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Value-focused US long/short manager Invenomic launches UCITS strategy
Boston-headquartered Invenomic Capital Management has launched a new UCITS version of its US-focused long/short equities strategy.
The Invenomic US Equity Long/Short UCITS Fund rolled out last month on fund structuring and governance service provider Waystone’s MontLake UCITS Platform ICAV.
The strategy launched with USD35 million in assets, with a steady pipeline ramping up to USD100 million.
The strategy, which replicates Invenomic’s existing offshore fund, invests in a diverse range of market caps in US equities, trading long and short with a fundamental approach to stock-picking and a strong value bias, using quantitative analysis.
Established in 2015 by Ali Motamed, Invenomic’s investment approach is built around trading “fundamentally sound” companies, disciplined short selling, and diversification, described by the firm as an “essential risk management tool.”
The strategy, which aims to outperform US stock markets over a market cycle with less volatility and drawdown, has generated gains of more than 17 per cent since inception, outperforming its S&P 1500 Index benchmark.
“We have been running our strategy with daily liquidity in the US for over four years now and feel that a UCITS fund available to non-US investors is a crucial next step in the development of our business,” Invenomic founder, managing partner and portfolio manager Motamed said of the European launch.
Before founding Invenomic, Motamed was co-portfolio manager of the Boston Partners Long/Short Equity Fund.
Kenneth Sim, global head of distribution at Waystone, said: “Following a decade of clear outperformance of growth over value, we have seen a clear shift in demand from investors looking for value-tilted strategies that can generate absolute returns through alpha.”
Sim added: “In response to this, the Waystone Investment Solutions team has sourced and partnered with Invenomic Capital Management LP to bring its strong track record and expertise to the European UCITS market, which has come at a time where such value-related strategies are starting to experience their long overdue tailwinds.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Long-short investing North America Markets Investing in Hedge FundsHedge funds split over ESG ahead of COP26 climate summit
As the 2021 UN Climate Change Conference (COP26) begins in Glasgow this weekend, hedge fund managers remain evenly split over the incorporation of ESG (environmental, social and governance) factors and sustainability metrics into their investment processes, according to a new poll.
Just over half – 53 per cent – of fund managers surveyed by Hedge Fund Research said they incorporate ESG factors or risks into their investment process – a total of 687 managers – while 47 per cent, or 609 fund managers, said they did not.
Over the course of 2020 and 2021, HFR quizzed hedge fund managers in their database on the incorporation of ESG into their investment processes.
Ahead of the COP26 summit in Scotland – which is seen as a pivotal moment in the fight against climate change – HFR’s survey found that three-quarters of funds engage with their portfolio companies on ESG issues, while 25 per cent did not.
Meanwhile, 77 per cent of funds interview said they consider climate change in their investment processes, while 23 per cent did not.
As impact investing and sustainability themes have come into sharp focus over the past decade, ESG investment factors have gained greater prominence within the global asset management industry, with allocators placing ever-greater scrutiny on how their portfolios and investments meet the climate challenge.
A wide-ranging study by Deutsche Bank last year found that ESG factors now shape the allocation decisions of roughly two-thirds of hedge fund investors.
A number of high-profile hedge fund firms – including Sir Chris Hohn’s TCI Fund, Caxton Associates, and Man Group – have emerged as vocal ESG advocates. Earlier this summer, US activist hedge fund Engine No. 1 secured three members on the board of ExxonMobil as part of its push for clean energy reforms at the US oil giant.
However, in a separate survey carried out earlier this month by EisnerAmper, just 17 per cent of hedge fund executives said their firm had an ESG portfolio. They pointed to a lack of standardised reporting and datasets (48 per cent), sourcing quality investment opportunities (20 per cent), and dispelling the notion of poor returns (17 per cent) as the biggest barriers to integrating ESG into their funds.
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 Research & Analytics Investing in Hedge FundsPico launches new flagship Corvil Analytics solution
Pico, a provider of technology, data and analytic services for the financial markets community, has enhanced its Corvil Analytics offering for electronic financial markets with the launch of a new flagship appliance, the Corvil 10000.
In today’s competitive, complex and evolving trading environment, Pico believes that maintaining performant trading infrastructure and robust monitoring systems for network transparency and data insights is paramount. The exponential increase in trading and data volumes, particularly since the onset of the Covid-19 pandemic, has accelerated this need for higher capacity infrastructure with up to four times faster initial uptake for 100Gbps deployments when compared to the previous transition to 40Gbps infrastructure. A new generation of high-performance analytics and data capture is required as the uptake of 100Gbps ethernet increases.
The Corvil 10000 establishes a new high bar for sustained throughput, with Corvil’s real-time accuracy and granularity hallmarks, to support the ever-increasing trading and data volumes in financial markets.
Highlights include:
• Sustained 100Gbps capture of packets for a forensic record of all network activity with real-time indexing to enable search, filter and export of the packets of interest, on a single 2U unit
• Accurate record including native hardware timestamping and support for third party timestamping by the leading packet brokers, also sustained at 100Gbps
• Network Analytics for 100 per cent of packets and flows – this includes TCP analytics for all flows with no topping and gap detection for more than 400 feeds
• Publishing of all flow analytics in real-time into third party data repositories (e.g. ElasticSearch) with support for up to 8 million active flows
• Multiple storage configurations ranging from 92TB – 660TB are available offering capacity and price flexibility
Corvil Analytics is used by the world’s largest banks, exchanges, electronic market makers, quantitative hedge funds, data service providers and brokers and has a twenty plus year legacy in extracting and correlating technology and transaction performance intelligence from dynamic network environments. The Corvil 10000 continues this legacy delivering the ability to capture data at high speeds and high volumes while providing analytics and visibility to support the continuity of trading technology performance, execution and trading performance as well as quick and accurate responses to regulatory inquiries.
“The Corvil 10000 appliance marks a significant evolution that equips clients with the analytics throughput to take on current and future traffic rates. In context, this unit can capture the entire US equities market, and US futures market, including OPRA A and B feeds for gap detection on one single appliance,” says Roland Hamann, Chief Technology Officer & Head of APAC at Pico. “The 10000 is the fastest selling Corvil product we have ever launched, reflecting the need for insight-powered performance as 100Gbps network adoption continues at a rapid pace.”
Quant Insight raises USD10m investment for European expansion
British macro analytics firm Quant Insight (Qi), the new quantitative financial market analytics and trading insights provider, has made a major expansion across Europe and the Middle Eastern (ME) territories, opening a new headquarters based in Limassol, Cyprus, in the Cedars Oasis Tower.
This news follows Qi’s recent scale up announcement, which has officially commenced after four years of research development and USD10 million in funding. The company also has offices in London, New York, Boston and Singapore and has clients with total Assets Under Management of over USD2.5 trillion.
Cyprus is a major global hub for Forex and Online brokerage companies, and well-positioned as a business gateway to access Asia, Europe, the Middle East and Africa. This will allow Qi to get closer and offer better services to their partners, customers and prospects across these regions.
