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Fees fall significantly in some ESG and impact strategy types
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.”
Like this article? Sign up to our free newsletter Author Profile Related Topics ESG & Responsible Investing Impact Investing Surveys & researchBEQUANT appoints General Counsel
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.”
Avelacom's Singapore expansion yields fastest trading in the market
Avelacom, a low latency connectivity, IT infrastructure and data solutions provider for global financial markets, has expanded its coverage in the APAC region b y broadening its partnership with Singapore Exchange (SGX) and becoming its colocation provider.
The new initiative is aimed at global proprietary trading firms and relative value funds who benefit from market volatility and need the fastest access to SGX’s trading platforms. Avelacom’s new server rack will be situated next to SGX’s core securities and derivatives matching facility, providing less than 20 microseconds round-trip network latency to SGX’s trading and market data engines – the fastest in the market.
Avelacom has partnered with SGX since 2016, with its market-leading lowest latency routes to/from SGX among the most popular in Avelacom’s extensive portfolio including routes between SGX and CME, SGX and Hong Kong, SGX and Shanghai, SGX and Tokyo and SGX and Sydney. With its new colocation services, Avelacom will provide enhanced infrastructure capabilities for trading on SGX, split into single-unit offerings to create a simple starting point for investors who are new to the Singapore markets.
Aleksey Larichev, CEO of Avelacom, says: “SGX is the leading multi-asset exchange in Asia, generating a constantly growing demand among international financial institutions. In addition, SGX products are becoming ever-more popular for arbitrage trading strategies, which require ultra-low latency and robust IT infrastructure that deliver good value. Our expanded range of services meets all these needs, and make SGX’s securities and derivatives markets increasingly attractive for arbitrage opportunities.”
Ng Kin Yee, Managing Director, Head of Data, Connectivity and Indices at SGX, says: “We are excited to see Avelacom’s growth and development as part of our co-location ecosystem. This partnership will enhance the connectivity options for our clients with the one-stop offering of both low-latency international connectivity and hosting infrastructure in SGX Co-Location.
Like this article? Sign up to our free newsletter Author Profile Related Topics Trading & ExecutionHedge funds start Q4 on a high note with majority in the black
The global hedge fund business started the fourth quarter of 2021 on a high note, with aggregate industry performance at +1.88 per cent in October and just over 70 per cent of funds reporting to eVestment seeing positive results for the month, according to the just-released October 2021 eVestment hedge fund performance data.
Year to date (YTD) performance for the hedge fund industry stands at +10.86 per cent, very close to surpassing the +11.07 per cent aggregate return the industry posted in 2020.
Commodity-focused funds continue to be among the strongest performing segments of the hedge fund business, with October average returns at +3.10 per cent and YTD performance at +22.63 per cent. Commodities funds’ YTD 2021 performance is much stronger than the +5.84 per cent these funds posted for all of 2020.
Among the Equity fund subsectors eVestment tracks, Equity Energy focused funds are also among the strongest performers, at +5.19 per cent in October and YTD average performance at +28.41 per cent. Equity Financial focused funds are also among the business’ top performers this year, posting average returns of +2.59 per cent in October and +22.73 per cent YTD.
India-focused funds, which have performed phenomenally this year, dipped into negative territory in October, with average performance for the month coming in at -1.79 per cent. These funds are still leading the entire hedge fund industry YTD with average returns at +41.40 per cent.
Among the primary strategies eVestment tracks, Event Driven – Activist funds were the top performers, with October average returns of +3.82 per cent and YTD average returns of +24.84 per cent.
Origination & Financing, Long/Short Equity and Managed Futures – were strong performers in October, with average performance figures for these funds in October all above +2 per cent, beating the industry average.
Size has not proven to be an advantage in 2021, with the 10 largest hedge funds reporting to eVestment seeing average returns of +0.99 per cent in October and YTD average performance of +6.90 per cent, both below the industry performance averages and performance averages for many other hedge fund types and strategies eVestment tracks.
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performance FundsHedge funds among seven new additions to FLX Distribution platform
FLX Distribution – a Resource and Asset Management Platform (RAMP) delivering on-demand distribution for asset managers, wealth management firms, and financial advisors – has announced seven new additions to its offering including hedge funds 180 Degree Capital Corp and Advocate Capital Management.
