most of the risk in the event that the borrower defaults.
In exchange for taking on the default risk, the investor gains increased diversity and the prospect for better-than-average returns.
So, what is the outlook for the CLO market over the next 12 months? How has the pandemic, which has badly affected the creditworthiness of many businesses, impacted the sector? Above all, are CLOs, which have traditionally been viewed as a relatively obscure area of investment, moving further into the mainstream?
Endless hunt for yield
In a world of low interest rates and an endless hunt for yield, the CLO market offers one reliable way to access higher returns.
Moreover, Greg Myers (pictured), global head of debt capital markets at Alter Domus, a fully integrated provider of fund administration, debt capital markets and corporate services backed by Permira, believes it is now easier than ever for asset managers to launch CLO funds because of innovations in the kind of managed services they can now access.
“What we can do for a manager is not only the loan administration and assistance, trade settlement, etc, but we can also become an extension of their back and their middle office, where we are tracking the entire portfolio, as it relates to all of the tests and limitations that are contained within the indenture for that DLL,” he says. “So, we are the ones that are reconciling with the trustee. We are the ones that are verifying all the cash accounts, the allocations, the cashflow waterfalls – all on behalf of the manager. We have the systems and the staff and everybody to support it.”
Alter Domus is already supplying such services for about 20 firms including some of the world’s biggest asset managers.
Stripping out cost and complexity
Myers says this outsourced approach strips out much of the cost and complexity involved in starting and managing a CLO fund, especially for new market entrants who are trying to evaluate the market opportunity and what will be involved.
“You need less office space. You don’t need much HR staff to manage. You don’t have to worry about redundancies, vacation, illness or anything like that.”
He says managed services of the kind offered by Alter Domus are attractive for asset managers who are asking basic questions: “Do I want to buy a system? Do I want to hire a bunch of staff? I don’t know how successful our CLOs will be in the market and how well they’ll be received.”
Myers adds that the hiring market in this area is extremely tough.
“If you were to launch a CLO, you would need to hire a couple of back office people that have experience, probably an analyst, an investment professional that understands all the math and everything else that goes into that CLO management. It becomes a pretty expensive endeavour.”
“It’s so hard to hire. It’s so hard to maintain all the systems internally, and if you can find the right service provider that can provide you with the staff and the systems and maybe pass those costs off to the deal, as opposed to the management company, it just makes sense.”
He continues: “Often the fees for our services get covered by the CLO itself, so it can become a really efficient model.”
Myers says he remains confident that demand for CLOs will remain robust over the coming years.
“I think the market is still going to remain strong,” says Myers. “The structuring of portfolios and the availability of assets that go into the portfolios continues to be good.”
Last month, it emerged New York hedge fund Diameter Capital was raising USD250 million from a group of investors to invest in CLOs.
In the US, total issuance of CLOs this year is currently about USD70bn, according to figures from S&P Global Market. That represents a record with the total market now worth about USD770bn outstanding, according to Citi.
Long-term outlook remains unclear
Either way, questions persist about the impact of the pandemic on the long-term outlook for the sector.
In the past, regulators had expressed concern that they could pave the way for a new financial crisis because they had made it easier for companies to access risky lending.
Supporters of CLOs say this criticism is unfair and after Covid the model has been proven to be resilient.
Myers says it is still unclear how the market will play out.
He says: “Going into Covid, the underwriting rules for broadly syndicated debt had become a little bit more lax. It felt like covenant light deals were becoming a bit more prevalent.”
He remains an optimist about the future of the CLO market, but believes that asset managers need to be aware of the risks of another economic shock on the sector.
Myers says: “What’s going to happen to all these corporate borrowers that are held in all these CLOs post-Covid? There is so much government stimulus in the market that is going to affect economies globally so what impact is that going to have on those borrowers? How are those borrowers going to perform, and other than selling the assets out of the CLO, how is that going to impact performance?”
Against this background, it’s crucial that asset managers take the right precautions, he concludes.
“Managers need to have the correct infrastructure. They need to have the right systems, the right oversight and compliance infrastructure to be able to ride out any kind of post-Covid economic impact to their portfolio.”
Greg Myers, Global Head of Debt Capital Markets, Alter Domus
Greg Myers is responsible for shaping Alter Domus’ strategy for lenders and debt fund managers globally and overseeing business relationship management for Alter Domus’ North America fund administration group.