Qi have also chosen Cyprus to launch its new retail product: iQ, which will bring cutting edge analytics and trading insights to individual retail investors worldwide. iQ is designed to help retail investors make well informed investment and trading decisions, where such insights were typically reserved for institutional investors – this offering will be made available later this year.
The new branch will be headed by Qi Partner, Zahi Younan, the CEO of Quant Insight Europe. Younan has over two decades of experience in Investment Advisory and Portfolio Management in multinational banks and family offices in UK and the Middle East. He holds an MBA and is a CAIA and CFA charterholder.
Quant Insight’s AI-based financial market brain (RETINA) scans millions of data points daily to provide a succinct overview on how macro forces are impacting all asset classes, from FX, indices and single stocks, to commodities, bond futures and cryptocurrency. RETINA reduces millions of data points into two to five essential daily insights and is already being used by some of the world’s best known investment banks, hedge funds and asset managers, including Alan Howard of Brevan Howard.
Zahi Younan CFA, CAIA, the CEO for Quant Insight Europe, says: “Cyprus was an obvious choice when it came to selecting the best placed base to lead our expansion into new markets and territories, as it is not only an ideal location to access markets in the adjacent continents, but it is also an emerging hub for traders, online brokers and retail investors in its own right.
“This expansion marks the first major step in the new growth and development stage of Quant Insight, and will shortly be followed by the launch of our cutting edge retail offering.”
Mahmood Noorani, CEO of Quant Insight, adds: “Zahi, both as a partner in Quant Insight and as CEO of Qi Europe, is a key addition to our team, and I am confident he will make major contributions to Quant Insight with his capability and experience.”
Liquidity solutions for FX funds
PARTNER FEATURE
FX trading is often seen as the poor cousin of equities when it comes to establishing and retaining a relationship with prime brokers (PBs); yet FX traders need access to services and liquidity just the same. One way for funds to access these requirements is the prime of prime model.
A challenging market
In the past 12-18 months, the FX market has been a challenging space, seeming to experience a split between larger existing players and new market entrants.
Sam Bratchie, Managing Director and Founder of fund administrator Ifina, comments: “From a start-up perspective, there has been a massive increase in enquiries, especially from traders who are looking to get into an institutional environment and can’t do it. Market volatility and getting no interest on your money in the bank means that people are looking for alternatives and this is encouraging new entrants to the hedge funds arena.”
Money managers and proprietary trading firms are also realising that they need more of a regulatory framework in order to carry out their trading activities, secure and raise capital investment and in turn grow revenues.
In the last few years with heightened global regulation from ESMA, CYSEC, FCA, ASIC etc., the retail FX brokerage segment has somewhat contracted and consolidated, leading a number of traders and firms turning to the hedge fund space as they look for more consistent, performance-based revenue streams. Additionally, proprietary, or buyside trading has increased due to the ease of access to API connectivity and algorithmic trading in recent years.
In contrast to Bratchie’s experience with start-ups, however, Philippe Bonnefoy, Founder of quant macro specialist, Eleuthera capital AG, has seen a marked drop in FX profitability. “This has been the most barren period in years,” he states. “Unless you are doing super-exotic stuff, volatility and intraday price dispersion has been killed by quantitative easing (QE).”
However, Bonnefoy does note that as QE ends the FX markets may be entering the most fruitful period of the cycle – if firms are already placed to take advantage of it. “It takes years for funds to get a track record, so they could miss a fabulous three years of trading,” he says.
Size and scale
This track record and the frequently associated size of the firm seems to be at issue in funds’ relationships with prime brokers too. Many prime brokers have not had an easy time over the last few years, with a notable downsizing taking place, which has impacted on their risk appetite and their costs.
One of the reasons for this is a shift in the regulatory environment. Adrian Marcu, Head of Investment Solutions at the multi-family office Belvoir Capital AG, comments: “There are regulatory requirements per liquidity provider and prime broker to do their reporting and checks per client, which has elevated the threshold of business that you have to provide per name. This raises the costs of the sell-side and the buy-side.”
Indeed, as prime brokerage becomes more capital intensive, the market is becoming increasingly segmented, creating a split between big, profitable clients and FX flow traders who are not providing the banks with enough income.
Jonathan Brewer, Commercial Director at ISAM Capital Markets, comments: “FX prime brokerage is a pretty low-yield business for banks. It is becoming more capital intensive so they need much more revenue from each client.”
He adds: “Barriers to entry to tier 1 PBs are significantly higher in terms of capital on account and fees to pay. Even after the initial threshold, there are significant amounts for funds to pay every year.”
And this is not the only risk when appointing a tier 1 PB: as Bratchie points out, prime brokers are liable to drop clients who do not provide sufficient income in what Brewer also terms “a regular cull”.
A new model
One option for smaller funds or new entrants to the market is the prime of prime model. Some such firms seek to offer a true prime broker service while others, such as IS Prime, offer clients access to credit, greater leverage, more understanding of flows, and the ability to curate liquidity appropriate to the trading style of each individual client.
Bratchie comments: “Clients starting with USD3, 5, or even 10 million are always going to struggle when PBs want guaranteed commission. Even if they start well and values then drop, they will still be turned off by a tier 1 PB. But prime of primes can offer them an institutional account and the ability to protect their alpha as flows are anonymised.
“Cost is paramount, too, as annual operational cost impacts severely on their NAV while their performance is audited. Start-ups don’t want a minimum monthly fee,” he adds.
Small firms also run into the issue of spreads: if they don’t have sufficient scale of flow, they can’t interest enough liquidity providers to compete for their flows to such an extent that they will receive good spreads.
“Clients can license a prime of prime’s spreads, buying power with the street, and scale of good quality flows,” Brewer says.
Funds also need to ensure they can cover the operational aspects of trading. Bonnefoy comments: “If you have an active market backdrop, that’s great, but if the market goes quiet you have to craft your own liquidity, and that sounds good until you have to manage it yourself which takes a lot of time and resource. There are a lot of mechanics behind the scenes and that’s where prime of primes come in.”
There can be a further issue for even larger or more established funds to contend with if choosing a tier 1 PB: that of internal structure and politics. “If you are trading multi-asset funds, it can feel like you are doing a ton of business with a firm, but FX is the little brother of equities and internal politics and P&L often don’t travel across departments,” Bonnefoy says.
“If you have 60 per cent of the equities book and 10 per cent of FX, you won’t get a really good deal on FX,” Bratchie adds.
The view of the allocators
One of the caveats to choosing a prime of prime rather than a Tier 1 PB might be the requirements of your allocators. End investors have traditionally liked the association with tier 1 banks, so how do they feel about this approach?
According to Brewer, it depends on the investors. “If you have certain names on the paperwork going out to investors, that will be the rubber-stamp you need in some cases. But those sorts of investors won’t invest anyway unless a fund has a critical mass of USD200-300 million.”