Ranging in size, asset class and business needs, the seven new managers underscore the breadth of the services and capabilities the FLX platform offers.
“This new group of managers reflects both the need and trust from the industry in our purpose-built platform that aims to drive a more flexible, scalable, and accessible distribution experience for all participants. These managers recognise FLX as a community consisting of more than a single feature but rather the culmination of multiple features brought together via a single destination – and we’re proud to partner with them as they grow their business,” says Brian Moran, FLX Founder and CEO.
180 Degree Capital Corp. is a publicly traded registered closed-end fund focused on investing in and providing value-added assistance through constructive activism to what it believes are substantially undervalued small, publicly traded companies that have potential for significant turnarounds. The firm’s goal is that the result of its constructive activism leads to a reversal in direction for the share price of these investee companies, ie, a 180-degree turn.
Located in New York City, Advocate Capital Management focuses on providing market protection and risk mitigation solutions to help clients effectively manage risk. Advocate's Macro Risk Hedging (MRH) and Rising Rate Hedging (RRH) strategies are designed to mitigate portfolio risk during episodes of market stress targeting significantly lower long-term cost than available market alternatives.
Like this article? Sign up to our free newsletter Author Profile Related Topics FundsHedge Funds return to winning ways with 1.68 per cent gain in October
The hedge fund industry shook off September’s swoon in October, posting a 1.68 per cent return for the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions.
By comparison, the S&P 500 Total Return Index gained 7.01 per cent in October.
For the year to date, the hedge fund industry was up 10.60 per cent through October. The S&P 500 Total Return Index was up 24.04 per cent over the same period.
Undaunted by the previous month’s far-flung red ink, nearly all Hedge Fund subsectors did an about-face in October. The industry’s return to gains was led by the Technology Index which was up +4.39 per cent, followed closely by the Distressed Securities Index, up +4.14 per cent and the Emerging Markets Asian Equities Index which advanced +3.84 per cent. Other sub-sectors gaining ground in October included the Equity Long Bias Index, returning +3.02 per cent, the Emerging Markets Sub Saharan Africa Index, up +2.99 per cent, and Option Strategies Index, at +2.16 per cent.
As for the sectors unable to shake off the September slump, they were led by Latin American indices including the Emerging Markets Latin American Equities Index -5.51 per cent and the Emerging Markets Latin America Index -3.96 per cent. Elsewhere the Fixed Income Arbitrage Index retreated -2.07 per cent, the Emerging Markets Global Fixed Income Index lost -1.05 per cent, and the Emerging Markets MENA Index fell -0.51 per cent.
For the year-to-date interval, nearly all sub-sectors are in the black through October. The Emerging Markets Eastern European Equities Index has had a banner year and leads all Hedge Fund subsectors, up +25.91 per cent. The Distressed Securities Index is nevertheless nipping at its heels, posting compound returns of +24.09 per cent year-to-date. Following at a decent distance in third position is the Equity Long Bias Index which is up +17.61 per cent through October.
Other notable year-to-date gainers included the Technology Index, up +16.27 per cent, the European Equities Index, advancing +15.42 per cent, and the Emerging Markets MENA Index, gaining +14.28 per cent.
Only a handful of subsectors have seen year-to-date losses. Woes continued unabated for the Emerging Markets Latin American Equities Index, which has lost -12.21 per cent so far this year, as well as for the Emerging Markets Latin America Index, which has shed -7.05 per cent. The Emerging Markets Global Fixed Income Index and the Fixed Income Arbitrage Index are on the bubble — down -0.48 per cent and -0.18 per cent respectively.
“US equity markets enjoyed their best month of the year in October, and hedge funds benefitted,” says Ben Crawford, Head of Research at Barclay Hedge. “While labour and supply chain issues dragged economies in the US and elsewhere, most hedge fund sectors appeared unaffected, notching October as another victory in a year already full of them.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performance FundsIntegral reports client average daily volumes of USD50.5bn in October 2021
Integral, a technology company in the foreign exchange market, has reported average daily volumes (ADV) across Integral platforms totalled USD50.5 billion in October 2021.
This represents an increase of +12.5 per cent compared to September 2021 and an increase of +15.3 per cent compared to the same period in 2020.
