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SBAI publishes guide to operational due diligence of crypto assets
SBAI, a global alliance of alternative investment managers and allocators and custodian of the Alternative Investments Standards, has released a new Toolbox memo providing guidance on completing operational due diligence on crypto assets. The memo can be found in the SBAI Toolbox for Crypto Assets.
Crypto assets were once the purview of retail investors, but more recently the asset class has gained attention from institutional allocators and alternative asset managers. There are dedicated crypto funds specialising in digital assets, however some more traditional hedge fund managers are now allocating to this asset class.
Institutional allocators conduct operational due diligence (ODD) on the underlying managers and funds that they invest in, including on elements such as counterparties, valuation, and conflicts of interest. Crypto assets operate using different infrastructure than more traditional asset classes, therefore any ODD must take account of certain risks that are more prominent within this asset class.
Steven D’Mello, Partner, Operational Due Diligence – Albourne Partners, says: “ODD of crypto assets requires a more in-depth look into certain operational risks. The infrastructure is still in its infancy, and whilst it is becoming more institutionalised, careful attention needs to be paid. This memo from the SBAI continues its work on improving industry outcomes by providing a valuable toolkit for allocators to understand where the risks might be different from more traditional asset classes and provide guidance on the types of questions that should be asked in due diligence processes.”
Sebastian Bea, President of One River Digital – One River Asset Management, says: “Trading crypto assets requires that responsible practices and control processes are in place the same as for any other asset class. This SBAI Toolbox memo gives guidance to asset managers on crypto specific questions that may be asked during due diligence and is also an important resource for asset managers to ensure they have robust controls in place for the risks specific to crypto assets and therefore maintaining high standards throughout the alternative investment industry.”
Maria Long, Research and Content Director of the SBAI, says: “Our mission is to solve for better and improve industry outcomes. We believe that responsible practices, robust controls, and efficient and transparent due diligence processes are vital to these outcomes. This Toolbox memo provides guidance for asset managers on the controls that should be in place and assists allocators with their due diligence processes.”
This toolkit was produced with input from both allocators and asset managers. The SBAI community is made up of over 150 asset managers representing over USD2 trillion in AUM and over 90 institutional investors overseeing USD4 trillion in assets.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsCAIS appoints Head of Data
Alternative investment platform CAIS has appointed George Davies, PhD, as its new Head of Data. Based in the Company’s New York office, Davies will report to Shane Williams, Chief Technology Officer.
“We are delighted to welcome George to this newly created position,” says Williams. “George’s track record working with data to enhance areas such as risk management, trade modelling, and pricing will complement our efforts to employ CAIS’ own data for trend spotting, creating personalised experiences for advisors, delivering meaningful engagements for managers, and informing business decisions.”
Davies has worked with technology platforms across wealth advisory, asset management, and trading for more than 20 years. He most recently served as Vice President of Data for personal finance technology platform SmartAsset, where he managed the company’s data engineering and data science teams while scaling system architecture. Davies also served as Chief Data Officer for fintech companies TraverseIQ and iSentium, and as a Quantitative Analyst for UBP Asset Management, ART Advisors, and Scotia Capital Markets. He earned his PhD in Astrophysics from Queen’s University.
“Having worked with a variety of financial technology companies throughout my career, I was immediately attracted to CAIS’ entrepreneurial mindset and the transformational impact this company is having across the financial advisory and asset management communities,” says Davies. “I look forward to working with Shane and the team as they continue to increase access and education around alternative asset classes for advisors, so they can help their clients realise supplemental income and higher returns.”
In this role, George will be managing teams that develop predictive analytics and machine learning across all business functions, seeking to enhance outcomes for all constituents within the CAIS community.
“George’s hiring reflects our efforts to attract quality talent from all areas of financial services,” says Matt Brown, Founder and CEO. “With a Head of Data in place, we will deepen our efforts to extract valuable insights from the front and back ends of our platform, which should lead to greater outcomes for the wealth management ecosystem that we serve.”
Transaction volumes on the CAIS platform were 74 per cent higher in the third quarter of 2021 compared to the prior year. The number of advisors on the CAIS platform also grew 89 percent year-over-year. Due to this increase in demand, CAIS has added 85 employees across all areas of the organisation within that same time frame.
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsRM Labs, Eventus, Notabene form partnership to deliver one-stop compliance solution for digital asset ecosystem
Three specialists in the global digital asset regulatory and compliance space have formed a partnership to create a one-stop solution for firms across the digital asset ecosystem, solving for cryptocurrency anti-money laundering (AML), trade surveillance, as well as Travel Rule compliance for Virtual Asset Service Providers (VASPs).
TRM Labs, a blockchain analytics provider, Eventus Systems, global provider of digital asset trade surveillance solutions, and end-to-end Travel Rule solution provider Notabene have formed “Project TEN,” which will provide the marketplace with a comprehensive offering to address a host of risk management and compliance challenges facing firms in the digital asset space.
