Category: Funds

Hedge Fund Manager of the Year 2015

Hedge Fund Manager of the Year 2015

Alkimis SGR was established in 2008 by Massimo Morchio, backed by several well-known Italian family offices. The firm is regulated by the Italian/European law and supervised by Bank of Italy/Consob. Massimo Morchio was previously CIO at RAS, Italy’s second largest insurer, where he ran over EUR 40 billion in long only assets. He left in the wake of the company’s takeover by Allianz.

The firm currently manages Luxembourg Sicavs and Italian mutual funds, all run with the same equity long/short, low volatility strategy. Morchio heads up a team which also worked together at RAS, including Luca Montorfano, former head of European equities and currently Chief Investment Officer of Alkimis.

With regards to products, Alkimis equity L/S strategy is implemented into several investment vehicles:UCITs compliant mutual funds and SICAVs or advisory mandates, managed either directly or as delegated investment manager.

This strategy aims to generate absolute returns with moderate volatility. It invests – purchase and short sell – in international equities selected through proprietary fundamental analysis based on cash flow. Long/ short performance is the main driver of the strategy return, not correlated with the direction equity markets. The strategy is declined into 4 investment vehicles with identical portfolios.

• Alkimis Capital UCITs (ALKCUTS IM, IT0004550882). Open-end mutual fund established in Italy. Also available as a “coupon fund”). Inception Nov 2009.
• Alkimis Capital (ALKCAPC IM, IT0004550783). Hedge fund established in Italy. Winner of the Mondoalternative 2014 prize. Inception Nov 2009.
• Duemme Alkimis Absolute (DUEALKI LX, LU0630939048; DUALKCI LX, LU1031506550). UCITs compliant Luxembourg Sicav. Available on AllFunds Bank. Inception July 2011.
• Unicorn Alkimis Equity Alpha (UAEARCE LX; LU0987301685; UAEAICE LX, LU0987301842), UCITS compliant Luxembourg Sicav. Inception February 2014. Also available in CHF hedged units.

The firm’s Alkimis UCITs fund is among their most successful, and since inception (27/11/2009) the fund has returned 26,6% with a volatility between 4 and 5%. The equity L/S strategy employed by the fund has proved to be uncorrelated not only with equities, but with all major asset classes, like bonds and commodities.

More recently, the firm has started to offer an additional strategy to its clients, called “Special Values”. This high conviction – long only strategy is designed to provide capital appreciation over the medium term, investing
in a limited number (20-25) of international companies selected across all sectors, with attractive shareholder remuneration policies. It was originally implemented as an advisory mandate in Feb 2012, and later (Feb 2014) incorporated into two investment vehicles with identical portfolios.

The strategy is available through the following funds/subfunds:
• Alkimis Special Values (DUMSAII LX; LU1008677459), UCITS compliant Luxembourg Sicav. Available on AllFunds Bank. Inception February 2014.
• Unicorn Alkimis Dividend Plus (UADPRCE LX; LU0987301925), UCITS compliant Luxembourg Sicav. Incorporated in February 2014.

The idea behind the strategy is to select companies that, while still growing the business, have been able to reward their shareholders with stable and growing dividends or/and regular buybacks. With zero or negative rates on corporate and government bonds, investing in companies that provide high and growing dividends year after year, is becoming an increasingly attractive investment proposition for a lot of investors.

As well as these unique investment products, the firm also boasts a cohesive and successful team. Prior to founding Alkimis SGR Senior Partners have worked together for nine years as a team at Ras Asset Management (the 2nd largest insurance co. in Italy), applying the same investment methodology and achieving superior long term results. Ras Asset Manangement was consistently ranked among the best SGR in Italy.

The firm’s CEO Massimo Morchio has previous experience as Head of Global Financials and Head of Specialist Fund in the Allianz Group (Pimco, AGF, Allianz, RAS), as well as being Chief Investment Officer at Ras.

Luca Montorfano, the Chief Investmernt Officer, is also an experienced investor, having previously worked as Deputy Head of European Equity in the Allianz Group (Pimco, AGF, Allianz, RAS) and Head of European Equity at Ras, Italy.

UK Government one step Closer to Introducing new State Pension

UK Government one step Closer to Introducing new State Pension

This means that those who reach State Pension Age on or after the 6th April 2016 and before the 6th December 2018 – when the State Pension Age equalises – will receive a fully indexed public service pension for their whole life.

This will ensure public service pension payments to these individuals continue to be equal between men and women.

The government is committed to ensuring older people can live with dignity and security in retirement. The introduction of the new State Pension in April this year will radically simplify state pension provision, making it easier for ‎people to understand what the State will provide in retirement.

As well as simplifying the system, the new State Pension will remove the inequalities in the current system whereby some groups, such as women and the self-employed, tended to build up low amounts of Additional State Pension.

As part of these changes, this complicated, earnings related element of the current system, is being abolished. To manage the transition to the new state pension, the government will continue its current practice of directly price protecting the Guaranteed Minimum Pension of public sector workers where the Additional State Pension uprating rules do not apply.

The government, as a large employer, has considered how best to address the implications of changes resulting from the introduction of the new State Pension, for public service pension schemes and their members, taking into account historical commitments made by previous governments.

The government is expected to launch a consultation this year on how to address this issue in the longer term, recognising the increased value of the new State Pension, and seeking to balance simplicity, fairness and cost for members, public service pension schemes and the taxpayer.

PMI and OPDU Collaborate to Promote Good Governance in Pension Schemes

PMI and OPDU Collaborate to Promote Good Governance in Pension Schemes

For all new OPDU members, the organisation will enrol the Chair of Trustees, free of charge, in the PMI’s Trustee Group for the first year of membership thus promoting even better governance of that company’s pension scheme.