Integral’s global trading network has been designed to meet the trading needs of the widest variety of buy-side FX market participants, including banks, brokers, asset managers, and hedge funds. Its clients leverage the deep and diverse FX liquidity available through our platforms within an integrated environment.
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performanceManagers and investors split on ESG integration, with data clarity a major roadblock
Fund managers and investors remain split over how they integrate environmental, social and governance (ESG) factors into their risk and investment processes, with industry participants citing a lack of clarity over data reliability, comparability and standardisation as the main challenge.
Alternatives-focused software-as-a-service and data management firm Vidrio Financial, in partnership with boutique advisory firm Close Group Consulting, polled a broad range of fund managers and institutional investors on how they are integrating ESG strategies into their overall investment process, and explored some of the data and structural challenges they face.
The latest ‘Vidrio Views’ survey – which was carried out ahead of the United Nations’ COP26 climate change summit in Glasgow – found that the challenge of ESG data comparability and reliability remains the primary roadblock when it comes to firms integrating ESG investment practices.
Specifically, some 42 per cent pinpointed ESG data challenges on comparability as the key barrier, while 25 per cent of those quizzed cited confusion over what constitutes best practice as the primary roadblock. Meanwhile, a further 16 per cent of respondents believe that calculating ESG-specific performance is the main hurdle to integration.
“True ESG integration is an issue that investors and allocators alike have been wrestling with for many years and not something we feel is going to be simply resolved over time,” Vidrio and Close Group observed in the study.
The report surveyed a mix of corporate pension funds, endowments, fund managers, funds of funds, OCIOs and others in both the North America and EMEA regions.
Allocators and managers are also similarly split on how important they consider ESG to be as an investment factor, and how they apply ESG factors into their risk and opportunity assessments.
Close to a quarter (23.08 per cent) said ESG is a key investment factor, in line with financial factors, within their investment processes. But the same number said that while ESG is a key investment factor, it is at a lower weight than financial factors, while a further 23.08 per cent said the importance of ESG factors depends ultimately on the strategy and underlying investment. Some 30 per cent did not consider ESG to be key investment factor.
At the same time, 38 per cent actively apply ESG factors to their risk and opportunity assessments, 31 per cent do not, while 23 per cent are not currently applying ESG factors, but plan to in the future. About 8 per cent are awaiting more concrete regulatory standards before formally incorporating an ESG framework into investment decision-making processes.
Quizzed on the main drivers for ESG integration, most fund managers (80 per cent) said the question did not apply to them. But elsewhere, other drivers of ESG integration among managers include alpha generation (10 per cent), meeting client/LP demands (10 per cent), helping the firm remain competitive (10 per cent), and advancing their firm’s competitive positioning (10 per cent).
On the investor and allocator side, the drive for ESG integration is fueled mainly by board or stakeholder demand (72.73 per cent). Meanwhile, creating alpha was the main driver among 18.18 per cent of respondents, while managing risk (18.18 per cent), aligning with market best practices (18.18 per cent), and aligning with peers (9.09 per cent) were also cited as major drivers.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics ESG & Responsible Investing Impact Investing Results & performance Research & AnalyticsSS&C GlobeOp Hedge Fund Performance Index at 0.45 per cent
The SS&C SS&C GlobeOp Hedge Fund Performance Index for October 2021 measured 0.45 per cent.
Hedge fund flows as measured by the SS&C GlobeOp Capital Movement Index advanced 0.59 per cent in November.
"SS&C GlobeOp's Capital Movement Index rose 0.59 per cent in November 2021, indicating positive net flows into hedge funds. This gain compares favourably to the 0.27 per cent increase reported a year ago," says Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "With this strong result, hedge funds are on pace to finish 2021 with the highest rate of net inflows since the post-financial crisis year of 2012."
Like this article? Sign up to our free newsletter Author Profile Related Topics IndexesManaged Funds Association forms international partnership with CAASA
Managed Funds Association (MFA), an organisation representing the global alternative investment industry, has announced the Canadian Association of Alternative Strategies and Assets (CAASA) as the first international member of the MFA Partnership Program.
“CAASA's membership features an impressive cross-section of the private funds ecosystem, including fund managers and allocators. Partnering with CAASA is an important step for the expansion of our regional partnership program,” says MFA President and CEO Bryan Corbett. “The inclusion of international partners supports MFA’s expanding global presence to better meet the needs of our globally-focused members and their investors—including pensions, foundations, and endowments."