It may also be the case that funds are using a prime of prime for FX but a tier one PB for equities, which could allay those investors to whom a big name matters. However, Bratchie adds: “The investor base for small entrants isn’t looking for a KPMG or a Goldman Sachs. They want to know that the fund, the managers, the brokers are all regulated. They also need handholding. They don’t know the funds arena and they just want to get on with trading,” he concludes.
Long-term relationship
For some clients, however, a big name really does matter and, once they reach critical mass, they may wish to transfer business from a prime of prime to a tier 1 PB. But many funds either choose to stay with their prime of prime or to continue to maintain a liquidity relationship.
Bonnefoy says: “Price movement creates opportunity, and if not much is happening, it might require a shift of how people are pricing you. It helps if someone more liquid than you is aggregating the flow of many clients and doing it full-time – another utility that comes into play. That’s where the added value of an intermediary comes in.”
“There is the added benefit of the anonymity of using a prime of prime, especially when markets or thinner or you are trading something you don’t usually trade,” Mancu adds.
The next step
As the markets continue to move on from the uncertainties of Covid, Bratchie predicts that the slew of new entrants will continue, particularly in FX and crypto, with new funds and start-ups acquiring funding from family and friends. Prime of primes will therefore also be looking to move, or move further, into these spaces.
The issue of technology may also be a mover. “Prime brokers take a long time to get things going, so tech can be a costly problem,” says Mancu.
Bonnefoy agrees: “To the uninitiated technology stability appears completely unimportant, that is until it doesn’t work. You take it for granted until you can’t get into or out of a trade.”
With so many drivers for change and new market entrants looking for services they can no longer get from prime brokers, it looks like the prime of prime model is here to stay, in FX and beyond.
Replay the Hedgeweek webinar – FX Funds: Is the traditional prime broker model of accessing liquidity still relevant and what are the alternatives? – produced in conjunction with IS Prime.
Like this article? Sign up to our free newsletterHedge fund allocations soar
The hedge fund industry continued to attract new assets in August with USD30.5 billion in inflows. August’s inflows represented 0.69 per cent of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.
August marked the sixth consecutive month of hedge fund industry inflows, totalling USD143.8 billion since March. A USD37.8 billion monthly trading profit brought total industry assets to nearly USD4.52 trillion as August ended.
“As economies continued to rebound and equity markets surged throughout the summer, investors saw growth and speculative opportunities in hedge fund investments,” says Ben Crawford, Head of Research at BarclayHedge. “Hedge Funds may also be having a moment for less optimistic reasons: They have a history of performing well during inflationary periods. While central bankers contend that the recent spike in the cost of living will be transitory, forecasters in the U.S. and elsewhere are revising their inflation expectations upward for multiple periods to come.”
Most hedge fund sub-sectors reported inflows in August. Fixed Income funds set the pace bringing in USD10.4 billion, 1.1 per cent of assets while Multi-Strategy funds added USD7.5 billion, 1.6 per cent of assets, Balanced (Stocks & Bonds) funds saw USD5.1 billion in inflows, 0.8 per cent of assets, Sector Specific funds added USD2.96 billion, 0.8 per cent of assets, and Event Driven funds brought in USD2.28 billion, 0.8 per cent of assets.
The handful of sub-sectors experiencing net redemptions in August included Emerging Markets – Global funds shedding USD2.7 billion, 1.3 per cent of assets, Emerging Markets – Asia funds with USD2.47 in outflows, 1.3 per cent of assets, Convertible Arbitrage funds with USD769.2 million in redemptions, 2.4 per cent of assets, and Equity Market Neutral funds with USD251.5 million in outflows, 0.4 per cent of assets.
After posting inflows in July, the managed futures industry returned to net redemptions in August with USD168.6 million in outflows. The four CTA sub-sectors tracked were evenly split between inflows and redemptions during the month.
Discretionary CTAs brought in USD672.2 million in August, 4.3 per cent of assets, while Multi Advisor Futures Funds saw USD152.3 million in inflows, 1.2 per cent of assets. On the redemption side of the ledger, Systematic CTAs shed USD763.6 million during the month, 0.24 per cent of assets, while Hybrid CTAs experienced USD77.7 million in outflows, 0.42 per cent of assets.
For the 12 months through August the hedge fund industry experienced USD146.8 billion in inflows. A USD103.6 billion trading profit over the period brought total industry assets to USD4.52 trillion as August ended, up from USD4.40 trillion at the end of July and up from nearly USD3.38 trillion a year earlier.
Of the 19 hedge fund sub-sectors tracked, 12 posted 12-month inflows through August. Fixed Income funds led the way adding USD78.7 billion, 10.2 per cent of assets, while Sector Specific funds brought in USD56.6 billion, 25.3 per cent of assets, and Multi-Strategy funds saw USD25.6 billion in inflows, 7.4 per cent of assets.
Other hedge fund sectors posting notable 12-month inflows included Emerging Markets – Asia funds adding USD22.0 billion, 17.1 per cent of assets, Event Driven funds bringing in USD21.5 billion, 11.3 per cent of assets, and Equity Long-Only funds with USD13.1 billion in inflows, 8.9 per cent of assets.
Among the sectors with the largest 12-month outflows were Balanced (Stocks & Bonds) funds with USD28.2 billion in redemptions, 6.2 per cent of assets, Equity Long Bias funds shedding USD15.3 billion, 4.6 per cent of assets, Macro funds with USD13.3 billion in outflows, 7.3 per cent of assets, Equity Market Neutral funds with USD5.7 billion in redemptions, 9.3 per cent of assets, and Equity Long/Short funds with USD4.0 billion in outflows, 2.3 per cent of assets.
Over the 12 months through August CTAs saw USD9.72 billion in inflows. A USD21.6 billion trading profit over the period brought total industry assets to USD339.9 billion, up from USD304.8 billion a year earlier.
All four CTA sectors tracked posted inflows over the 12-month period. Systematic CTAs set the pace with USD4.9 billion in inflows, 1.7 per cent of assets. Discretionary CTAs added USD3.1 billion, 27.2 per cent of assets, Hybrid CTAs brought in USD1.7 billion, 18.1 per cent of assets, and Multi Advisor Futures Funds saw USD660.2 million in inflows, 6.4 per cent of assets.
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performance Funds Surveys & researchHITE Hedge appoints COO
HITE Hedge Asset Management (HITE Hedge) a USD670 million, alpha-focused investment firm specialising in the energy sector and its transition, has appointed industry veteran Howard B Rubin, CFA as its Chief Operating Officer.
Rubin has a successful multi-decade track record of managing institutional infrastructures and compliance for a variety of hedge funds and investment firms and will oversee all business management and operational functions at HITE Hedge.