Martin Kellaway, Executive Director at OPDU said:

“We welcome the opportunity to join with the PMI on this initiative. It comes at an exciting time for OPDU and represents a key part of our strategy to provide strong customer focus, and ensure our members derive maximum benefit from joining. The PMI is the industry leading provider of professional qualifications and training so a perfect partnership to support our aim of improved governance.”

Vince Linnane, PMI Chief Executive, commented:

“We are continually looking for ways to support trustees to provide good governance and working in partnership with OPDU is key to ensuring we expand our membership and raise the standards of our Trustee Group. We believe the knowledge sharing enabled by the educational material and information we provide, will help to raise the bar for what pension scheme members can expect from their trustees.”

The PMI Trustee Group has a strong track record going back to 1994 of supporting pension scheme trustees. More than 3,000 trustees have passed the PMI Award in Pension Trusteeship qualification since it was introduced. Many more have also attended dedicated PMI Trustee Seminars.

FCA Encourages Firms to do more to Support Ageing Population

FCA Encourages Firms to do more to Support Ageing Population

Changing demographics and trends in health and society mean that developing more inclusive financial products and services is increasingly important the FCA argues. Their Ageing Population Discussion Paper is an important first step in their conversation with firms, consumer groups, and other stakeholders to determine how the regulator and industry can collaborate to address the range of issues facing older consumers, when they engage with financial services.

Tracey McDermott, acting chief executive of the FCA, commented:

“The number of people aged over 65 in the UK is expected to increase by 1.1 million in the next five years. There is a real and urgent challenge for the financial services sector to develop new and innovative products to meet the needs of our changing population.

“The publication of this discussion paper is intended to stimulate debate and discussion about these needs and how to meet them. Ultimately, the industry must take the lead but we recognise that the FCA has a key part to play in ensuring we encourage appropriate innovation that also provides proper levels of protection for consumers. This work will help us and the industry to develop our approach with the benefit of insights from others, in particular those representing the end consumers of these services.”

Next steps

The FCA is working with stakeholders, including industry, trade bodies, consumer groups, and the public sector to discuss experiences, best practice and potential approaches to the issues raised in this discussion paper. Further research will be undertaken by the FCA to develop a regulatory strategy that promotes better outcomes for older consumers. The strategy will be launched in 2017.

New CEO of PMI Announced

New CEO of PMI Announced

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Mr Tancred has enjoyed a long and successful career to date in a number of financial and senior managerial positions. He was most recently employed by the British Institute of Facilities Management, latterly as its Chief Executive Officer, where he oversaw a significant growth in its qualifications, membership and profitability.

Mr Tancred said:

”I am very excited to be joining PMI at this time. I look forward to building on the successes that Vince, the Board, Advisory Council and the PMI House team have achieved and to delivering the PMI vision. Clearly there are significant challenges ahead, but I eagerly anticipate serving an industry and profession that is vital to the economy and society at large.”

He commences work at the PMI on 1 March, where he will work for a period alongside Mr Linnane to ensure a smooth transition.

PMI President Kevin LeGrand commented:

“I am delighted to welcome Gareth to the PMI team. His experience, enthusiasm and impressive track record make him an ideal candidate to lead the PMI through the next phase of its development. I have no doubt he will provide strong leadership for the Institute though the challenges that undoubtedly lie ahead, positioning it to help its members in addressing the new pensions and savings world that is developing now.

I would also like to pay tribute to Vince Linnane, who has led the PMI to this point, handing on a strong organisation to Gareth. I wish Vince every success in his future endeavours.”

Commercial Aviation Deals

Commercial Aviation Deals

Commercial aviation has been precariously placed since the summer of 2008. During this period the sector has faced a plethora of obstacles; crude oil rocketed to almost $150 a barrel, increasing competition hindered profits, and airlines faced the consequences of a global lending squeeze. Passenger number growth was also below expectation during this period, whilst aircraft production levels also fell.

Finally, after almost eight years, these market headwinds are receding. Demand for commercial aviation is again rising, due to broader global economic expansion and the growth of the middle classes in developing nations. For all of the recent challenges, the competitive environment of the noughties has ensured that airlines have optimized and improved their overall efficiency. Banks are benefitting from monetary easing and now have greater capital to lend. This is seeing them lend to larger, more secure organizations, with airlines being one such example.

Crude oil has plummeted to around $30 a barrel. Crude oil can account for 35-50% of an airline’s costs and, as this discount for the airlines is yet to translate to discount for customers, airlines are enjoying greater profits and can expect rapid advancement in growth.

In the last few weeks, Iran has completed a $25b deal to purchase 118 aircraft from Airbus. This is indicative of a general trend of expansionist attitudes to fleet acquisition in the industry. Flynas, Vietjet and United Airlines have all either placed or proposed orders for new fleets of aircraft. Orders at the annual Bahrain Airshow reached $9b in 2016 – triple the figure from 2014. Forecasts from investors for aviation industry progression in 2016-17 have therefore been unsurprisingly optimistic.

Despite this expected boom, a dearth of qualified commercial pilots is now a genuine obstacle to industry growth. A lack of aviators is now a more pressing issue than any concerns surrounding global economics, terrorism or even the price of oil. Boeing has stated that by 2034, 558,000 additional commercial pilots will be necessary to service expanding fleets on a global scale.

While the gravitas of the problem is appreciated within the industry, the current pilot training infrastructure is insufficient to offer a solution. Therefore, private training academies provide high-potential investment and acquisition opportunities not only in the existing climate, but also in the decades to come.