As an experienced financial executive, Greg has over 15 years of broad-based financial services expertise. Previously, Greg managed the Specialty Bank Loans team within LaSalle Bank’s Global Securities and Trust Services group and acted as an equity options market maker at the Chicago Board of Options Exchange. He additionally worked as a financial analyst and Y2K consultant with other financial institutions.
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As investors hunt for yield, the CLO market is booming but can the industry keep pace with demand?
By Robin Pagnamenta – In a world of rock bottom interest rates, asset managers are engaged in a relentless hunt for yield.
It’s one reason why the market for collateralised loan obligations (CLOs) is attracting growing attention and is now on track for a bumper year.
CLOs are effectively bundles of leveraged corporate loans chopped into tranches and sold on to investors, who benefit from higher returns and a more diversified portfolio.
Despite a wobble last year, when pandemic worries triggered a plunge in debt prices and briefly paralysed the market, the sector roared back to life this year, amid brisk demand for the instruments.
Cornerstone investment
Once viewed as a niche area of specialist investment, CLOs are increasingly being accepted as a cornerstone of many portfolios where managers are seeking inflation-hedged and stable returns.
In the US, around USD75 billion of new CLO issuance had been priced by June, putting volumes on track to hit about USD140 billion this year, according to forecasts by Bank of America.
That robust demand for CLOs is being fuelled by the healthy spreads up for grabs, raising concerns in some quarters about the ability of the broader market to cope.
So what are the main factors shaping the CLO market this year and into next? And what should investors expect from a performance perspective?
Critics fret that CLOs allow companies to take on more debt than they can afford and therefore represent a potentially risky proposition.
Others say the sector is no more risky than the regular corporate bond market and its robust recovery from the depths of the market meltdown in the spring of 2020 reflects its long-term viability.
Either way, there are more pressing concerns facing fund managers and others seeking to capitalise on the rising interest.
End of LIBOR
One issue facing market participants is the looming migration away from London Interbank Borrowed Rate (LIBOR) at the end of this year – a development with sweeping implications for the CLO market as it serves as the reference rate for hundreds of billions of dollars worth of new and historic contracts.
“What impact is that going to have for new issuances going forward, but also legacy issuances, because all of those assets are based on LIBOR, as are all the liabilities in the CLO?” says Greg Myers of Alterdomus. “I don’t know how that’s going to prevail over time.”
Another consideration is the growing role played by non-traditional lenders in the market for CLOs, which is changing the shape of the sector.
Where historically, the CLO market was dominated by big banks like Bank of America or JP Morgan, these days some of the biggest players are the debt investing arms of private equity giants like Blackstone and Carlyle.
“There’s more deals that are being done by non-bank lenders, and I’m sure their underwriting standards are just as good, but we’re seeing that shift away from banks and investment banks,” says Myers.
“Is that healthy or unhealthy for the broader market?”
Myers said he was “neutral” on the implications of this trend.
“Competition typically is good, but it’s certainly going to disrupt the traditional distribution of those assets.”
Like this article? Sign up to our free newsletter Author Profile Related Topics InvestmentsCLOs in Focus
As investors hunt for yield, the market for collateralised loan obligations (CLOs) is booming. What should investors expect in terms of performance? And how should CLO managers control the underlying risks? In this exclusive report from Hedgeweek, we examine some of the implications of the CLO boom and how asset managers can benefit from rising interest in the space.
Apex Group adds to Luxembourg leadership team
Apex Group (Apex), a global financial services provider, subject to Commission de Surveillance du Secteur Financier (CSSF) approval, has appointed Frederic Bilas as CEO and Member of the Board of Directors of Apex Fund Services in Luxembourg (Apex Fund Services).
In this role, Bilas will be responsible for driving Apex Fund Services through a phase of significant growth to become the leading fund services provider in Luxembourg, implementing the scalable governance structures and systems to deliver the highest level of service to clients. Client service remains at the heart of the Group’s strategy and has recently created two new departments in Luxembourg in addition to the existing service teams: a dedicated Client Relationship Management arm, and a Strategic Client Function – both of which are dedicated to nurturing and enhancing relationships with clients.