Prior to joining HITE Hedge, Rubin was the Chief Operating Officer of Burrage Capital Management LLC, a Boston-based healthcare sector focused hedge fund he joined in 2018. Before that he was a Managing Member and Chief Operating Officer of Midwood Capital Management LLC, a Boston-based US small-cap long/short equity hedge fund he joined in 2012, and prior to that a Co-Founder, Managing Partner and COO of Tara Hill Capital Management LP, a Boston-based US long/short equity hedge fund firm launched in 2009. Prior to these roles he was a Senior Managing Partner at Boldwater Capital Management, a long/short hedge fund based in Boston, MA and spent 17 years as a Director and Member of the Executive Committee at Standish, Ayer & Wood, Inc (now Standish Mellon Asset Management).
"It is a great pleasure to welcome Howard to the team as we look to capitalise on increased institutional interest in our energy transition offerings," says James Jampel, Founder & Co-CIO of HITE Hedge Asset Management. "Our institutional infrastructure and operational processes have been key to our growth and Howard’s expertise and many decades of experience will make sure that they continue to go from strength to strength.”
Howard B Rubin, CFA, says: “What attracted me to HITE Hedge was the quality of its team and products and its specialised focus on generating alpha using energy securities. Additionally, HITE is a pioneer in the ESG space, having created a first-of-its-kind solution for investors seeking to profit from decarbonisation without taking net long exposure. I look forward to helping HITE grow its business.”
Rubin is succeeding Jim Conant, who is departing HITE in the fourth quarter of 2021. At that point Rubin will also have the titles of Chief Financial Officer and Chief Compliance Officer. Conant has served HITE in these roles since 2007 and the HITE team wishes him well in the next phase of his career.
Short-selling: Man GLG, Marshall Wace and BlackRock dominate UK-listed bearish bets
Man GLG, the discretionary hedge fund unit of London-headquartered global asset management giant Man Group, now holds the largest number of short positions against UK-listed stocks, followed by Marshall Wace and BlackRock, according to new industry data.
New analysis from ETP provider GraniteShares shows that GLG – the long-running discretionary manager which runs a range of long/short equity, emerging market and multi-strategy credit funds – held 23 negative wagers on publicly-traded UK names.
Both Marshall Wace, the high-profile long/short equity giant set up by Sir Paul Marshall and Ian Wace in 1997, and US-based global asset manager BlackRock Investment Management each hold 21 bearish bets in London-listed companies, while JP Morgan Asset Management and Ennismore Fund Management have taken nine short positions, GraniteShares said on Wednesday.
Jupiter Investment Management and AQR Capital Management each hold eight short positions.
Cineworld, the beleaguered global movie theatre chain, remains the most shorted UK-listed name overall, with more than 9 per cent of its stock held short by seven investment managers, the data shows.
Holding some 2.42 per cent of Cineworld’s shares, New Holland Capital holds the biggest bearish bet against the global cinema group, whose share price has endured a turbulent 18 months since the Covid-19 outbreak forced it to shutter 767 outlets globally. In March, Cineworld – a long-running target of hedge fund short sellers on both sides of the Atlantic – reported an eye-watering USD3 billion pre-tax loss for 2020.
FTSE 250-listed gold miner Petropavlovsk, whose operations are focused mainly in Russia, has 6.9 per cent of its stock held short by four short sellers.
Elsewhere, 6.3 per cent of property development and investment firm Hammerson’s stock is the subject of negative wagers by six hedge funds. Electronic payments provider Network International Holdings, and Wood Group (John) Plc, the Aberdeen-based engineering consultant, each have 4.6 per cent of their stock held short by four managers.
“Shorting stocks is no longer the exclusive pursuit of institutional investors, as sophisticated individual investors are now increasingly doing this,” said Will Rhind, Founder and CEO of GraniteShares.
Rhind noted the value of funds invested in its 3x short single stock ETPs listed on the London Stock Exchange was around USD34m million as of October 17, highlighting particular interest in certain US tech names such as Tesla, Uber, and Apple.
“Worries about rising interest rates have had an impact on more growth-oriented tech names presenting a potential opportunity for some sophisticated investors seeking to take advantage of price declines over recent weeks.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Distribution Long-short investing Markets Results & performance Investing in Hedge FundsSEI acquires Finomial
SEI has acquired Finomial, an investor lifecycle management firm offering cloud-native financial technology. The technology is expected to be added to SEI’s existing investor-focused platforms to further enhance automation and digitisation capabilities, as well as reporting and transparency.
“We were impressed with Finomial’s cloud-native investor-focused technology platform. We see potential for immediate applications of their digital collaboration tools and solutions—not just in our outsourcing and fund administration services, but also in our wealth management solutions,” says Steve Meyer, Head of SEI’s Global Wealth Management Services. “We’re excited to welcome the Finomial team to the SEI family, as we believe their expertise in cloud-native technology will help drive our strategic initiatives as we continue to execute our One SEI strategy. We’re also pleased to welcome Finomial’s clients, who will continue to benefit from Finomial’s technology, as well as SEI’s scale.”
Finomial’s cloud-based technology is expected to complement SEI’s existing platforms, including SEI Trade, the SEI Manager Dashboard, SEI Investor Platform and the Global Regulatory and Compliance Platform. This technology will add data-mapping tools, flexible data models, and rules engines to further enhance current capabilities. The technology has the ability to enhance and streamline existing anti-money laundering and know-your-client services, while adding depth and flexibility to data and reporting capabilities.
Finomial Founder and CEO Meredith Moss joins SEI, alongside a total of 42 engineers, developers, cloud specialists and client service personnel from the US and India. This talented team will support a smooth integration, and their deep domain expertise in cloud development will be an invaluable asset to SEI. We believe Finomial’s clients, representing approximately USD500 billion in assets under administration, will also benefit from the combined expertise and expanded opportunities for alternatives market participants.
“We believe time is better spent building investor relationships, not managing documents and workflows. We built Finomial to transform interactions between investors, asset managers, and asset servicers—encouraging collaboration and transparency, while maintaining peerless regulatory compliance,” says Moss. “I’m proud to be part of the SEI family and to continue our efforts across SEI’s platforms and clients. The SEI team shares our commitment to fostering relationships, and we’re excited to continue our work on a larger scale.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Acquisitions Finance & InsuranceGaining the Edge announces charity events to improve networking across January Florida Cap intro conferences
In mid-January 2022, South Florida will host thousands of alternative investment fund managers and investors attending multiple capital introduction conferences. Gaining the Edge, one of the industry’s prominent thought leaders and event organisers, has announced a strategy to improve networking across these multiple events while raising money for charities that benefit at risk youth.
Gaining the Edge will host a day of charitable, social activities open to all industry professionals including those attending other cap intro events on Saturday, 22 January, directly following its Gaining the Edge Cap Intro Florida conference.
Opening participation to attendees of other, potentially competing, events is made possible by Gaining the Edge’s commitment to donate 100 per cent profits to charities that benefit at-risk youth. The four confirmed events include a charity golf tournament hosted at PGA National (with registration only recently opened the tournament is already 40 per cent sold out), a charity Everglades airboat tour, a charity tennis clinic/tournament hosted at PGA National, and a charity sunset cruise.