With the launch of Project TEN, crypto-native firms as well as traditional financial institutions moving into virtual assets will benefit from a joint service designed to help maximise the efficiency of regulatory compliance operations. The offering will feature Eventus’ trade surveillance and market risk applications; TRM Labs’ transaction monitoring, wallet screening and forensics tools; and Notabene’s counterparty risk management and Travel Rule compliance software.
Esteban Castaño, Co-founder and CEO of TRM Labs, says: “Organisations operating in the crypto space are tasked with managing a complex regulatory landscape in a rapidly evolving market. Project TEN helps organisations address this complexity by bringing distinct areas of risk management expertise into one comprehensive offering.”
Eventus CEO Travis Schwab says: “We’re delighted to join forces with two other market leaders in the global digital asset space to introduce efficiencies and make lives easier for crypto firms striving to hold themselves to the highest standards, both to attract investment flows and meet regulatory obligations. Powered in part by our Validus trade surveillance platform, the Project TEN partnership offers a compelling solution to a wide cross-section of participants, including traditional financial institutions looking to enter the digital asset space while ensuring they have the same robust processes in place that they apply to other asset classes.”
Pelle Brændgaard, CEO of Notabene, says: “There are many distinct tasks that must be addressed by any institution offering digital asset services. Project TEN creates a comprehensive compliance solution for firms across the rapidly growing global digital asset space. Partnerships are critical as many complex components must work together to manage overall compliance risk. We’re thrilled to embed our privacy-preserving Travel Rule solution into Project TEN, the first comprehensive offering allowing institutional clients to enter the crypto space in a regulatory-compliant manner.”
Bitnomial launches margined, physically settled bitcoin futures in the US
Bitnomial, a US cryptocurrency derivatives exchange company, has launched US-based, physically settled bitcoin futures with 35 per cent margin, a significant milestone and a first for a de novo exchange.
Bitnomial's contracts allow for efficient basis trading, eliminating the need to execute bilateral trades to unwind positions, and enabling lenders and miners to hedge at scale. The launch marks the first in a suite of products, with options and other assets to be offered in the coming months.
Today’s announcement coincides with the announcement of new strategic investors including Franklin Templeton, the O'Brien Family Office, and Belvedere Strategic Capital. The new investors join current investors and participants including Jump Trading, DV Chain, Consolidated Trading, Coinbase Ventures, Digital Currency Group, Electric Capital, and Bittrex Global.
Bitnomial has partnered with brokerage firms ED&F Man Capital Markets, Marex, RJ O’Brien & Associates, and StoneX Financial to support trading for customers globally.
DV Chain and Galaxy Digital executed the first trade which was cleared by RJ O’Brien & Associates and ED&F Man Capital Markets, while Genesis has been an early and key supporter of the offering.
Garrett See, CEO of DV Chain, says: “Bitnomial’s physically delivered futures represent a turning point for institutional crypto trading. The margined and cleared products allow for professional traders to scale their activities without counterparty risk or operational inefficiencies.”
Joshua Lim, Head of Derivatives at Genesis, says: "As a derivatives block liquidity provider and early Bitnomial market participant, Genesis is excited to see the launch of additional regulated venues for trading physically settled futures products. We see Bitnomial filling a niche for basis trades on deliverable futures."
Brooks Dudley, Global Head of Digital Assets at ED&F Man Capital Markets, says: “Our firm has been at the forefront of providing clients with access to this important alternative asset class. We are therefore delighted to support this launch and look forward to further innovative products in the coming months.”
Bitnomial initially offers trading in two quarterly contracts, Bitcoin US Dollar Futures and Deci Bitcoin US Dollar Futures, sized for both institutions and individuals, and does not charge for market data or trading access.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital Assets Trading & ExecutionHow hedge funds can navigate Brexit and Covid-19 trade upheaval
The sweeping changes and far-reaching trade upheaval brought about by Brexit and Covid-19 heralds sizable investment opportunities for hedge fund managers, according to a new study by IG Prime.
The report – ‘An Analysis of Post-Brexit Economies’ – examines the impact of Brexit on international trade, gauging potential growth areas in specific sectors, and considers the broader trends unfolding from evolving international trade patterns as a result of the UK’s decision to leave the European Union.
Specifically, the report probes the UK’s main exports prior to Brexit – such as precious metals, vehicles, and pharmaceutical products – as well as the main exporters of those same products in the EU and Singapore, in order to determine which countries may be set to increase exports. It also looks at the impact of the Covid-19 impact on trade over the course of 2020.
With commodity supplies from the UK decreasing, and existing contracts coming to an end, hedge fund managers should closely monitor the potential for certain product industries to open up even more in the coming years, said IG Prime, the institutional prime brokerage unit of IG Group.