CAASA is the largest association representing the alternative investment industry in Canada with more than 320 members — including alternative investment managers, pension plans, foundations, endowments, and service providers — and has organised more than 80 webinars in 2021 plus six multi-day conferences. Its membership and activities span all alternatives from hedge funds and venture capital to real estate and cryptocurrencies. Founded in 2018, CAASA's mission is to bring Canada to the world and the world to Canada by promoting information sharing, networking, and collaborative initiatives between its members and the industry at large.
"Joining the MFA Partnership Program enables CAASA to expand further its extensive member offering, including events, educational resources, and networking capabilities, and provide a platform to showcase Canada as a global leader in alternative investment management," says James Burron, President and Co-Founder of CAASA.
The MFA Partnership Program aims to enhance the collective power of national, regional, and state alternative investment industry networks. The program works to increase collaboration, promote information sharing, build key allocator relationships, and create a more efficient and effective network to support, educate, and connect in markets in the US and around the world.
"CAASA members will gain access to an unparalleled network of peer organisations in the US through the relationship with MFA," sasaysid MFA Chief Commercial Officer Brooke Harlow. "The MFA Partnership Program will provide them the resources to stay on top of the latest policy, regulatory, and operational developments impacting alternatives and private funds investors and allocators."
Current members of the MFA Partnership program include the California Alternative Investments Association, Connecticut Hedge Fund Association, New York Alternative Investment Roundtable, Palm Beach Hedge Fund Association, and Texas Alternative Investments Association.
CI Financial makes strategic investment in alt investment platform GLASfunds
CI Financial Corp (CI) has made a strategic investment in GLAS Funds (GLASfunds), a turnkey alternative investment platform and alternative asset management firm based in Cleveland.
Founded in 2009, GLASfunds is a tech-enabled platform providing investors with secure and streamlined digital access to institutional-quality alternative investment opportunities and asset management oversight. It has approximately USD1.1 billion in combined assets under management and assets under contract.
CI’s investment will strengthen GLASfunds’ offering to the broader market, while providing CI Private Wealth clients with enhanced access to alternative asset classes through a best-in-class platform.
“Alternative assets are an increasingly important part of investing today and having an execution platform like GLASfunds is a critical foundational component to our strategy in this space,” says Kurt MacAlpine, Chief Executive Officer of CI Financial. “Making this investment will enable us to deliver a better client experience, which is incredibly important as we work to build the leading high-net-worth and ultra-high-net-worth wealth manager in the US.”
“We are thrilled to work with CI to bring our leading alternatives solution to CI Financial and their fast-growing CI Private Wealth group,” says GLASfunds Managing Partner Michael Maroon. “Alternatives have become a core component of high-net-worth client portfolios, but the process to invest has often been cumbersome. We simplify that process, enabling advisors to deliver even better investment management service. Having CI as a strategic partner will enhance our capabilities and reach and broaden our appeal to all advisor firms seeking an alternative investment platform.”
GLASfunds is thoughtfully designed to reduce the difficulties advisors and their clients face in the alternatives space. Through the platform, advisors can aggregate client capital and invest in alternatives through a fully digital dashboard, streamlining the process and reducing the paperwork typically required to execute a customised alternatives portfolio. GLASfunds provides quarterly updates, timely performance estimates and one aggregated K-1 report across all positions. GLASfunds’ expert team can also provide additional analytics, portfolio construction support and more. The reduced administrative burden, simplified investment process and access to top-tier alternatives make GLASfunds an exceptional solution to add to CI Private Wealth’s growing investment capabilities.
CI will take a strategic minority stake in GLASfunds, with an option for majority ownership over the next four years.
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Finance & Insurance InvestmentsGlobal private credit market focusing on sustainability
According to a new research paper, Financing the Economy, published by the Alternative Credit Council (ACC) in partnership with Allen & Overy, private credit managers are accelerating the integration of ESG into their investment strategies and engagement with businesses on sustainability.
The ACC surveyed 57 private credit managers and investors based across the US, Europe and Asia Pacific that collectively manage more than USD600 billion. The research found that 74 per cent already integrate ESG into their investment strategies and consider it to be a core part of their approach to due diligence, borrower engagement and investor reporting.