Record high participation rates are anticipated for these Florida conferences with many companies attending multiple events. This is due to a projected surge in manager search activity amid what is expected to be the greatest asset-raising environment in the history of the alternative asset industry.
Don Steinbrugge, CEO and Founder of Gaining the Edge, says: “Professionals in the alternative investment industry are eager to resume in-person conferences and meet people face to face. As they travel to Florida to attend one or several of the conferences, many are looking for to meet with industry peers, share ideas, and have fun. We believe these charitable events are a great way to promote industry-wide camaraderie while also raising money for a great cause.”
Align recognised as Best Cybersecurity Provider in Hedgeweek US Awards
Align, a global provider of technology infrastructure solutions and Managed IT Services, has been voted as “Best Cybersecurity Provider” in the Hedgeweek US Awards 2021.
This recognition is based on an online peer-review survey in which investors, hedge fund managers and service providers are invited to nominate a “best-in-class” in a variety of categories.
Over the past 18 months, Align Managed Services and its dedicated Cybersecurity Advisory team have ensured that their clients were able to operate their firms seamlessly and securely while addressing the compliance, operational and security challenges associated with the pandemic and subsequent industry shifts.
“To meet client demand, Align is continually evolving its services to account for industry changes. As a result of this dedication to innovation, Align was the first firm to offer a built-in Cybersecurity Advisory team as part of a Managed IT Services offering,” says John Araneo, Managing Director, Cybersecurity & General Counsel. “The Align Cybersecurity team really pioneered the concept of providing model cybersecurity programs that are appropriately scaled for investment advisers.”
As cybersecurity controls continue to evolve and adapt to ever-changing threat vectors, regulatory regimes, technologies, prevailing security standards and more, it has never been more critical to approach cybersecurity from the ground up by focusing and investing more in the underlying IT infrastructure.
“We are honoured to achieve recognition for our Cybersecurity services as the superior solution within the investment management space,” says Vinod Paul, Chief Operating Officer at Align. “By strategically unifying our Managed IT Services and Cybersecurity Advisory Practice, we can provide our clients with a robust, cost-effective, comprehensive solution that scales with their needs while addressing all of their technological, security, governance and compliance requirements.”
Align Cybersecurity, Align's leading-edge Cybersecurity Advisory Practice led by a multi-disciplinary team of industry subject matter experts, provides appropriately scaled cybersecurity solutions that address current regulatory and compliance requirements and meet prevailing operational due diligence standards and investor expectations.
Bitcoin Latinum now trading on DigiFinex
Bitcoin Latinum (LTNM), the next generation, insured, asset-backed cryptocurrency, has officially listed on the DigiFinex exchange, opening over 200 per cent in its first hour of trading. Bitcoin Latinum congratulates DigiFinex on a successful launch, and everyone who has supported the project.
Monsoon Blockchain, Bitcoin Latinum’s developer, plans for Bitcoin Latinum to officially list on seven top-tier public exchanges, under the ticker LTNM. In addition to DigiFinex, the exchanges are: HitBTC (the fifth largest exchange by volume at USD4 billion), FMFW (formerly Bitcoin.com and operating with USD3.3 billion in daily trading volume), Changelly (USD2.71 billion in daily volume), Changelly Pro, Bitmart (USD1.6 billion in daily volume), and XT.com by the end of 2021.
Headquartered in Singapore, DigiFinex boasts over four million users across the globe, and can be accessed by users in 150 countries. With daily trading volume around USD1 billion, DigiFinex is one of the top rated global cryptocurrency exchanges that offers spot, leverage, perpetual trading and fiat to crypto trading. In addition, DigiFinex offers unparalleled 24/7 customer service for its user base.
Bitcoin Latinum was built as an open-architecture cryptocurrency technology, capable of handling large transaction volume, cybersecurity and digital asset management. Based on the Bitcoin ecosystem, Bitcoin Latinum was developed by Monsoon Blockchain Corporation on behalf of the Bitcoin Latinum Foundation. LTNM is a greener, faster and more secure version of Bitcoin, and is poised to revolutionise digital transactions.
Unlike other crypto assets, LTNM is insured, and backed by real-world and digital assets. Its asset backing is held in a fund model, so that base asset value increases over time. It accelerates this asset-backed funds growth by depositing 80 per cent of the transaction fee back into the asset fund that backs the currency. Thus, the more Bitcoin Latinum is adopted, the faster its asset funds grow, creating a self-inflating currency. The listing on DigiFinex highlights Bitcoin Latinum Foundation’s commitment to supporting the growth of a sustainable crypto ecosystem.
Bitcoin Latinum was developed with a highly scalable network that will initially support up to 10,000 transactions per second and millions of transactions per day to facilitate retail transactions. With its Proof of Stake (PoS) consensus method, Bitcoin Latinum ensures the network facilitates more transactions per minute at lower transaction fees. Utilising an efficient consensus mechanism, Bitcoin Latinum provides a much better on-chain payment network compared to Bitcoin, with an average transaction confirmation in 3-5 seconds.
LTNM is one of the greenest cryptocurrencies in existence, and recently joined the Crypto Climate Accord. Utilising its advanced Proof of Stake (PoS) mechanism, LTNM holders will earn rewards for holding their coins as collateral to stake on the Bitcoin Latinum network. This leads to less electricity consumption. LTNM reduces the energy consumption to only 0.00015 kWh per transaction.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsPerforming under pressure: How hedge funds can weather Q4’s choppy markets
Hedge funds are well-placed to outperform other assets classes in a potentially choppy market environment during the fourth quarter, with commodities, event driven and certain credit strategies faced with a rich opportunity set and strong upside potential as markets adjust to a post-Covid world.
In its latest ‘Fourth-Quarter Hedge-Fund Strategy Outlook’, K2 Advisors said global equities and bond markets are now locked in a “tug-of-war” between good news and bad news, which is shaping the way investors position their portfolios.
“Change creates opportunities for those nimble enough to capture the new tailwinds while hedging out the risks associated with a shifting environment,” K2, the hedge fund investing unit of Franklin Templeton, observed.
Specifically, Covid cases are set against tightening central bank policies, stronger employment numbers are balanced against supply chain problems, while solid earnings growth this year face worsening year-over-year comparisons in early 2022.
K2 pinpointed relative value trading opportunities in commodities amid a continued tightened supply and demand environment which has pushed prices up. A range of commodities - crude, natural gas, heating oil and gasoline – have hit multi-year highs recently, and with more economies beginning to reopen, demand for oil and products is set to grow further as work and personal travel increases.
“We look forward to a rich opportunity set, particularly in the energy sector, as volatility and prices increase,” said K2, observing how supply is unlikely to meet demand and noting a “significant lag” between any increase physical production and the result of higher supplies.
“Despite renewed institutional interest, commodity managers have remained disciplined in accepting investments and are managing capacity closely.”