Bilas joined Apex in 2020 as Managing Director, and Chief Operating Officer of the Apex Luxembourg business. He has over 25 years of experience in the Investment Funds, Asset Servicing, Commercial and Private Banking sectors. Most recently before joining Apex, Frederic was Director of Operations and Member of the Executive Committee at European Fund Administration, and Head of Securities at Banque Internationale à Luxembourg.
Over the last year, the Group has successfully transferred and integrated the activities of a number of Apex subsidiaries, as well as of newly acquired entities into its connected Luxembourg operations structure while simultaneously has been organically growing its business through the successful onboarding of clients.
Bilas says: “I am excited to take on this role as leading Apex Fund Services in Luxembourg ; Luxembourg is a key strategic focus area for the group, being home to our single-source solution and our largest office globally, employing 750 people across fund, financial and corporate solutions. As a connected business, we are well positioned to drive growth through providing clients with cross-jurisdictional access and the broadest range of solutions in the industry. I look forward to working with my colleagues at Apex Fund Services and the other entities of the Group to grow Apex’s presence in the jurisdiction as we continue to invest in our employees and our systems to better serve our clients as both the industry and workplace evolve.”
Cowen adds four senior hires to alternative strategies global advisory team
Cowen has expanded its Global Alternative Equity Strategies team with four senior hires, strengthening its plans to grow a global market-leading advisory business in event-driven investing and catalyst-driven situations.
The new team members previously worked with Mark Kelly, Cowen’s recently appointed Global Head of Alternative Equity Strategies.
The team, based in London and operating within Cowen Execution Services Limited (CESL), will have a global remit, working closely with Cowen’s Markets team in the US. Their focus will be on advising a broad range of investors, from specialist arbitrage funds to the world’s largest pension funds, and issuers in how to navigate complex event-driven investment opportunities and catalyst-driven special situations.
The new hires are:
Tarquin Orchard – Managing Director – Previously a Managing Director at Olivetree Financial, with almost 20 years’ experience in event driven investing, including for RBC Capital Markets, Dresdner Kleinwort, NSBO and Seaport Europe Ltd.
Sebastian Greensmith – Director, Sales Trader – 10 years’ experience in event-driven investing, having previously worked at Olivetree Financial, Oppenheimer Europe Ltd and NSBO.
Charlie Hawkesworth – Director, Sales Trader – Eight years of event-driven investing experience at Olivetree Financial, having joined on the graduate program.
Alastair Mankin, CFA – Vice President, Event Driven Analysis & Sales – Five years at Olivetree Financial, having joined on the graduate program, progressing to Senior Associate.
Matt Cyzer, Chief Executive Officer of CESL, says: “The appointment of Mark and his team is in line with the firm-wide strategy of building our business around areas of expertise that differentiate us. Leveraging the expertise of this specialist team, the broader investment community can gain significant value from in-depth understanding of the events and specialist situations, which can materially impact their investment performance.
“We are delighted to welcome Alastair, Tarquin, Sebastian and Charlie to Cowen. Under the leadership of Mark, they built a formidable business together, with an outstanding reputation in event-driven investing. Given the experience and track record this team now brings to Cowen, our ambition is to become the global leader in this space, with a client base consisting of the world’s biggest investors. We are very excited at the significant growth opportunities they bring to the firm.”
Mark Kelly, Managing Director and Global Head of Alternative Equity Strategies, adds: “Cowen is absolutely the right fit for our team in terms of its culture and shared values. In addition, Cowen’s independence in London, strong relationships with the long fund community, client diversity and complementary products and services in the US make it the ideal home for us. The combination of our expertise and contacts with the resources of Cowen is very powerful. I am confident that with the team we have in place, the Alternative Equity Strategies division at Cowen can be the lead advisor for the global market in event-driven investing.”
Cowen Execution Services Limited (CESL) is a leading independent, non-conflicted trading platform providing execution services in more than 100 markets worldwide over a full range of multi-asset capabilities. CESL is highlighted by exceptional algorithmic execution capabilities, an award-winning, full service, prime brokerage team and access to Cowen’s cutting-edge research based in the United States.
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsOptions expands ultra low latency hosting capabilities across JPX, TSE and OSE markets
Options, a provider of managed trading infrastructure and connectivity to the global capital markets, has ex[anded its managed hosting and connectivity capabilities in Japan Exchange Group (JPX) providing access across both the Tokyo Stock Exchange (TSE) and Osaka Exchange (OSE).