Beyond investing, the survey found that managers are a growing source of guidance and technical support on sustainability issues for many SMEs and mid-market businesses. Almost half of private credit managers see this service as their biggest value-add on ESG issues, and nearly a third see their ability to influence ESG outcomes as their biggest strength.
A third of firms reported offering ESG-focused private credit products that incentivise businesses to become more sustainable, for example by linking the interest rate to ESG-related criteria. Such products are likely to become more prevalent, with a further 28 per cent of respondents planning to make loans with ESG-linked financial incentives in the future.
The research reveals that private credit managers provided an estimated USD196 billion of credit to the economy during 2020, a 74 per cent increase on the USD113 billion respondents predicted they would invest when surveyed last year.
The main recipients of credit continue to be SMEs and mid-market businesses, with 74 per cent of respondents’ most common loan size being below USD100 million. The research also finds that a significant part of the market is now focusing on larger businesses, with 26 per cent of respondents describing their most common loan size as greater than USD100 million, up from 10 per cent last year.
Jiří Krόl, Global Head of the Alternative Credit Council, says: “It is encouraging to see how quickly the industry adapted and deepened its approach to ESG integration. There is broad agreement that we are still in the early stages of development when it comes to methodologies, loan documentation and engagement practices. It is also clear that while regulation can be helpful in some ways, the real driver of change is the industry’s desire to innovate and deliver for its borrowers, investors and society at large.”
Jake Mincemoyer, Head of US Leveraged Finance at Allen & Overy, adds: “Over the last decade, private credit has developed into a global and highly-diversified market, in excess of USD1 trillion. With the increasing volume of capital being provided to SMEs and middle-market businesses and the growing size and frequency of mega-deals in private debt, managers have also seen greater focus on ESG principles across the global private credit market. While some regions have seen broader adoption of these changes than others, there is no doubt that ESG principles will remain a growing focus over the coming years.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Surveys & researchCitigate Dewe Rogerson appoints hedge funds specialist as Director
Citigate Dewe Rogerson, an international financial and corporate communications consultancy, has appointed Dominic Tonner as Director.
Dominic is a hedge fund and private equity strategic communications specialist who joins from a leading reputation management consultancy where he advised clients across financial services and other sectors. Previously he was Global Head of Communications at the Alternative Investment Management Association (AIMA), the global hedge fund industry body, from 2014-2018. He spent the first 14 years of his career as a journalist, contributing to The Sunday Times and the Financial Times, among other titles.
He will be working closely with Senior Director Christen Thomson, who founded Citigate Dewe Rogerson's rapidly growing, award-winning hedge funds practice in 2016, and who was Deputy CEO and earlier Head of Communications at AIMA from 2008-2014. The pair worked together at AIMA from 2009-2014.
Citigate Dewe Rogerson's hedge fund practice is centred on London, New York, Paris, Hong Kong and Singapore. Client strategies covered include equity long/short, credit, quant, event-driven, activist, distressed, global macro, FX, crypto, emerging markets, biotech, disruptive tech and ESG. Its services to hedge fund management firms include advising on special situations, crisis and issues management, profile building to institutional investor audiences and marketing support.
Chris Barrie, Managing Director, Citigate Dewe Rogerson, says: “Dominic adds significant value to our financial services team given his experience as a journalist, in the industry and in agency. He will also be invaluable to our rapidly growing hedge funds practice."
Christen Thomson, Senior Director, Citigate Dewe Rogerson, adds: "I am very glad to be working again with Dominic, who has tremendous expertise and experience in hedge funds. With our growing team and our international network of offices in the major hedge fund industry centres worldwide we are well-placed to support a complex, sophisticated industry.”
Dominic Tonner, Director, Citigate Dewe Rogerson, says: “I have closely followed Citigate Dewe Rogerson’s impressive growth in the global hedge fund industry over the last five years, and I am really pleased to be joining Christen and the rest of the team as we seek to drive the next phase in the firm’s expansion."
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsCoinShares appoints two Independent Non-Executive Directors
CoinShares International Limited (CoinShares) has appointed Christine Rankin and Viktor Fritzén as Independent Non-Executive Directors of the Company.