Meanwhile, the adviseFUBDr is also taking a positive stance on event driven hedge fund strategies.
Its outlook is underpinned by a combination of record deal volumes across M&A, leveraged buyouts, buybacks and activist campaigns, as well as attractive spreads, and a “particularly attractive” diversity of outcomes stemming from greater regulatory and geopolitical uncertainty.
Specifically, K2 pointed to greater regulatory involvement in the US and abroad, increased fundamental uncertainties due to changing monetary policies, and more active shareholder and management activism.
“These risks have translated to wider spreads and greater potential upside for managers who can produce alpha through security selection and trading,” they noted.
K2 also favours certain credit-based assets, as well as macro hedge funds. In credit, the prevailing macro picture remains “very supportive”, K2 said, with capital markets offering a solid environment for new issuance since late 2020 and spreads tighter across the board.
“We look forward to higher levels of dispersion among issuers and therefore a better opportunity set for pure credit pickers,” it wrote. “In the meantime, however, managers remain focused on events to generate performance. In high yield, for example, the primary market remains extremely busy.”
For long/short credit strategies, tighter spreads provide better entry points for short positions, the outlook added, while the rebound in structured credit offers dispersion opportunities in commercial mortgage-backed securities (CMBS) and aviation, which depend on the economic reopening.
K2 is also overweight global macro strategies, as managers look to position around the inflationary outlook and its far-reaching impact on monetary and fiscal policy in the US.
As markets are shaped by the policy developments, thematic macro strategies can capitalise on emerging opportunities, K2 said.
“While shifts in these factors have contributed to volatility and challenged some managers’ positioning in the last quarter, increased clarity on policy paths going forward may support medium or long-term thematic positioning across major markets,” the outlook observed.
“Specialist managers focused on relative value may continue to find opportunities, for example, between commodity exporting and importing countries. The potential for policy certainty to help develop medium- to long-term directional themes and trends may also support systematic macro strategies.”
The forecast comes as new Q3 data published by Preqin this week underlined how hedge funds have continued to insulate investors’ portfolios as market conditions turn.
Hedge funds dipped some 0.27 per cent in the three months between July and September, but still outperformed the S&P 500 PR Index, which was down 0.45 per cent over the same period.
Beyond the headline numbers, several hedge fund strategies remained in the black – macro funds were up 1.83 per cent for Q3, while relative value (0.77 per cent), credit (0.57 per cent), event driven (0.52 per cent), and CTAs (0.77 per cent) were also in positive territory, according to Preqin metrics.
“High levels of volatility and dispersion, and divergence in recovery between countries, have all created attractive opportunities for hedge funds,” said Sam Monfared, associate vice-president, Research Insights at Preqin.
“The upside is still there for hedge funds, and they generally perform well under market pressure. As central banks step away from the markets, volatility will likely increase, and hedge funds will certainly be there to support investors in that environment.”
Like this article? Sign up to our free newsletter Author Profile Mark Kitchen Employee title News Editor Twitter Related Topics Results & performance FundsSheppard Mullin adds tax partners
Sheppard, Mullin, Richter & Hampton has appointed Josh McLane and Niya Tang as partners in the firm’s Tax, Employee Benefits, Trusts & Estates practice group.
McLane is based in the firm’s Orange County office and was most recently a partner at Kirkland & Ellis. Tang joins the firm’s New York office and was most recently a shareholder at Greenberg Traurig. Sheppard Mullin has added 20 lateral partners this year.
“Our transactional tax partners have been extremely busy due, in large part, to the sustained surge in the deals being handled by our corporate group,” says Jon Newby, vice chairman of Sheppard Mullin. “Josh and Niya’s particular skills addressing the complex tax issues private equity firms face are fantastic additions to our team’s existing expertise and will be of great benefit to our many private equity clients.”
Amy Tranckino, co-leader of the firm's Tax, Employee Benefits, Trusts & Estates practice group, adds: “We’re thrilled to welcome Josh and Niya. Our clients need – and want – sophisticated tax advice, and their backgrounds allow them to provide ‘spot-on’ counselling supported by real world experience.”
McLane focuses on the tax aspects of complex business transactions and reorganisations, including mergers and acquisitions, private equity investments, divestitures, joint ventures, financings, restructurings, and bankruptcies. In addition to his law firm experience, McLane served as general counsel and corporate secretary of CareTrust REIT and was a senior associate at Deloitte. He received his BS in Accounting from Brigham Young University, Marriott School of Business, and his JD, cum laude, from Brigham Young University, J Reuben Clark Law School.
Tang has significant experience on a wide range of transactional tax matters, including private equity funds, hedge funds, mergers and acquisitions, divestitures, partnerships and joint ventures, corporate restructurings and financing transactions. She represents both sponsors and investors on a wide range of domestic and international tax matters relating to both inbound and outbound investments. She earned her BS from Fudan University; her JD from the University of California, Hastings College of the Law; and her LLM in Taxation from New York University School of Law.
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsVenture debt growing in popularity on both sides of the pond, says Crestbridge
PARTNER FEATURE
As any start-up founder knows, launching a new business can be an exhausting and all-consuming experience. When not dealing with day-to-day operations or handling accounts, there are investors to deal with and venture funding to be raised, often from multiple backers with competing agendas.
The herculean efforts made by many entrepreneurs to juggle all this helps to explain the growing popularity of venture debt as a source of funding.
It already makes up a large proportion of US venture capital funding and is now also growing in popularity in Europe, says Alex Di Santo (pictured) of Crestbridge, a Jersey-based firm which specialises in services to venture debt funds.
Crestbridge, which employs over 500 people in eight offices around the world, offers a range of financial services for clients in the private equity, real estate and family office sectors.
Venture debt
Venture debt is a form of short- to medium-term debt financing generally provided to venture-backed companies by non-bank lenders or other specialist banks.
Used to fund growth or extend the runway, venture debt has, over the past 10 years, emerged as a growing source of funding for start-ups.
In a world of low interest rates, it can be a relatively cheap way to fuel growth and is often used to supplement equity finance raised from other sources.
Typically, start-ups will access venture debt after their first or second big rounds of equity funding.
Between 2018 and 2020, over USD80 billion in loans and other debt products were created for VC-backed companies in the US, up from USD47 billion in the previous three years, according to PitchBook figures.
Now a similar trend is underway in Europe as founders recognise the benefits and big players in the market, like Silicon Valley Bank, seek to broaden their offering to new geographies.
Non-dilutive funding helps founders
Perhaps the biggest advantage over regular equity funding is that venture debt is non-dilutive, allowing founders to retain control over their business while also raising essential funds.
“When taking venture debt over equity there's no dilution so there can be more upside for the founders,” Di Santo says, adding that venture debt managers don’t require governance rights through board seats or specific approval rights around eg key hires, exit etc. “So venture debt avoids the relinquishing of control by founders.”