Pilot training organizations with a proven track record, established airline relationships and a powerful brand offer the greatest security. Naturally this marks them out as a better prospect for investment and acquisition. Penetrating the market as a start-up is a more significant challenge. The risk/return ratio is not as enticing an investment opportunity – especially as national aviation regulators are more rigorously enforcing stringent standards for training and safety in pilot academies.

Different types of training academy offer different opportunities to potential investors. Academies offering an all-encompassing experience including end-to-end pilot training solutions (whereby airlines can outsource the entirety of their training requirements), rather than solely flight training, are the most desirable investment option. Pilot training facilities offering an array of flexible and bespoke training solutions, such as the Multi-Crew Pilots License, will be at an advantage owing to their propensity to variable regulatory and airline requirements.

The Asia-Pacific region will enjoy the strongest growth within the commercial aviation sector as almost half of the world’s growth in air traffic will be located there. Three billion people are projected to have entered the middle classes by 2030. A large proportion of this number will be across the Asia-Pacific region where budget carriers will service the new budget-wary middle class. Some of the best returns on investment will therefore come from pilot training academies supplying the budget Asian carriers with their pilots.

Aircraft and simulator manufacturers, including Airbus and Boeing among other industry players are also expanding into the pilot training market. The $220m purchase of CTC Aviation by space communications system L3 is a recent example of this. The experience and flexibility of established training providers will see them capitalize on the market’s new growth opportunities. The next 3-5 years will see significant growth in the number of pilot training academies and the expansion of existing academies.

The possibility of a shortage of qualified commercial pilots threatens to hinder the growth of the commercial aviation Industry irrespective of the lessening economic issues and projection of continually low oil prices in the coming years. Investing in the pilot training academy market at this time will offer strong growth and returns on your investment, while allowing the aviation sector to maximize its considerable potential by imbuing the industry with the pilot personnel it needs.


UK Government Takes aim at Pension Freedom Barriers

UK Government Takes aim at Pension Freedom Barriers

People looking to access their pension pot under the new pension freedoms will benefit from easier transfers and more information as the government outlines further action to remove unjustifiable barriers, the Economic Secretary to the Treasury Harriett Baldwin announced today (10 February 2016).

Building on the Chancellor’s announcement last month that the government would limit early exit charges for people seeking to access the freedoms, the government has today published its response to the Pension Transfer and Early Exit Charges consultation.

The response outlines that:

• government will introduce a new requirement for trust-based pension schemes to regularly report on their performance in processing transfers;
• The Pensions Regulator (TPR) will issue new guidance for scheme trustees to ensure transfers are processed quickly and accurately;
• Pension Wise will develop new content on the transfer process, which will include information on likely timescales, what customers need to do and greater clarity on whether financial advice is required.

The consultation found that whilst the majority of eligible individuals are able to access their pension under the new freedoms, there are a small but significant number who have been effectively prevented from accessing the pension freedoms because of high exit charges or long transfer times.

The consultation found that for Financial Conduct Authority(FCA)-regulated contract-based pension schemes, transfers took 16 days on average, however, TPR data showed that the mean transfer time for trust-based pensions was 39 days, with many consumer survey respondents saying that they had to wait significantly longer for individual transfers.
Harriett Baldwin, Economic Secretary to the Treasury, commented:

“It is only fair that people who have worked hard and saved their entire lives are able to access their pensions flexibly, without facing any unjustifiable barriers. That’s why we’re taking action to curb excessive exit charges, make transfers easier and ensure people have the information they need to make informed decisions.

“We will continue to work to ensure that our landmark reforms deliver real freedom and choice for people.”

Baroness Ros Altmann, Minister for Pensions at the Department for Work and Pensions, said:

“Encouraging people to save and helping them on their way to a financially secure retirement is a priority for this government and we need to ensure that the right protections are in place for consumers.

“No consumers should have to pay excessive early exit fees, regardless of the type of scheme that they are in. And we will be working to ensure that action is taken to protect members of trust based schemes.”

Lesley Titcomb, Chief Executive of The Pensions Regulator added:

“We welcome the government’s commitment that all pension savers will be protected from unnecessary barriers to accessing their pensions, such as excessive early exit charges and delayed transfers. We will be working closely with government and the industry to deliver the recommendations of the response.”

The Chancellor announced on 19 January 2016 that the government would introduce legislation to place a new duty on the FCA to cap early exit charges. The consultation sets out that the government will introduce this legislation through the Bank of England and Financial Services Bill. The government will mirror these requirements in relation to trust-based schemes.

As part of the consultation the government conducted an online consumer survey – with over 70% of respondents supporting a legislative cap.

The pension freedoms, which came into effect on 6 April 2015, represent the most significant pension reforms for a generation. They allow people who have worked hard and saved their entire lives to access their savings how and when they want. Still in its first year, the government’s pension reforms have already seen over £3.5 billion flexibly accessed through nearly 400,000 payments.

Real Estate Fund Manager of the Month - US
FundsReal Estate

Real Estate Fund Manager of the Month – US

At Ethika, their advisers employ an entrepreneurial investment strategy designed to consistently achieve attractive risk-adjusted returns by creating capital appreciation opportunities through repositioning, restructuring, redevelopment and intensive post-acquisition asset management of underperforming assets. As a result of their expertise, Ethika’s team has over $5 billion in diverse real estate transaction and development services experience, encompassing investment management, asset management, operational repositioning and design/development management.

As a company immersed in the real estate industry, Szita has noticed a number of trends in their industry, unsurprisingly stemming from the 2008 Global Financial Crisis. “Since the financial crisis, financing has remained conservative,” says Szita. “This is positive, as it has helped keep supplies generally in check. New construction loans, for example, were a lot easier to come by in the last cycle, which of course resulted in a market oversupply.”