Rankin is a former Partner at PWC and has held positions of trust at several organisations including Spotify, NASDAQ and Cherry AB. She currently holds the position of Senior Vice President, Corporate Control of Veoneer, a worldwide leader in automotive technology. Christine earned her Bachelor in Business Administration and Economics from Stockholm University. She is a Swedish citizen and is based in Stockholm, Sweden.
Fritzén held the positions of Global Investment Research Analyst and Corporate Finance Analyst at Goldman Sachs and GP Bullhound respectively, before joining LeoVegas Group as CFO. He currently holds the position of non-executive director on the boards of Avanza Bank Holding AB, StickerApp Sweden AB and others. Viktor earned his Master in Finance from the Stockholm School of Economics. He holds both Swedish and American citizenship and is based in Stockholm, Sweden.
Daniel Masters, Chairman of the Board, says: "It is with great pleasure that I announce the appointment of two new Board Members. Christine brings a wealth of experience in financial control and audit. Her broad, high-level, multi-jurisdictional and Main Market experience makes Christine an optimal candidate. Viktor Fritzén brings a rare combination of high profile, public company experience, and a natural enthusiasm and appreciation for the digital asset industry. These appointments in combination with our highly talented incumbent board are another important step by CoinShares on the path to up-listing to the regulated segment of NASDAQ OMX. I would like to extend my warmest welcome to both our new members and I look forward to continuing the CoinShares journey with our new colleagues aboard."
Rankin adds: "I am excited to join the Board of CoinShares at such an exciting time in the Company's journey. I hope to contribute to the Group's continued success."
Fritzén says: "I have been invested in CoinShares' products since 2015 and have been impressed by CoinShares' track record across all its business areas. For many years I have had a strong belief that great businesses will be made in the intersection of the crypto-economy and traditional finance and CoinShares is one of the best-positioned technology companies for this megatrend. I am delighted to join the CoinShares Board of Directors and look forward to being a part of this exciting journey."
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital Assets Moves & AppointmentsBitfinex enables deposits and withdrawals for tether tokens (USDt) on Avalanche
Digital token trading platform Bitfinex has enabled its users to deposit and withdraw Tether tokens (USDt) on the Avalanche transport protocol.
The launch of USDt on Avalanche, a decentralised smart contracts platform built for the scale of global finance, further expands the reach of USDt, the largest stablecoin by market capitalisation.
The Avalanche protocol is designed as a highly scalable ecosystem with the aim of delivering near-instant transaction finality while levying low transaction fees that are fractions of a cent.
“I’m sure our growing user base will appreciate the immediacy of access to Avalanche’s highly scalable and decentralised network,” says Paolo Ardoino, CTO at Bitfinex. “Avalanche’s community is growing and flourishing as the protocol continues to gain traction within the wider digital token ecosystem.”
USDt is supported by numerous e-commerce platforms and payment gateways, and already provides faster payment as compared to credit and debit cards, and traditional payment systems.
Bitfinex is leveraging its position as one-stop shop for crypto trading offering a variety of services, including margin trading with up to 10x leverage.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsCTAs now set for their best year since 2014
CTAs and trend-following hedge funds remain on track for their best annual performance since 2014’s landmark performance, with managers continuing profit from continued trends across bonds, equities, indices and commodities markets in the run-up to year-end.
Société Générale’s main CTA Index – which charts the daily performances of 20 of the largest CTAs, including funds managed by Man AHL, Graham Capital, Systematica, AQR, and Aspect Capital – remains up more than 9 per cent this year. It ended October on a high, generating 2.56 per cent for the month, though the first week of November has seen it give back 0.72 per cent.
With just two months left until the end of 2021, the index – a key industry benchmark – is on track for its best performance since 2014, a banner year for CTAs which saw the sector advance more than 15 per cent annually.
Meanwhile, trend-following hedge funds, as measured by SocGen’s SG Trend Index, added more than 3 per cent last month, before dipping 1.34 per cent in early November.
Overall, the benchmark – which comprises the daily returns of 10 of the biggest trend-following hedge funds – is up 12.43 per cent since the start of 2021. The gain, which is roughly double 2020’s 6.28 per cent annual return, is also the index’s largest since 2014’s stellar 19.7 per cent rise.