Research in the US indicates that founders using venture debt can, when reaching Series D, retain around an extra 10 per cent of ownership when they combine venture debt with equity, compared with using just equity financing.
Pandemic boost
That’s one reason why the industry experienced a surge in interest during the Covid-19 pandemic, when many start-up founders found themselves in urgent need of funding to keep their businesses afloat but were often understandably reluctant to relinquish control.
“When Covid emerged, we saw lots of activity in the space because early-stage companies were after capital and they didn't necessarily want to go down the equity route,” Di Santo says.
Another benefit is the speed with which debt finance can be arranged and accessed.
Typically, it takes less time to access capital than with equity investment, where potential backers – whether private equity, angel investors or venture capital firms – usually demand more time to meet with founders, discuss the business model and conduct detailed due diligence.
“Venture Debt can be very quick to access so the whole process can be much quicker than an equity raise,” says Di Santo, adding that this can help founders execute rapid bolt-on acquisitions if an opportunity arises.
Alternatively, the debt funding can be used to hit another key milestone for the business in order to bolster a corporate valuation for a subsequent equity fundraising.
The growing popularity of venture debt has been fuelled in part by its widespread acceptance in Silicon Valley as an effective way to power the growth of early-stage companies.
“In the US, venture debt is tried and tested and well known and it’s a well-established asset class,” Di Santo says.
“Silicon Valley has been ahead of the curve in the Venture space and the same applies to Venture Debt. In Europe, it’s less popular. There are very few venture debt managers but the trend we're seeing is an increase in European managers moving into venture debt.”
Europe is lagging in booming market
He says that in Europe there are still a relatively small number of Venture Debt providers who are active in the market, although the number is growing.
With more players active in the sector, the lending market is becoming more competitive with better deals on offer for borrowers.
Start-ups increasingly can access funding on highly favourable terms, with lighter covenants, fewer demands for warrants and often lengthy interest only periods available.
Of course, debt financing does not come without risk and critics say the combination of start-ups and elevated levels of debt at such an early stage in their development can raise red flags.
“Obviously if you get into trouble and you can't repay the loan, things can become difficult. The venture debt provider could take control of the assets,” Di Santo says.
“There can also be early repayment fees associated with Venture Debt and success is generally reliant on successful equity funding. It’s not for everyone. Debt needs to be taken at the right stage of the lifecycle of the business,” he adds.
At the very least, the company needs to be at the point where it has proven recurring revenues so it can afford to make the necessary debt repayments.
Like this article? Sign up to our free newsletter Author Profile Related Topics Private Debt VCApex adds two to Jersey business
Apex Group has appointed Paul Monahan as Head of Corporate Services, Jersey and Chantal Slabber as Head of Client Services & Operations, Jersey.
In this role, Monahan will be responsible for driving the continued development and growth of Apex’s Corporate Services offering in Jersey, reporting to Stephen Reilly, Head of Corporate Solutions, Jersey.
Monahan joins Apex Group from Langham Hall where he was Executive Director and Co-Head of Funds. Prior to this, Monahan was a manager in the Jersey Financial Services Commission’s Funds Authorisation Team, having gained experience as a fund officer and administrator to Real Estate Funds.
Slabber joins Apex as Head of Client Services & Operations, Jersey with responsibility for the overall quality of all deliverables of the operations team. Slabber most recently held the role of Head of Operations at UBS Trustees (Jersey) Ltd, following experience of working at KPMG Channel Islands, PwC and Capitec Bank.
Apex’s comprehensive range of corporate services are at the forefront of industry best practice and meet the highest standards of corporate governance throughout all stages of the entity life cycle. Apex’s experienced teams work closely with clients to develop tailored solutions and provide a flexible and reliable service.
Established in 1956, Apex is one of the largest corporate and fund services administrators in Jersey, employing 200 people and celebrating its 65th anniversary in 2021. Today’s appointments are the latest indication of the continued growth of Apex’s Jersey operations, following the hires of former RBS International Managing Director Stephen Reilly as Head of Corporate Solutions, Jersey and Alice Read, Commercial Director, Corporate Solutions from Intertrust.
Stephen Reilly, Head of Corporate Solutions, Jersey at Apex Group, comments: “Jersey continues to play an important role on the global financial services stage and is now home to one of Apex’s largest offices. We are delighted to welcome Paul and Chantal to the Jersey office to lead our Corporate Services and Client Services teams, respectively. These hires are further evidence of our commitment to attracting, retaining and training the best talent the market has to offer.”
Matt Claxton, Global Head of Corporate Solutions at Apex Group, adds: “These senior appointments further build on our strong local presence which, when combined with a global reach across multiple jurisdictions, is a compelling proposition for our clients in Jersey. As Jersey continues to attract interest from global funds and businesses, we are better placed than ever to meet their needs, with our excellent local team delivering truly global single-source solution and outstanding levels of client service.”
Digital assets investment products see record flows
Digital asset investment products saw inflows last week totalling USD1.47 billion, the largest on record by a significant margin, according to the latest Weekly Digital Asset Flows report from CoinShares.
During the week total assets under management reached a new record of USD79.2 billion but closed week-end at USD76.7 billion.
The record inflows were a direct result of the US Securities & Exchange Commission allowing a Bitcoin ETF investing in futures and the consequent listing of two Bitcoin investment products with inflows totalling USD1.24 billion.
Other altcoins saw inflows with the most notable being Solana, Cardano and Binance.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsPrivate credit remains compelling but is operationally complex
PARTNER FEATURE
As more alternative fund managers explore the yield opportunities in private debt, one of the risks is introducing too much complexity to their middle- and back-office operations. Outdated accounting and portfolio management systems or insufficient internal resources for tracking individual loan performance increase that risk.
Private debt AUM stood at USD575 billion at the end of 2016 and grew to USD848 billion by 2020. According to Preqin, the asset class will increase by 11.4 per cent annually to USD1.46 trillion by the end of 2025. Moreover, as Bain & Company's Global Private Equity 2021 report reveals, the amount of dry powder for direct lending has grown 726 per cent since 2010, twice as much as any other alternative asset class.
Additionally, sell-side institutions expect the collateralised debt obligations (CLO) market to heat up due to the pent-up demand for new issuance amid tighter spreads. For example, Bank of America is forecasting USD300 billion of primary loan issuance in 2021.
Against this backdrop, hedge fund and private equity managers are converging on private credit to roll out new fund strategies and tap into the burgeoning asset class.
"More credit managers are originating private loans, and we see this across hedge funds and private equity," says Aani Nerlekar (pictured, above right), Director, Solutions Consulting, SS&C Advent.
Operational rigour
One of the main operational challenges for private credit investors is ensuring that every moving element of the portfolio works in synch and leverages the same clean data set. An associated challenge is making the highly fragmented data more transparent.
The public equity and fixed income markets are standardised for corporate actions, event processing and dividends. Even reconciliations are a lot more straightforward, with custodians and prime brokers matching and triangulating data points.