“Alongside this, leverage has also remained conservative, since many deals ended up underwater during the financial crisis. This has refocused the attention of fund managers primarily to high quality assets in high quality markets – concentrating equity in the country’s Gateway and top 20-40 markets.”

With conservative financial activity now a prevailing theme across the financial landscape, many banks have remained reluctant to lend in the sector over the past number of years. However, according to Szita, this development has really paved the way for private lending. “With heavier banking regulations, from Dodd-Frank domestically to the Basel III regulatory agreement globally, requiring banks to hold more of their secured product on their balance sheet, the door has been opened for private lenders,” explains Szita. “As such, private equity real estate fund and debt fund capital has been able to step in and take the place of banks, with the opportunity to earn some attractive yields.

“The evolved lending landscape has created a great wealth of capital amongst investors and fierce competition among borrowers,” adds Szita. “Any investor that is leaning away from more core assets is finding themselves dealing with the non-banking lenders more frequently. The positive aspect is, of course, that for investors focused on value-add in non-core assets, these groups have the opportunity to be nimbler and are not as boxed in as the bank lenders have traditionally been.”

With the financial markets always being susceptible to uncertainty, Ethika’s investment process is grounded upon diversification and consequently leaves them less vulnerable to volatility. “We make sure to look at opportunities in such a way that they’re not purely cycle driven,” says Szita. “Instead, we like to invest when we see a rapidly improving market on a macro level, while identifying what we deem pockets of opportunity, be that market specific or pertaining to particular asset classes.”

“Generally speaking, Ethika prefers to buy into assets that aren’t perfectly stabilised, allowing us to acquire properties at a very attractive price. We’re generally more of the mind-set of taking a higher stabilised yield in the future, rather than pay full price today. If we can buy a perfectly stabilised asset, you don’t have a clear path to grow the value. With no room to improve the asset, you’re at the mercy of the market. Whereas with a value-add investment strategy, there is a clear path to improve the property to make it competitive, using the fact that the asset is not performing at its fullest potential to then build the value.”

2016 has been an exciting year for Ethika, primarily due to the launch of their new real estate fund at the closing end of 2015. The fund focuses on opportunistic investments in the top 30 U.S. markets that will create value through significant renovations and operational improvements. Named the Ethika Investment Diversified Opportunity Fund II, the platform is targeted to attract $250 million in equity capital from both new and existing investors, resulting in nearly $1 billion of new acquisitions over the next several years.

In sticking to their tried and tested strategy, the Ethika Diversified Opportunity Fund II will adhere to Ethika Investments’ vertically integrated investing approach that includes sourcing real estate assets with positive fundamentals in compelling locations at prices below historical values and replacement costs. The launch came on the heels of full deployment of Ethika Diversified Opportunity Fund I, which last year delivered an internal rate of return of 22.3% and a 2.1x net equity multiple to investors after investing in 17 properties across 13 different markets.

Alongside their investment strategy, Ethika have a number of other features which allow them to distinguish themselves from their competitors. As Szita outlines: “As a vertically-integrated investment firm, we not only serve as a fund and capital manager, we can service every investment that we do,” explains Szita. “In taking on a value-add investment, we can very quickly put a strategy in place that encompasses everything from sourcing the asset, underwriting the asset, escrow, design, construction, repositioning, accounting, investor relations and property management, consolidating the entire process to a single operation, again minimising risk and the room for error.

“Moreover, the midsize niche that we’re in is also a true differentiator,” adds Szita. “A typical deployment for Ethika usually sits between the $15 to $50 million mark. We’re nimble and can take on these sorts of assets and stabilise them, increasing value on our net multiple goal of 2.0x over the fund’s investment.”

As a result of their success, Ethika has grown to provide a highly diverse client base, and building and maintaining relationships with their clients is at the heart of everything Ethika does. “Our fund partners vary throughout each real estate cycle, but are generally a 65/35 split between foreign and domestic capital sources. We service a wide variety of investors, from large institutional pensions to private sovereign wealth funds.”

Despite the shifting road ahead, Ethika remain confident that their company will continue to strive and find the pockets of opportunity that may come along the way. “Of course, we will be primarily focusing on our new fund throughout the course of 2016,” says Szita. “While growth pace has slowed significantly, we still strongly believe that of all the major economies in the world, the U.S. still has the best underlying monetary policy and pricing fundamentals for growth and strong investment returns moving forward.”

Company: Ethika Investments
Name: Andres Szita
Email: [email protected]
Web Address:
Address: 1880 Century Park E #1016, Los Angeles, CA 90067
Telephone: +1.310.954.2009

Forming Funds in 2016

Forming Funds in 2016

Starting from consulting services to facilitate the decision making process of what type of fund should be incorporated
according to the individual needs and preferences of each client, following to the preparation and submission of the application packages for the granting of a license from the Cyprus Securities and Exchange Commission, and finally to the provision of any other services necessary for the efficient operation of the Fund. PwC operates as a “one-stopshop” for Funds and Fund Managers.

PwC has a wealth of experience in servicing international clients in the financial services industry. Partners and members of staff of the Firm are actively participating on the Board and sub-committees of the Cyprus Investment Funds Association (CIFA), which aims to promote the local fund’s industry. In cooperation with CIFA and other local market players, PwC is engaged with the enhancement of the local legislation for funds. Changes in the fund’s regulatory environment.