SocGen indicated that short positioning on bonds’ downward trend, long bets on equity indices during October, and the continued rise across energy markets have fueled the sector’s momentum lately.
On the flipside, currencies have proven “more challenging” for trend-followers amid inconsistent markets moves, aside from the yen’s weakening against the dollar.
Overall, some 90 per cent of all the individual CTAs in the SocGen CTA Index and SG Trend Index generated positive performances in October, with a number of managers gaining over 5 per cent, SocGen’s data shows.
Elsewhere, the SG Short-Term Traders Index added 1.95 per cent last month, and has stayed roughly flat so far in November, to put its year-to-date returns at 2.19 per cent. Eight out of the ten funds in the index – a performance snapshot of CTAs and global macro managers with 10-day trading windows – were in positive territory in October, with two again gaining more than 5 per cent.
Tom Wrobel, director of capital consulting at Société Générale Prime Services and Clearing in London, noted that many trend-following strategies are comfortably in double-digit territory in the 10-month period since the start of January.
“The key sectors for CTA performance appear to have been commodities and equities in 2021, but October also highlighted that all asset classes are important, with significant opportunities for trend-followers in bonds, depending on individual model time-frames and portfolio construction approaches,” Wrobel said this week.
“It was encouraging to see shorter-term CTAs also record a positive month, as institutional investor interest in CTAs remains high; and industry reports indicate that alongside multi-strategy funds, CTAs have enjoyed the largest capital inflows among major hedge fund strategies this year,” he added.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Funds Markets Results & performance Investing in Hedge FundsSEC wins fraud jury trial against hedge fund manager
Jurors in a Boston federal court have returned a verdict in the Securities Exchange Commission’s favour against a hedge fund adviser and his investment advisory firm.
Gregory Lemelson and Massachusetts-based Lemelson Capital Management LLC were charged with fraud in September 2018 for reaping more than USD1.3 million in illegal profits by making false statements to drive down the price of San Diego-based Ligand Pharmaceuticals Inc.
The SEC’s evidence at trial showed that after establishing a short position in Ligand through his hedge fund, Lemelson made a series of false statements to shake investor confidence in Ligand and lower its stock price, increasing the value of his fund’s position.
The false statements included assertions that Ligand’s investor relations firm had agreed that Ligand’s most profitable drug was on the brink of obsolescence and that Ligand had entered into a sham transaction with an unaudited shell company in order to pad its balance sheet.
The evidence also showed that Lemelson had boasted about bringing down Ligand’s stock price through his “multi-month battle” against the company.
The jury found Lemelson and Lemelson Capital Management liable for fraudulent misrepresentations. The court will determine remedies at a later date.
“Investment professionals play a crucial role in our markets and when they break the law they undermine investors’ trust,” says Gurbir S Grewal, Director of the SEC’s Division of Enforcement. “We’ll continue to use all of the tools in our toolkit to hold wrongdoers accountable, including litigating whenever necessary. This verdict underscores that commitment as well as our staff’s ability, tenacity, and experience to win those trials.”
The SEC’s litigation was conducted by Marc J Jones and Alfred A. Day of the Boston Regional Office. The SEC’s investigation was conducted by Virginia Rosado Desilets, Sonia Torrico, and Jennifer Clark, and supervised by David A Becker and Carolyn Welshhans.
Like this article? Sign up to our free newsletter Author Profile Related Topics Legal & Regulation North AmericaSeward & Kissel’s first report on SMAs highlights convergence of major industry trends
A first-of-its-kind report on separately managed accounts (SMAs) in the hedge fund industry from national law firm Seward & Kissel LLP reveals that investor demand for bespoke products has resulted in an increase in SMAs.
The SMA Snapshot Report offers detailed metrics on the individualised accounts that are increasingly favoured by large ticket investors.
“The demand by investors for specific terms and strategy exposure is substantial, and only growing, which has been a large contributor to the increase in SMAs,” says Steve Nadel, a partner in the Investment Management Group of Seward & Kissel and lead author of The SMA Snapshot Report. “We feel that the uptick in SMAs reflects the convergence of the four biggest trends impacting the industry – greater investor demand for bespoke products, private asset exposure, ESG sensitivity, and cryptocurrency.”
For 45 per cent of the SMAs studied, managers deviated from the investment strategy of their flagship hedge funds to accommodate investor mandates around a handful of priorities, including ESG considerations, exposure to privates and digital assets, as well as other issues.