“This may mean that companies still based in Europe continue to expand, while the broader import opportunities may also result in growing numbers of start-ups in those product areas,” the report explained.
Despite the coronavirus crisis beginning to subside in some countries, IG Prime sounded a note of caution on this expansion trend, which is unfolding against a backdrop of sustained market volatility, with “even enterprising investment managers” needing to “tread carefully”.
“While of course this comes with stronger elements of commodity risk, and there may be fewer opportunities for new breakouts in established areas like petroleum and derivatives, other products like machinery may see a wealth of start-ups appearing in countries like Germany to fill the gap left by the UK.”
Similarly, the report indicated that much of Brexit’s impact has been delayed by the effects of the Covid-19 pandemic, adding that further trade will likely follow “a more complex course” than it has up to now.
As a result, hedge funds may choose to consolidate their hedging strategies while the international market’s changes remain unprecedented, “rather than pushing through the immediate risk,” with a clearer image of international trade likely to have formed by the end of 2021 as the effects of coronavirus subside and the true impact of Brexit unfolds.
Chris Beauchamp, chief market analyst at IG Group, said the UK’s vote to leave the EU in 2016 represented a “huge leap into the unknown”, adding that Covid-19 has served up an additional layer of complexity to international trade and cross border investments.
He said: “Some hedge funds who aren’t swayed by volatility may focus on shifting investments in Europe from the UK to a short-term spread across smaller economies like Croatia and Ireland. Once the effects of the pandemic subside and a clearer picture of Brexit emerges, many are likely to move back into the UK.”
Underlining this point, the report noted certain industries – such as organic chemicals – have not experienced the same degree of Brexit-related upheaval as other sectors, since the bulk of UK trade was with the US.
“Simply moving out of Europe isn’t necessarily a barrier to the UK’s value – indeed, a change in trade agreements might bring new UK opportunities elsewhere,” the report observed.
Beauchamp added: “The combination of Brexit and Covid has unveiled opportunities for hedge funds to think about invest more broadly than before.”
Max Hayden, global head of prime brokerage sales at IG Prime, said smaller economies offer unique opportunities, but also cautioned they remain higher areas of risk.
“Short positions may see more benefit as the larger initial gains steady out, but hedge funds and family offices looking for more steady growth would likely be better served focusing on countries with existing economic infrastructure to support the transition from UK to European trade,” Hayden observed.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Coronavirus Research & Analytics Investing in Hedge FundsMicro E-mini Equity Index Futures and Options surpass one billion contracts traded
CME Group's Micro E-mini Equity Index futures and options have surpassed one billion contracts traded across all four indices.
Micro E-mini Equity Index futures became available for trading across four US indices – S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average – in May of 2019, with Micro E-mini options available on Micro E-mini S&P 500 and Nasdaq-100 futures contracts in August of 2020.
"At just two-and-a-half years old, Micro E-mini Equity Index futures and options have become among the most actively traded equity index products at CME Group, enabling clients to manage risk in our highly liquid markets," says Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products. "At one-tenth the size of our benchmark E-mini equity index contracts, these micro-sized futures also help traders to execute equity trading strategies more nimbly, scale index exposure up or down or hedge existing equity portfolio positions."
"The S&P 500 and the Dow Jones Industrial Average are trusted, independent and transparent gauges, which for generations have also become important barometers for US financial market performance," says Aye Soe, Global Head of Core and Multi-Asset Product Management at S&P Dow Jones Indices. "We congratulate CME Group for reaching this milestone which reinforces the ongoing strength of the S&P 500 and DJIA brands and demonstrates the crucial role of these benchmarks in offering essential insights to help investors and market participants mitigate risks and capture market return opportunities."
"The Nasdaq-100 index represents the new industrials – companies playing an important role in our society and economy," says Sean Wasserman, Vice President and Global Head of Index & Advisor Solutions, Nasdaq. "The success of Micro E-mini Nasdaq-100 futures and options demonstrate our shared commitment with CME Group in bringing innovative products for investors to manage risk and meet their investment objectives."
"FTSE Russell congratulates CME Group on reaching a major milestone of one billion contracts traded across its Micro E-mini derivatives complex," says Ricardo Manrique, Director, Strategy, Data & Analytics, London Stock Exchange Group. "As a leader in innovation and a valued long-term partner to FTSE Russell, we are proud to have supported CME Group in this achievement since the Micro E-mini products were first launched in 2019. We look forward to continuing to work closely with CME Group on growing the Micro E-Mini Russell 2000 futures and options suite and providing investors with access to highly liquid and efficient US small cap equity risk management tools."
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performance Trading & ExecutionEEX publishes additional 2021 sell-off dates for the national Emissions Trading System
The European Energy Exchange (EEX) is extending the sell-off calendar for the national Emissions Trading System (nEHS) in coordination with the German Environment Agency to include additional dates in December 2021.