World-class asset management companies and Alternative InvestmentFunds (AIFs) may serve many different markets, but they have one thing in common: they understand that regulatory compliance and transparency are becoming an important element of the new business environment. It is expected that AIFs will spend a bigger portion of their time and resources over the coming years figuring out how to address regulatory matters. At the same time, it is also important to highlightthat regulatory pressures and calls for additional transparency create opportunities for AIFs to enter in new markets which were previously dominated by financial institutions (i.e. P2P lending etc.). To help market participants plan for the future, we have considered the likely changes in the alternative asset management industry landscape over the coming years and identified key areas of success. Our regulatory compliance experts can help interested parties to navigate the regulatory maze.

The Cyprus funds market
Over the last couple of years, Cyprus has developed as a regional domicile for investment funds and asset managers, and coupled with its competitive strategic location, it has become the most accessible bridge for managers from the Middle East, Asia and the CIS region to enter the EU funds’ industry. Furthermore, the local Alternative Investment Funds (AIF) Law which came into effect in July 2014 provides a level playing field along the lines of the frameworks of the main European investment fund hubs. It is thus apparent that Cyprus’ competitive position is significantly strengthened.

A noteworthy increase of funds applications has been observed which is very positive for the industry as it means that customers have surpassed the point where they remained at the decision making process and have now proceeded to the implementation stage. Given the breadth of options provided by the AIF legal framework, various types of funds can be set up in Cyprus, a fact that has already been recognized and appreciated by investors (both local and foreign) and is already being exploited.

Why set up a fund in Cyprus? Cyprus offers the full spectrum of legislative framework to all fund products (UCITS and non UCITS). In particular, it provides fund managers to structure as Alternative Investments Fund Managers, as presented in the relevant EU directive, or a MiFID compliant Investment Firm, both offering EU “passporting” ability. Cyprus is a well-regulated EU member state, combines tax efficient features of a modern financial centre with the necessary infrastructure for the funds’ industry. It has a UK based legal system, independent judiciary and friendly business environment. Furthermore, in Cyprus there is a low cost base, efficient and investor friendly government authorities with minimal red tape.

On a tax perspective, according to the taxation system in Cyprus, no withholding tax applies on distributions to investors and no taxation of capital gains. Also the services provided by the Investment Manager of the fund are not subject to VAT, hence the value base of the fund is not eroded with a non-recoverable cost. Moreover, the company legal form for a Fund can take advantage of the double tax treaty network of Cyprus.

Alternative Investment Fund with limited number of persons
Private investors may choose to set up an Alternative Investment Fund with limited number of investors (AIFLNP). It can take one of the following legal forms:
• Fixed or Variable capital company;
• Limited Liability Partnership.

The number of investors in the AIFLNP may not exceed 75 and they need to be well-informed/professional investors.

The Law allows the establishment of an AIFLNP with various investment compartments, each one of which will have its own investment policy. However, the limitation on the number of the investors is applicable to the whole scheme. In addition, exceptions may apply in the need to appoint a manager or/and custodian.

The main benefits of an AIFLNP include the fact that there are no restrictions on the type of investments of the fund, there is no defined minimum initial capital requirement and no onerous ongoing reporting requirement to the Regulator.

Company: PricewaterhouseCoopers Ltd
Web Address:
Name: Chris Odysseos
Email: [email protected]
Telephone: 00357 22 555000
Name: Maria Athienitou
Email: [email protected]
Telephone: 00357 22 555000

Hedge Fund Manager of the Year Mauritius

Hedge Fund Manager of the Year Mauritius

Barak’s core investment pinpoints sub-Saharan Africa and is related primarily to the soft agricultural commodities and food product-related sectors. The Barak investment approach is based upon the principles of discipline, diversification, collateralisation and downside-case scenario valuation. The company acknowledges that African investments encompass a certain degree of risk given the nature of investing in a continent whose primary markets are influenced by a multitude of volatile factors. Each investment is thus approached with a stringent on-boarding process
– using both desktop and on-the-ground due-diligence processes
– in order to determine the viability of a potential project’s funding.

As for our fund, The Barak Structured Trade Finance Fund came into inception in February 2009, with approximately USD 500,000 AUM of the Fund Manager’s own money. This is now currently in excess of USD 250m AUM, and up from 160m at the start of 2015. As a result of its success, the fund has won numerous awards over the last few years, with the most recent being the winner of the Global Trade Review Best Alternate Financier in sub-Saharan Africa, which was also won in 2014.

In terms of personnel, there are two fund managers on the fund, as well as four deal originators based in South Africa and two in other parts of Africa. We currently have in excess of 80 counterparties on the book who we provide short-term trade finance to, and operate currently in 15 countries in the SSA region. The fund predominately looks at soft-agricultural commodities to invest, with the most popular commodities currently being fertiliser, FMCG, pulses, equipment, minerals and rice. The majority of the investors are located in the UK and Europe, as well as increasing popularity in the US. To date, the fund has produced highly consistent returns since inception with no negative months to date in its 7-year life, and has a goal of 10% annual returns.

In terms of our strategy, the fund will seek to invest in the full value of trade finance assets or the first loss portion required by all trade financing banks. A particular emphasis will be placed on commodities with a high physical liquidity, and commodities can be of an export, import or regional nature.

Furthermore, transactions always contain an off-take agreement, although typically less emphasis is placed on the credit quality of the off-taker and investment decisions are weighted heavier on trading principles and track record rather than debt principles. Investments are entered into with counterparties well known to the fund managers and track records of counterparties are placed high on the list when investment decisions are made. Investments are short-term and cyclical with most investments made during harvesting season when markets are typically at their lowest. The intention is always to maintain a book with the majority of deals averaging between 100 to 120 days, and this ensures that the deals are not overly short term and that that new deals are permitted as old deals roll-off. Furthermore, it reflects repayment trends by clients, which is very important to the fund managers.