The report also reveals that most investors in SMAs (52 per cent) are funds, while 25 per cent were high-net-worth individuals and family offices, and that the vast majority (82 per cent) of SMA managers have more than two years of experience as hedge fund managers; 61 per cent had more than five years of experience.
Insig delivers ESG scoring solution to support CarVal Clean CLO product line
Insig AI, a data science and machine learning solutions company providing ESG solutions to the asset management industry, has now delivered its ESG scoring tools to CarVal Investors (CarVal), a global alternative investment manager, to support its risk scoring methodology.
This follows the Company's previous announcement "Insig to support CarVal Clean CLO Product Line" released on 23 July 2021.
Insig AI's ESG solutions supports CarVal's ESG risk assessment model measuring each asset across six themes:
Climate Change, including carbon emissions and carbon footprint
Natural Capital, including raw material sourcing and water stress
Pollution, including toxic emissions and waste
Human Capital, including health and safety and labour management
Product Liability, including product safety and consumer financial protection
Corporate Governance, including ownership and board (structure/composition)
These measurements have been utilised to create a composite ESG risk assessment that is then comparable at an individual credit and portfolio level.
Lucas Detor, a managing principal of CarVal Investors, says: "At CarVal, we believe ESG risks can have a material impact on the performance of credit investments. The creation of this ESG-compliant platform now enables us to measure ESG risk at an issuer and portfolio level to create a unique and attractive product for investors. This strategy aligns with our long-term goals of reducing the cost of capital for ESG-minded companies by creating an independent, auditable and comparable risk assessment model. We are pleased that Insig AI has helped put us in pole position to deliver a unique and optimal product for both investors and for society."
Steve Cracknell, CEO of Insig AI, says: "We are delighted to have worked on this ground-breaking product line with CarVal Investors. Today's news is the culmination of a long collaboration. We look forward to working with CarVal on its other fixed income offerings."
Alter Domus and Canoe Intelligence partner to deliver automation and accuracy to alternative data management
Alter Domus, a provider of integrated solutions for the alternative investment industry with USD1.3 trillion in global AUA, and Canoe Intelligence (Canoe), a financial technology company redefining data management processes for alternative investors and allocators, have formed a strategic partnership to provide clients with alternative data management solutions that combine best-of-breed automated technology and data accuracy.
By partnering with Canoe, Alter Domus will modernise and bring scale to its existing alternative data management and asset servicing businesses, while continuing to deliver exceptional service to its 1,700 global clients. Canoe’s automated technology for alternatives and private markets will significantly streamline Alter Domus’ ability to collect and categorise documents, and extract, validate and deliver data to downstream systems. Ultimately, this will enable Alter Domus to bring the most comprehensive alternative data management solution to the market.
“We’re excited about our strategic partnership with Canoe and look forward to delivering our combined data management solution to alternative investors,” says Jared Broadbent, Head of Fund Services, North America at Alter Domus. “Our combined data management solution will change how data is consumed by limited partners.”
“This partnership with Canoe is an exciting one for us and really builds on the technology infrastructure we’ve developed at Alter Domus,” says Darren O’Banion, Chief Technology Officer at Alter Domus. “We are combining Canoe’s tools with our own data management tools to provide an industry-leading data solution. We’re proud to partner with market leaders to deliver tech-enabled solutions to the industry and look forward to passing these benefits and efficiencies along to our clients.”
Since its commercial launch in 2018, Canoe has enabled more than 125 alternative investors and allocators to scale their businesses and has become the industry-standard approach for automating alternatives documents and data management. Canoe leverages shared intelligence from its diverse client base of institutional investors, capital allocators, asset servicing firms and wealth managers, and a growing fund master database of over 14,000 funds across numerous asset classes. This scale enables Canoe to ingest high volumes of complex documents and create instantaneous access to actionable data.
“We’re proud to partner with leading fund administrators like Alter Domus to bring automation and scale to its existing suite of services for alternative investors,” says Jason Eiswerth, CEO at Canoe Intelligence. “The combination of Canoe’s automated technology and Alter Domus’ data management services will enable investors to have the best of both worlds when it comes to managing their alternatives documents and data.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Technology & software solutions