JPX, one of the largest stock exchanges globally, was established through the combination of the Tokyo Stock Exchange and Osaka Securities Exchange in 2013 and provides market participants with reliable venues for trading through the provision of market services, market data, order execution, and clearing and settlement.
This exciting addition to the firm’s colocation footprint means Options will be working alongside this premium exchange for both low-latency market data, and order entry routing, with test/UAT access available also in the JPX colocation facility.
Options’ Managing Director for APAC, Jun Ashida, says: “As the world’s leading Managed Colocation service provider, our focus is always to provide clients with stable Ultra-Low Latency connectivity and hosting services within a fully compliant infrastructure. We have worked closely with JPX in expanding our market data and order entry routing offering and are proud to offer clients best-in-class TSE and OSE market access.
Coupled with our infrastructure upgrades and resilient high-capacity links across the region, clients can efficiently trade across all key Asia exchanges and liquidity venues with minimal latency.”
Kenichi Kobayashi, Director of IT services at TSE, adds: “We are delighted to be working with Options to provide access across TSE and OSE markets.
"Combining Options’ and JPX’s financial infrastructure services will enable clients to leverage their businesses across both TSE Equities and OSE Derivatives markets, creating an optimal customer experience."
Today’s news marks the latest in a string of announcements for Options, including their selection by a Top-Tier Investment Bank to expand its FX footprint across Singapore, a win at TradingTech Insights USA Awards in the Best Managed Services Solution for Market Data category, their partnership with Packets2Disk to provide Market-Leading Network Analytics , and a decade of SOC compliance.
In 2019, Options received investment from Boston-based Private Equity Firm, Abry Partners. This investment has enabled Options to accelerate its growth strategy and develop its technology platform whilst expanding its reach in key financial centres globally.
Like this article? Sign up to our free newsletter Author Profile Related Topics Trading & Execution Technology & software solutionsLawson Conner rebrands as IQ-EQ
Global investor services group IQ-EQ's Specialist regulatory hosting and outsourced compliance business, Lawson Conner, has rebranded as IQ-EQ.
IQ-EQ completed the acquisition of Lawson Conner in 2018, adding appointed representative and AIFM solutions to its comprehensive range of existing compliance, administration, asset and advisory services for investment funds. Integrated and working seamlessly as part of the Group, the time has come for Lawson Conner to embrace the IQ-EQ brand and operate as an integral part of the Group’s overall service offering.
Rachel Aldridge, Managing Director, Regulatory and Compliance Solutions at IQ-EQ, says: “As we evolve our business to better reflect our clients’ needs, our brand identity must mirror the shift. Throughout our 11-year history, we have stayed ahead of industry trends and market changes to support the strategic needs of our clients. For us rebranding as IQ-EQ is the next logical step on our journey and represents our continued commitment to helping our clients manage regulatory risk.”
John Legrand, Managing Director, UK and Ireland, adds: “In today’s complex world we know that our clients are looking for a one-stop shop when it comes to investor services so making the decision to rebrand as IQ-EQ wasn’t a difficult one. Operating under a single and unifying brand name will allow us harness the strength and depth of the Group to provide our growing global client base with a holistic suite of services that saves cost and reduces time to market. We’re confident that operating as IQ-EQ will bring positive benefits to our employees and clients alike and are hugely excited about what the future as IQ-EQ has in store.”
Lawson Conner’s regulated services, delivered by its two FCA-regulated entities, G10 Capital Limited and Sapia Partners LLP will continue to operate under their existing entity names following today’s announcement.
Hedge fund and institutional investors forecast strong increases in levels of share trading
Professional investors around the world are forecasting strong growth in the level of share trading over the next 12 months, new research from blockchain-based derivatives trading platform CloseCross shows.
Around 62 per cent expect levels of trading to increase with 16 per cent forecasting dramatic increases. Just 12 per cent believe trading levels will drop and just 4 per cent expect a dramatic fall with 26 per cent expecting trading levels to remain broadly unchanged.
The research by CloseCross, which is regulated under MIFID II rules, among professional investors around the world responsible for around USD380 billion in assets under management found the financials, information technology and energy sectors are regarded as offering the best growth opportunities for investors over the next year.