Additionally, the strategy also focuses heavily on global and African commodity prices, and thus takes on transactions that are not heavily reliant on volatile prices, i.e. portfolio exposure will focus on FMCG when commodity markets are as volatile as they currently are.

Although we work in a highly competitive industry, the Barak Structured Trade Finance Fund is arguably the only alternative investment fund focusing purely on African agricultural commodities and trade finance, by providing up to 100% debt to clients. Another important factor is that we have an on-the-ground presence in Africa with the ability to fly out to all of our clients in the matter of a few hours. At the same time a competitor may appear to have an impressive setup in Europe for example, but will be without the capability of an on-the-ground ever-presence in the sub-Saharan African region.

Furthermore, our on-the-ground Origination Team ensures that we are always ahead of the curve in terms of the changing industry, and we have members of this team in all the countries in which we operate as least once a week. The due diligence that is constantly conducted in these countries extensively covers all the possibilities of new opportunities, and we do not rely merely on research papers or what the news is saying or what current news is speculating may be unfolding in the regions.” The bottom line is that Barak’s deal-makers prefer to get a first-hand view before actively pursuing a potential deal.

Looking further into 2016 and beyond, the future holds many exciting ventures, with a strong pipeline of deals and continued strong investor sentiment to fulfil the funding required for these deals. Furthermore, Barak is going to be launching three new funds in the first quarter of 2016 (a longer-term Impact finance fund, a structured credit fund, and an FX fund), which will provide the company even more opportunities to be the leading alternative financier in sub-Saharan Africa, and arguably the whole continent. Watch this space!

Company: Barak Fund Management
Email: [email protected]
Web Address:
Address: 14 Marbella Road, Pellegrin,
Trianon, Quatre-Bornes, Mauritius
Telephone: +230 698 0397

Hedge Fund Manager of the Year Europe

Hedge Fund Manager of the Year Europe

Investment strategy
QW Capital was set up in 2008 and launched their first fund in March 2009. The fist strategy was European equity market neutral investing in Large Cap stocks only. It then evolved into a Global Equity market neutral Large Cap adding to the original European investable universe, an American one; plus, to benefit at the most from diversification a Japanese Portfolio is under construction. From the very beginning, the firm’s approach has been purely non-discretionary and full systematic. All mathematical models underpinning the trading strategies have been
developed internally at 100%.

QW Capital always trades in pairs of stocks belonging to the same economic sector, so that the downside is really limited and the time horizon of the trade is short (i.e. a few days); the investable universe, made out of ca. 10,000 pairs, is re-assessed on a daily basis: In that timeframe it is assumed that two stocks in the same sector will revert to a longer term mean under certain conditions. The models are designed in order to detect whether and when these conditions are met and to gauge the mean-reversion chance, providing the portfolio manager profitable signals to trade.

The company believes that their own models are on average more efficient than their main competitors’ ones because they manage to get rid of more inaccurate, so called “false” signals. A convincing proof of this is their high hit ratio (i.e. the percentage of profitable outcomes on the total of the trades): hit ratio is 63%, rarely heard about in the industry. The strategy is by construction Zero Beta and Pure Alpha, totally uncorrelated to the market: the source of Alpha is given by the dispersion of the different stocks in the market that QW Capital calls Market Vitality; Looking for market dispersion and benefiting out of it implies that this strategy performs particularly well when market are volatile or in presence of market stress or turbulences: it represents a very good “Tail-risk hedge”, so performing particularly well under market stress conditions as proven by QW Capital track record. At the same time it manages to offer a positive absolute performance: indeed, the performance in 2015 was 7% and it is in excess of 3% for 2016 (as per the 17th of February).

“We decided to start with an Equity market and Sector Neutral fund because we wanted to build a strategy that provided “pure Alpha” performance being “strictly sector and market neutral” at any point in time, explains the firm’s CEO and Managing Partner Gianluca Lobefalo in an exclusive interview.

He goes on to expand this point by saying this is pure alpha by definition “because all our position are made of spreads of large cap stocks belonging to the same sector (long and short), and with the same size. The investable universe comprises the 270 largest stocks in Europe excluding Ireland and Greece and the 660 Largest Cap traded in the USindices and are in the process to add the 120 Largest Cap traded on the Nikkei 225. The strategy, along with being zero correlated is characterized by low volatility and limited downside as a direct consequence of the structure of any spread, where the same amount is invested on the long and on the short, with all the spreads equally weighted in the portfolio. So, the exposure in general and in any sector will always be zero.”

“You have limited volatility because whatever happened to the marketyou are always market and sector neutral”. We ended up having a low risk strategy that benefits when there is a lot of trading activity especially where the market is under stress” he continues.

Gianluca Lobefalo cut his teeth in the industry when he worked at JP Morgan in 1997, in foreign exchange research for a couple of years before moving into the buy side at Schroders Investment management still in London for another couple of years. He then moved on to Morgan Stanley where he worked in fixed income for eight years until he had the experience and motivation necessary to start his own firm. But how did he achieve this? “The idea for the firm came to me whilst at Imperial College where I enrolled in PhD program in applied mathematics, during my eight years at Morgan Stanley.

Investment management 

The portfolios, Europe, US (and soon Japan) are run independently. Lobefalo is of the opinion that 2015 started off very well, due to the lessening of interventions by the American Central Bank which enabled the market to be freer, despite some intervention in Europe, Japan and China. However, as stress created by the economic crisis in Greece spilled over into the market, “the market became more unpredictable and under stress”. Our models allow us to see “order and investment opportunities” where most investors just see “Chaos”.