This provides regulated companies under the nEHS with further opportunities to purchase national emission certificates (nEHS certificates, abbreviated to nEZ at the EEX) at a price of EUR25 before the end of 2021.
The additional sell-off dates for 2021 will be held on the 9, 14 and 16 December respectively with the sell-off window taking place between 9.30 am to 3.30 pm CET.
The reason for the 2021 extension is due to the fact that in the first reporting year 2021, only a specific period was originally available for the purchase of nEHS certificates.
In addition, EEX also published the calendar for the sell-off dates in 2022 in coordination with the German Environment Agency. The sell-offs will take place twice a week throughout the year. Participants will be able to purchase nEHS certificates on Tuesdays and Thursdays. The time window will be open for six hours from 9 am to 3 pm CET.
Participants can purchase nEHS certificates for the year 2022 at a fixed price of EUR30 each throughout the year during the sell-off dates for 2022. Additionally, to a limited extent, post-purchases of nEHS certificates for the year 2021 are also possible at the corresponding fixed price of EUR 25 per certificate.
However, the possibility of post-purchase is limited by law to 10 percent of the quantity already purchased by the respective participant in 2021 (Section 10 (2) sentence 3 Fuel Emissions Trading Act (BEHG)). Pursuant to Section 6 (2) of the Fuel Emissions Trading Regulation (BEHV), the reference point is the quantity of nEHS certificates held by the participant in their compliance account at the end of the calendar year (here: 31 December 2021).
nEHS certificates dated 2021 can only be surrendered for the reporting year 2021, and regulated companies must meet their surrender obligation by 30 September 2022. The last date of the sell-off with the possibility of post-purchase is 22 September 2022. nEHS certificates dated 2022 can also be surrendered for the reporting year 2021.
Like this article? Sign up to our free newsletter Author Profile Related Topics MarketsCoinFLEX opens institutional access to new crypto yield offering with Copper ClearLoop
CoinFLEX, crypto exchange and yield platform, has partnered with Copper.co, a digital asset custodian, by integrating with ClearLoop, Copper’s unique instant settlement trading network.
This partnership will open the gateway for institutional investors to access flexible crypto yield products, including flexUSD, accelerating the stablecoin to a USD1 billion market cap by Q1 2022.
Over 300 institutional asset managers at Copper will be able to use CoinFLEX’s interest-earning stablecoin, flexUSD, as collateral to trade on exchange while securely storing their assets offline and off the exchange. CoinFLEX’s integration with ClearLoop is paramount because it adds an extra layer of regulatory assurance for institutional traders, while enabling this segment with a wider range of crypto trading options.
For the first time, Copper's institutional clients can access a highly liquid, easily redeemable, yieldgenerating stablecoin via the Copper platform. flexUSD is the first interest-earning stablecoin pegged 1:1 with USDC that pays holders interest every 8 hours on-chain -- meaning users can hold flexUSD in a cold wallet and still earn interest. flexUSD is currently paying 16 per cent APY and has distributed USD11 million in interest to holders in the past 12 months.
This integration aligns with CoinFLEX’s business expansion plans to enlarge institutional user adoption further, symbolising its commitment to innovate, develop, and strengthen its ecosystem, whilst enhancing liquidity within CoinFLEX.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital Assets Trading & ExecutionHedge fund short sellers ramp up bets against Hargreaves Lansdown
Hedge funds are ramping up their negative positions against Hargreaves Lansdown, with the UK retail-focused investment and advisory firm now the most shorted stock among FTSE 100 names, new market data from Ortex Analytics shows.
Some 7.24 per cent of Hargreaves Lansdown’s free float shares are on loan, up from 6.52 per cent last month, with the firm also the most shorted FTSE 100 name in terms of days to cover, London-based equity research and short interest data provider Ortex has found.
Marshall Wace, the high-profile long/short equity giant set up by Sir Paul Marshall and Ian Wace in 1997, as well as Hound Partners and the Pelham Long/Short Master Fund, have all increased their bearish bets against Hargreaves Lansdown in recent weeks, according to regulatory disclosures made to the UK Financial Conduct Authority.
AQR Capital is also positioned short against the firm, whose share price has been volatile for much of 2021, taking a sharp slide earlier this month. A recent trading update in October showed Hargreaves Lansdown’s revenues dipped 1 per cent from GBP143.7 million last year to GBP142.2 million, as falling transaction volumes on its investment platform put a squeeze on commissions.
Other UK blue chip companies subject to negative wagers among hedge funds include Ocado Group, BT, Sainsbury’s and Schroders.
Some 5.35 per cent of Ocado’s stock, and more than 4 per cent of both BT and Sainsbury’s shares, are on loan, Ortex’s data shows.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Retail & Leisure Results & performance Investing in Hedge FundsFees 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.
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