But the study with professional investors including hedge funds, wealth managers, institutional investors, fund managers and IFAs shows there are a wide range of views.
While 52.5 per cent of investors said financials offered the best growth opportunities 36.6 per cent said it offered the worst opportunities. The 22.8 per cent saying industrials offered the best growth opportunities was slightly lower than the 23.8 per cent saying they offered the worst opportunities as the table below shows.
CloseCross, which enables traders to generate profits through a simplified three clicks process of selecting an asset, predicting price-bracket(s), and committing funds to these predictions, for a variety of asset classes including stocks, crypto, forex pairings, indexes, and commodities, believes traders will benefit from access to real time data from other traders.
CloseCross CEO, Vaibhav Kadikar, says: “Stock trading is set for another strong year with professional investors expecting increased levels of trading to be sustained for the next 12 months.
“Picking the best sectors to invest in for growth is not as straightforward and while there is some consensus about the strongest sectors there is still considerable disagreement.
“Our platform offers CloseCross Crowd Wisdom which provides real-time data on the views and investments of other traders on the platform which can help investors make better decisions.”
Hedge funds’ quarterly returns more than double as industry resurgence receives “strong vote of confidence”
Hedge funds’ returns more than doubled from Q1 to Q2, as commodities-focused managers powered ahead on the back of the spring oil price surge, and larger funds’ gains outweighed smaller funds’ performance, new analysis by hedge fund asset administrator Citco shows.
Hedge funds’ weighted average returns swelled from 2.75 per cent in the first three months of 2021 to some 6 per cent between April and June, according to Citco Fund Services’ latest ‘2021 Q2 Hedge Fund Report’.
More hedge funds ended the second quarter in positive territory, with 82 per cent of managers scoring a positive annual return in Q2, against 73.4 per cent in the previous three-month period.
Citco, which has some USD1.6 trillion in assets under administration, noted that all hedge fund strategy classes recorded positive returns in the three-month period to the end of June.
Commodities hedge funds led the way with an 8.33 per cent Q2 return, followed by multi-strategy managers, which added 7.04 per cent, and equities-based strategies, which were up 6.62 per cent.
Meanwhile, the biggest managers performed the best, with those funds running USD3 billion-plus in assets up 7.69 per cent, compared with USD1-3 billion managers, who gained 4.78 per cent. Funds managing between USD500 million to USD1 billion returned 5.12 per cent, while those with USD200-500 million were up 2.81 per cent.
Citco’s quarterly report examined industry performance, trading volumes and investor flows, among other things.
The research found that trade volumes rose by 3.5 per cent in May, and were up 12.9 per cent compared to May 2020, while June volumes were up 4.5 per cent over the prior month. Overall, the study observed 8.5 per cent higher year-to-date volumes in June 2021 compared to the same period in 2020.
The study also zeroed in on the strong correlation between market volatility and trade volumes. The VIX averaged 31.9 in June 2020, having been much higher earlier in Q2 that year. In contrast, volatility levels stood at 16.95 in June 2021, the closest yet to pre-pandemic levels. As a result, the contrasting market environments translated into the use of “very distinct asset classes”.
The trading of equity swaps was up 44 per cent in Q2 this year against Q2 2020, interest rate swap volumes were the highest on record at the end of Q2, and June saw increased use of swaptions, bank debts and currency futures.
Citco, which provides asset servicing solutions to the global hedge fund and alternative investment industry, recorded some USD50.5 billion of gross subscriptions during Q2, against USD41.8 billion of redemptions, yielding net inflows of USD8.7 billion.
That, Citco said, represents a “strong vote of confidence in the resurgent attractiveness of alternatives as an asset class”.
Multi-strategy, global macro, private equity hybrids and fund of funds mopped up the bulk of those allocations, while equities and arbitrage-based funds registered net outflows. Asia-based managers recorded outflows, while North American and European funds added to their coffers.
Like this article? Sign up to our free newsletter Related Topics Results & performance FundsBridging of USDT now available on Umbria Network
USDT can now be migrated cross-chain almost instantly and at minimal cost using Umbria’s Narni Bridge - bridge.umbria.network.