The performance for 2015 was of 7% of “pure Alpha” with zero correlation to the market and low volatility. As expected, our strategy performed particularly well during the most stressed periods of 2015, such as August and December, confirming our effectiveness as a “Tail Risk Hedge”. All in all, 2015 was the year where we managed to over perform our direct competitors in the equity market neutral space, the hedge fund community in general and most, if not all, major equity indices, Lobefalo adds. The final word of Lobefalo who comments that, “If the market continues the way it currently exists, then the future holds many challenges to the fund industry as currently making money is not an easy goal to accomplish; at the same time we expect it to be a friendly scenario for QW Capital strategy

Company: QW Capital
Name: Gianluca Lobefalo
Email: [email protected]
Address: 26 Cadogan Square, London SW1X 0JP
Telephone: 0207 581 3505

Hedge Fund Manager of the Year - Best Long / Short Equity Fund Manager

Hedge Fund Manager of the Year – Best Long / Short Equity Fund Manager

Chilton has a long-term focus and we view ourselves as investors not traders. The firm seeks to invest in, on the long side, high quality and sustainable business models with organic growth, strong cash-flow generation, good pricing power and management who are good stewards of capital. At Chilton, our strategy is fundamental and the investment process is conducted mainly from the ‘bottom-up’. This ‘bottom-up’ approach involves meeting many companies in order to find the best, and most enduring, investment ideas. On the short side, Chilton looks for ‘melting ice-cubes’ i.e. business models that are in secular decline and with deteriorating fundamentals.

One of the key features of our company is that we seek to generate alpha on both sides of the portfolio, long and short, throughout market cycles. In this sense, having a permanent short book is advantageous in periods of volatility or drawdown, however in a bull market long/ short investors will invariably lag long only investors. Over the full cycle though, we seek to generate a return superior to that of the market, combined with lower volatility.

Although Chilton conducts deep fundamental qualitative and quantitative research on the companies that it invests in, we find that the market is always capable of delivering surprises. As mentioned earlier, Chilton is predominantly focused on constructing portfolios from the bottom up, but at the same time it is also important to be aware of the macro environment in which we operate, and this helps us develop themes as well as leading us to prefer some countries and sectors over others.

Looking back on 2015, we were very pleased with our performance as it was clearly a stock picker’s market, which plays to our strengths. We believe Chilton’s out-performance of comparable benchmarks was attributable to strong stock selection within our sector allocations. In addition, our short book performance enhanced our returns and accounted for approximately one third of our positive attribution. 2015 marked a return to lower correlations in stocks, coinciding with the end of QE which helped the short performance. For several years between 2009 and 2014, the market often ignored poor fundamentals and stocks sometimes traded up, even on earnings misses, simply because they were in the right indices. Those days appear to have ended and we saw the market distinguish more clearly between the winners and the losers.

As we progress further through 2016, it is clear that global growth concerns continue to dominate the investor’s mind-set. We believe the US will experience solid but not spectacular GDP growth in the region of 2.5%. After 6 years of a US Federal Reserve fuelled bull market (QE), we have seen a structural shift in the market and we believe that passive index exposure is less likely to be successful going forward. For 2016, we comfortably expect mid-single digit earnings growth for the S&P 500 which is similar to what we witnessed in 2015. We believe the US market currently offers very good opportunities to find high quality business models trading at attractive levels (long side) and ‘melting ice cubes’ which are being punished by the market (short side). Furthermore, we expect to see some volatility during the year and we are equipped to be opportunistic and to take advantage of these market movements.

Company: Chilton Investment Company, LLC
Name: Richard L. Chilton, Jr.
Email: [email protected]
Web Address:
Address: 33 Sackville Street, London W1S 3EB
Telephone: 44(0)20 7087 6000

Real Estate Investment Manager of the Year

Real Estate Investment Manager of the Year

We have focused on attracting and retaining the requisite human and intellectual capital which we deploy in key markets to assist in the appropriate risk-adjusted return analysis of the investment opportunities we review.

Our leadership team has been together for over 20 years and successfully built one of the largest fully-integrated real estate services companies, Insignia Financial Group, Inc., prior to creating C-III. Founded on that deep industry expertise, C-III is focused on using its platform to meet the needs of all constituents in the commercial real estate industry. We are confident that our products, services and strong relationships will make valuable contributions toward enhancing the financial returns of our clients’ commercial real estate portfolios.

In the current lending landscape, it is a good time to be an investor and a lender; we are both. Volatility in the current environment is making it challenging for borrowers to get a firm quote. Due to new CMBS risk retention rules that are set to take effect in December 2016, investors’ yield expectations are set to widen and borrowers are concerned their costs will increase. This prospect is driving many borrowers to refinance prior to December 2016, resulting in a significant increase in volume. Only a relatively finite number of investors and lenders that have a fully integrated real estate platform – like C-III’s platform – can manage this increased volume to properly underwrite and manage risk.

To be innovative within the industry and tailor our solutions, we scale our fundraising to closely align our ability to deploy capital with the available investment opportunity. Fixed income markets in particular have cycles of price volatility that influence the pace and returns associated with capital investments. Our equity funds are sized relative to the opportunity set we see for the next two to three years. Since 2010, our investors have committed over $1.3 billion to our debt and equity strategies.

Our equity funds focus primarily on opportunities where we are able to enter at an attractive basis relative to replacement cost, often times by purchasing a defaulted loan and securing a fee simple title through foreclosure or deed-in-lieu of foreclosure, and taking over management of the property with the goal of improving operations. We improve operations in numerous ways, such as reducing bad debt collections, eliminating unnecessary expenses and passing on reimbursements to residents where applicable. Through this strategy, we seek to achieve outsized returns relative to the risk of the investments.