But when you venture into private credit, there are no standard processes. As a result, loans may need to be processed manually, terms can change quickly, cash flows are irregular, and reconciliations are more challenging.
"We've seen clients struggle when there is a lack of data transparency," says Nick Nolan (pictured, above left), Senior Director, Product Management and Solutions Consulting, SS&C Advent. "There are a lot of operational processes that work quite differently to public markets; it's not just systems, it's data, it's reconciliation. So those are things our clients focus on, and where we try to help them – whether it's with technology or managed services – to support new workflows."
He notes that while some of SS&C Advent's clients have, for quite some time, been investing in more traditional debt. Many of them are now originating their debt and coming up with their bespoke terms for cash flows and other features.
"As a result, our systems have needed to adapt to these changes as clients venture into more complex structures and types of investments," he adds.
Managing interest payments from bank loans and self-originated loans, including unitranche, mezzanine and senior secured loans, can be operationally complex. Typically, it requires tracking multiple loans with scheduled versus ad hoc payment-in-kind, including term loans, delay draw loans, revolvers and loan total return swaps. In addition, if the portfolio is holding distressed loans, another operational consideration is effectively monitoring loan defaults and amortization of loan discounts.
Loan tracking can quickly become a challenging task for any fund manager to handle, no matter how sophisticated their internal operations might be.
Systems that lack automation, comprehensive multi-asset class coverage, and the technology infrastructure to draw data in from many sources potentially expose inferior, inefficient data management processes. Disparate information can reduce the capacity for both the front- and back-office teams to view each moving element of the portfolio in a single, consolidated manner.
Investors are more sophisticated and will look carefully at the operational rigour of those moving into the private debt space when conducting their due diligence. Likewise, managers with sophisticated IT systems will likely be better placed to demonstrate their ability to manage every complexity across the investment lifecycle. Ultimately, operational superiority can determine the success of the fundraising process.
"Investors do demand more of their managers in terms of transparency around how these funds are operationalised," comments Nerlekar. "There are higher expectations from investors for look-through reporting and determining how much of each loan in the portfolio is being funded by an individual investor."
Tracking fees and waterfall calculations
One of the issues that managers must contend with as private credit grows is more choice (for investors) and less opportunity to roll out standard, 2/20 fee structures. Instead, investors are increasingly looking to negotiate individual fee terms with the manager, meaning that the accounting process has to factor in cash flow movements across multiple fee structures and have the ability to calculate customized waterfall and carry structures terms.
The ability to track multiple cash flows is further accentuated by investors' need for more opt-ins and opt-outs.
Historically, investors automatically participated in every investment, but now, managers are giving investors the option to participate (or not) in a deal because of customised terms.
As a result, managers will increasingly need to account for 'deal by deal' carry within the fund.
Now more than ever, it's more important for managers to have a look-through system tightly integrated for all of these different components. For example, investment accounting, fund accounting and investor accounting – all three pieces are handled effectively by SS&C's Geneva.
"We have the asset class coverage to fully support and manage the different terms of these loans, regardless of how large the overall fund structure is. So the user can understand where the asset is held, where the investors are coming in from, and how much capital they have," concludes Nerlekar.
Like this article? Sign up to our free newsletter Author ProfileWarning signs for hedge funds as investor allocations slow down
The recent steady flow of new investor capital into hedge funds this year could be showing signs of slowing down, with less than half of managers (44 per cent) seeing positive inflows in September, according to new eVestment research.
Overall, investors yanked USD7.99 billion out of the global hedge fund industry during September, according to eVestment’s latest ‘Hedge Fund Asset Flows Report’. Coupled with a performance slide of 0.57 per cent for the month, hedge funds’ overall assets dipped from USD3.62 trillion in August to USD3.59 trillion in September, eVestment’s metrics show.
“That quarter-end data would show outflows is not surprising as that has been the norm across the industry over the last 18 quarters,” Peter Laurelli, eVestment’s global head of research. “That aside, September net redemptions do not appear to be a sign that an otherwise positive year for the hedge fund business is about to shift in sentiment.”
Hedge funds have drawn more than USD30 billion in new capital from allocators over the course of 2021. But Laurelli indicated that last month’s outflows offer warning signs for some in the hedge fund business.
“The data shows only 44 per cent of funds saw inflows in September,” he said. “This is a signal the momentum of inflows is slowing.”
“On one hand we could dismiss September’s outflows for this reason in the face of what has been an otherwise generally good year for capital raising across the industry, but if we dig, we can find some underlying metrics which point to a slowing of this year’s inflow momentum that extends beyond just September’s data.”
The strategies most in-demand among allocators in September were managed futures, which pulled in USD1.9 billion, long/short equity - drawing USD1.78 billion - and event-driven strategies, which attracted USD1.37 billion of investor capital.
In contrast, macro hedge funds registered some USD4.10 billion worth of withdrawals, putting the strategy’s year-to-date redemptions at USD3.30 billion. Investors also fled directional credit (-USD3.21 billion) and multi-strategy hedge funds (USD2.23 billion) during September.
“The managed futures segment has now seen aggregate net inflows for seven consecutive months, matching its previous largest streak of net inflows from 2015,” eVestment said.
“Echoing the theme of concentrated allocations in September, fewer than half of reporting managers’ data indicated net inflows during the month and looking across the various reporting funds we see the bulk of all net new assets coming in this year have gone to larger managers in the space.
“The ten largest net inflows so far in 2021, which account for almost 70 per cent of reported data’s net inflows, have gone to products with an average AUM near USD4 billion.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Funds Investments Market data Results & performance Investing in Hedge FundsGordian Capital chooses SS&C to support alternatives platform
SS&C Technologies Holdings, Inc (Nasdaq: SSNC) has been chosen by Gordian Capital, an Asian institutional fund management platform, with AUM of USD7 billion, to expand its relationship with SS&C Technologies Holdings in Singapore and Japan.
The platform, which leverages SS&C GlobeOp for fund administration, has added the Eze Investment Suite to its stack to support trading, portfolio and risk management. As a result, Gordian Capital will now take advantage of the integrated solution in Singapore and Japan, consisting of 25 hedge, private equity, real estate and fund-of-funds.
“We were looking for an order and execution management system that was robust, versatile, and capable of supporting a vast array of different strategies and investment styles for our growing client base,” says Mark Voumard, CEO of Gordian Capital. “SS&C’s solution provides stability, maturity and functionality we require to support our platform.”
Gordian Capital’s fund management platform provides institutional-grade infrastructure for new fund managers, ensuring they can meet regulatory and operational demands quickly and efficiently. In addition, its open architecture supports multiple pricing models and the full spectrum of liquid and illiquid strategies.
“Gordian Capital is an influential player in Singapore’s asset management industry. We are pleased to support their growing business,” says Frank Maltais, Sales Director, ASEAN, SS&C Eze. “SS&C provides the cutting-edge technology and services our clients need to help meet increasingly sophisticated investor demands.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Services Fund administration