In addition to bridging the stablecoin quickly between the Ethereum Mainnet and Polygon network with extremely low fees, users can lend their USDT to the bridge in a system called pooling and earn APY (a return similar to interest on deposits). With Narni’s ‘pool and earn’ feature (https://bridge.umbria.network/pool/), liquidity providers receive fees when other participants bridge USDT between networks. Stablecoins are expected to accrue higher fee generation because of their popularity and uses.
Using the Narni bridge, it takes an average of 47 seconds at an average cost of just USD2.80 to transfer USDT from the Ethereum network to the Polygon network (formerly Matic). Transferring USDT from Polygon to Ethereum takes an average of two minutes 12 seconds and costs on average USD5.62. This is ground-breakingly quick and inexpensive with other methods costing many times more and taking much longer.
“With Narni, it’s a lot easier for people to use their crypto assets across different networks, and the addition of USDT is another milestone,” said Oscar Chambers, Co-lead developer of Umbria. “We’re going to be rapidly introducing other assets with an initial focus on stablecoins. We are already seeing the staking feature of the Narni Bridge attracting yield farmers to provide valuable liquidity to bridge the Matic and Ethereum communities and in return provide themselves with a lucrative return on their crypto.”
For more information about the bridge see the Umbria documentation page: bridge.umbria.network/docs and for feedback, questions and the very latest news about the Narni Bridge please head to our Discord channel.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsUS cryptocurrency exchange to provide CFTC regulated futures and options trading
West Realm Shire Services Inc (FTX.US), a US-regulated cryptocurrency exchange, has executed a sale and purchase agreement to acquire Ledger Holdings Inc, parent company of LedgerX, a Commodity Futures Trading Commission (CFTC) regulated digital currency futures & options exchange and clearinghouse.
The acquisition is anticipated to close, pending satisfaction of customary closing conditions.
Brett Harrison, President of FTX.US, says: “This acquisition marks a significant milestone for our rapidly growing US business and is a key part of our strategy to bring regulated crypto derivatives to our US user base. We believe the integration of our technological capabilities, product portfolio and large balance sheet with LedgerX will enhance our ability to provide innovative products to all US cryptocurrency traders. We’re excited to take this step and work with US regulators to ensure compliance with the existing derivatives licensing regime. We believe it is incumbent upon the industry to be proactive and to seek out working relationships with regulatory groups like the CFTC to help shape the future of our industry.”
LedgerX is a CFTC regulated Designated Contract Market (DCM), Swap Execution Facility (SEF), and Derivatives Clearing Organization (DCO). LedgerX is available to both retail and institutional investors 24x7 and offers physical settlement of all contracts, block trading and algorithmic trading opportunities for institutional investors. Since its launch in 2017, LedgerX has cleared over 10 million crypto options and swap contracts and pioneered the bitcoin mini contracts that enable granular trading. This acquisition will have no material impact on LedgerX’s operations as it will continue to provide its current offerings to its existing customer base.
Zach Dexter, CEO and Co-Founder of LedgerX, adds: “US crypto derivatives is an incredibly underserved market, and it took time and resources for us to become a regulated entity under the existing frameworks. FTX.US has taken the view, which we share, that US regulators are ready and willing to partner on innovative products, and it's the responsibility of the industry as a whole to step up and work with agencies like the CFTC.”
The combined entity will leverage its resources to create products that meet the needs of both retail and institutional traders alike. Additionally, the Company will be devoting significant resources towards developing a strong working relationship with the US regulatory community, specifically with the CFTC. Through this acquisition, FTX.US hopes to further drive innovation that is compliant and meets the rigorous standards of the US financial services industry.
The financial terms of the deal have not been disclosed.
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Acquisitions Digital AssetsWinners and losers: Hedge fund investor flows turn positive, but capital allocations “not felt by all”
Investors are adding more money into hedge funds this year than they are pulling out – but new industry data points to continued dispersion across the strategy spectrum, with managed futures funds attracting new capital while macro and long/short equities managers suffer sharp outflows.
Investors added USD1.80 billion to hedge funds during July, according to eVestment research, which marks a return to positive flows after allocators yanked some USD10.99 billion from the industry in June.
Overall, hedge funds have attracted USD27.80 billion in new capital since the start of 2021, which compares more than USD59 billion of investor outflows annually in 2020.
eVestment research pointed to a considerable degree of dispersion across strategy flows during July, with managed futures continuing to draw more investor assets, while macro and long/short equity funds suffered outflows.
Managed futures funds added USD1.67 billion of new assets in July, which has brought their year-to-date inflows to USD9.25 billion in total. Overall, the strategy has registered six positive months out of seven so far this year, with more than 50 per cent of funds enjoying inflows.
Observing the ramp-up in flows to trend-followers, eVestment said that not since 2015-2016 have investors appeared “truly interested in expanding within the segment”.
“All it took was a really difficult global economic environment plagued by a pandemic,” eVestment added. “Another good sign is that investors are likely happy with their recent allocations as returns have been fairly good among those with the largest net inflows this year. Funds with the ten largest net inflows all have positive returns this year and their average so far is almost 9 per cent.”
Elsewhere, investors weighed in with some USD1.55 billion to relative value credit hedge funds and also pledged USD1.45 billion to multi-strategy managers, with the latter having now drawn more than USD20 billion in inflows since the start of 2021. Convertible arbitrage strategies meanwhile drew USD550 million.
On the flipside, investors pulled more than USD1.5 billion out of macro strategies during July, which came on the heels of some USD5.5 billion of outflows in June. eVestment said macro outflows appear to be performance-driven, with the five largest net outflows coming from funds returning an average of below -5 per cent.
Allocators also withdrew USD850 million from market neutral equity funds, USD790 million from long/short equity managers, USD780 million from directional credit and USD390 million from event driven funds.
Year-to-date, long/short equity hedge funds have registered outflows of almost USD13 billion. However, eVestment noted that outflows among long/short equity managers were reduced for the second consecutive month.
“This year continues to feel like a decent one for the industry, but it’s absolutely not being felt by all, or even by the majority for that matter,” Peter Laurelli, eVestment’s global head of research, said of July’s data.
“Wide-felt success hasn’t defined the hedge fund industry for a long time, but this year has shown some improvements in the breadth of success metrics. With a global landscape that has continued to highlight uncertainty, it would be surprising to see interest in the industry shift meaningfully in the second half of 2021.”
Like this article? Sign up to our free newsletter Related Topics Results & performance FundsHedge funds to help drive growth in global alternative data market to USD69.36bn by 2028
The global alternative data market size is expected to reach USD69.36 billion by 2028, expanding at a CAGR of 58.5 per cent from 2021 to 2028. The increasing emphasis on gaining alpha from hedge funds is expected to boost the demand for alternative data.
That's according to a new report from Research & Markets which says that: "asset managers from hedge funds, mutual funds, private equity funds, pension funds, unit trusts, life insurance companies, and other BFSI entities are highly inclining to use alternative data to derive predictive insights". Moreover, the use of alternative data for risk management processes is expected to drive the market.
Nowadays, data sources are not limited to transactions and email receipts as companies are finding ways to extract data from various emerging sources. These include social media, web traffic, mobile devices, sensors, IoT-based devices, satellites, and e-commerce portals. The data analysts utilise this data in correlation with each other to derive various hidden patterns and insights. However, the data collected from some of these sources conflict with privacy regulations such as the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR). Thus, the data aggregators and end-users need regulatory compliance, which ensures their datasets are free from Personal Identifiable Information (PII).
North America dominated the market in 2020 with a share of more than 68.0 per cent and is estimated to continue dominating the market from 2021 to 2028. The emerging presence of numerous alternative data providers in the US is the major driving factor. Companies such as Advan, Eagle Alpha, M Science, and YipitData are providing various types of alternative data, including credit and debit card transactions, email receipts, geo-location (foot traffic) records, mobile usage, satellite, weather data, social and sentiment data, and web scraped data. The acquisitions and partnership initiatives from companies, such as Nasdaq and S&P Global Platts, are further expected to fuel the regional market growth. Asia Pacific is expected to emerge as one of the fastest-growing regional markets over the forecast period. This is due to the rising use cases of alternative data in the BFSI, retail, automotive, and telecommunication industries. The use of alternative data for investments and risk assessment, particularly from companies in emerging economies, such as India and China, is expected to boost the regional market growth.
Magnetar appoints head of Business Development for Systematic Investing
Alternative asset manager Magnetar Capital (Magnetar) has appointed Stuart Davies as head of Business Development, Systematic Investing.
A 24-year industry veteran, Davies brings a wealth of alternative investment, client partnership and product innovation experience to Magnetar's Systematic Investing team.
"Our Systematic Investing business is seeing an increase in demand for our products and solutions as investors continue to adopt our belief that systematic hedge fund returns are a critical portfolio component," says Alec Litowitz, founder, CEO and head of Systematic Investing at Magnetar Capital. "I'm happy to welcome Stuart to the team. He is one of the true innovators in the systematic alternatives space and innately understands investors' wants and pain-points. I know our clients will utilise him as a strategic, trusted partner."
Davies comes to Magnetar from AllianceBernstein, where he served as co-head of AB Custom Alternative Solutions. Previously, he was a partner and co-head at Ramius Alternative Solutions LLC, where he built a more than USD3 billion business that sold to AllianceBernstein in 2016. In both roles, Davies worked closely with large global institutions to design and implement customised alternative solutions that incorporated systematic strategies in managed accounts, fund structures and unfunded implementations via total return swaps. Before Ramius, Davies was a managing director and global head of investments at Ivy Asset Management and worked as a portfolio manager for Coronation Fund Managers prior to that.
"Magnetar's Systematic Investing business has always stood out for its active management practitioners' DNA coupled with the longevity and high-quality nature of the systematised hedge fund return streams it has delivered investors to-date," says Davies. "I look forward to connecting more investors to Magnetar's differentiated approach, while strengthening current client partnerships and adding value to their interactions with us every step of the way."
Launched in 2014, Magnetar's Systematic Investing business leverages the firm's decades of active practitioners' experience and proprietary data to offer investors products and solutions that aim to extract the systematic components of hedge fund strategy returns in a more transparent, liquid, cost-effective and diversifying manner.
"As many institutional investors' portfolios today are dominated by equity risk, both public and private, the need for sensible portfolio diversification has never been greater," Davies says. "While a significant portion of the hedge fund industry's return streams are derived from equity risk premium, Magnetar's Systematic Investing approach is different. Its sustainable, high-quality return streams often originate from structural market anomalies which Magnetar has a rich history of systematically capturing throughout market environments and cycles. Coupled with the support of a best-in-class infrastructure, risk management platform, research capabilities and a robust operational team, Magnetar's Systematic Investing business is well-positioned to play an increasingly important role for investors in the years to come."
Davies is a CFA charterholder. He earned a Bachelor of Commerce in Accounting and Finance and a Postgraduate Diploma in Accounting from the University of Cape Town in South Africa. He joined Magnetar on August 16 and is based out of its Evanston office.
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsNew bfinance wealth manager survey reveals increase in use of hedge funds and other alt investments
Wealth Managers are expanding the range of investment strategies available to clients, particularly within alternative asset classes including hedge funds, adding to a new survey from bfinance.
Firms are innovating too as they fight to maintain market share and profitability in an era of fee compression and new tech-based competition.
The Wealth Manager Investment Survey gathered data from 120 wealth managers in 29 countries across five continents. Major developments are divided into three key areas: expanding investment capabilities, the rise of ESG and impact investing, and—finally—evolution in structures, systems and service providers.
More than two thirds (69 per cent) have added new asset classes for wealth clients within the last three years, with 52 per cent stating they will do in the next two years. Fully 60 per cent now provide exposure to private equity, 52 per cent use emerging market debt, 52 per cent use private credit, 48 per cent use infrastructure and a further 42 per cent provide access to hedge funds.
When looking at allocations, the majority of wealth managers have reduced the proportion of wealth client assets invested in fixed income (63 per cent) while 66 per cent have increased allocations to equities and 61 per cent have increased allocations to private markets strategies. The shift towards alternatives is set to continue strongly in the next two years, with improving sentiment towards liquid alternatives such as hedge funds, but only a minority plan to increase equity exposure. The surge of passive investment is also slowing. Just 21 per cent of wealth managers expect to increase their use of passive strategies in the next two years, compared to 50 per cent in the last three years.
Kathryn Saklatvala, Senior Director and Head of Investment Content at bfinance, says: “It’s fantastic to see the breadth of investment capability that many wealth managers are now able to offer to clients—the results of this survey show a significantly higher usage of strategies such as private equity, infrastructure, private credit and hedge funds than we’ve seen in other studies, and far more widespread integration of ESG factors into investment."