With a broad range of activities, C-III Investment Management currently manages 26 investment vehicles, separate accounts and CRE-CDO/re- REMICS. The responsibilities of the vehicles include principal acquisition, financing, asset management, property management, disposition, administration, surveillance and workouts.

Our investors include some of the largest pension fund plans, university endowments and insurance companies in the United States, as well as private equity firms, private pension plans, fund-of-funds and high-networth individuals.

What are the primary target investments for funds and accounts managed by C-III Investment Management?
Target investments include commercial real estate equity, distressed commercial real estate mortgage loans, CMBS (including newly issued B-Pieces), CDOs, whole loans, B-notes and mezzanine debt.

Our success as an investment manager is based on several key qualities:
Firstly, our basic skill set enables us to identify and execute on investment opportunities amid challenges and volatility – this includes the expertise to underwrite assets brick-by-brick; to accurately assess risk; to capitalize on opportunities at the ideal time; and to scale fund size to meet the available market opportunity.

Secondly, we have the resources to distill data into valuable information and use that information to drive effective decision making. Thirdly, we possess the discipline to exit investments when our business plan has been met. Finally, we have the discipline to not invest when opportunities do not exist within the investment strategy.

In 2015, we launched a new series of debt funds to focus on newly issued unrated and non-investment grade CMBS. With our expertise in the space, we have a good track record of investing in CMBS B-Pieces that dates back to some of the first issuances back in the early 2000s. Our deep understanding of these assets enables us to see that the market was too risky from 2005 to 2007, so we chose not to invest over that timeframe.

With significant opportunities available going forward, we are well-positioned with adequate capital available to make the most of these opportunities. Specifically, we expect numerous acquisition opportunities to arise out of the current volatility in the capital markets, as well as over $1 trillion of commercial real estate loans scheduled to mature in the next four years alone.

We are honored to be named the 2015 Real Estate Investment Manager of the Year. When we formed C-III Investment Management in 2010, there was a fair amount of pessimism in the market about the wisdom of starting a new investment management business. Conventional wisdom at the time indicated that institutional investors were generally focusing on working with a small set of existing managers, not new, “first time” managers. Over the past six years, it’s been gratifying to witness our investment management business grow from a standing start to achieve this level of performance. Our principals’ 25+ years of experience in the real estate investment and management space enabled us to create a truly new, different model that has delivered strong results. We are eternally grateful to our entire investor base for their confidence in and support of our firm.

Name: Robert C. Lieber, Executive Managing Director
Email: [email protected]
Web Address:
Address: 717 5th Avenue, 18th Floor, New York, NY 10022
Telephone: 212.705.5000

Real Estate Fund Manager of the Month
FundsReal Estate

Real Estate Fund Manager of the Month

The firm’s Senior Management Team has extensive experience investing in high-yield investments throughout Europe and has advised and managed in excess of €10 billion of real estate, acquisition, capital markets and restructuring transactions throughout the world.

With offices in Switzerland, Luxembourg and the Czech Republic, and local partners in over 20 locations throughout Europe, they are strategically positioned to utilize their global financial experience and local market expertise to source off-market deals and actively manage the entire investment process to provide solid returns for our investors and strong economic assets for the communities.

Marc E. Cottino is the founder of M&A Property Investors, established in late 2009 in London and Zurich, and his job is focused on developing relationships with financial partners with the view of implementing Club Deals to co-finance the firm’s pipeline deals. M&A Property Investors activities, visions or investment strategies they evolve quickly according to economic changes, so it is important to not lose the cap and make turn errors from the past into success. “Quick reactions and “Deja-vue” situations can be a strong driver to consolidate experience toward new successes”

In 2016 he celebrates 18years of industry experience and throughout professional life he has discovered that the elements needed to realise a good investment must not be complicated or hazardous. On his firm’s portfolio, he said that “we team up with European Real Estate promoters from Portugal to Czech Republic, people different for cultures and languages, we do require few important facets, Professionalism, Transparency and Will to share ventures with us. Money and profits come later” he says in an in-depth interview.

Giving an insight into the work Cottino does behind the scenes, he outlines his main responsibilities and says that “at 62 I am the old stager with tremendous will and commitment as a teenager who rules the corporate strategy, who links relationships with investors, bankers, wealth managers, family offices or any other institutional investors partnering with

“I carry the responsibility of millions Euro invested in tangible assets thousands of kilometres away from each other, and I have passed unintentionally through the crisis’s peak without anguish or distress which I am proud of it. To avoid failure, I carefully listen to the market trends, including smiff off-market deals opportunities in niche markets to source unique investments for my partners.”


“I began my career in London at 24 in early 1977 as a junior commodities trader. Years later I moved to Paris evolving to a well-known financial firm who specialised in Capital Market Instruments, which really a great experience” enthuses Cottino when asked about his experience prior to his role in M&A Property Investors. “In 1990 an Anglo-French financial firm offered me to manage the Madrid branch, so I spent 4 years in that beautiful City. In 1995 I was asked to manage the Private Banking Division of a private bank in Switzerland, which was a really boring job for a guy like me” he adds.

 “In spring 1998 a Real-Estate promoter asked me to loan-finance a luxury residential building in downtown Lugano. I was seated over multi-millions portfolios of Swiss francs, but the question was how to finance the promoter instead of selling bank instruments? Due my experience, I quickly set-up an investment vehicle and subscribed my clients, so in one-week I raised 7 Million Swiss francs and I financed the promoter. The development was a nice trophy project, indeed all magazines wrote positively about it, the investment was great, the asset was sold in short time and return was
excellent. At the end of the story I was fired by the bank because I was not on-line with the bank’s investment ‘policy” Cottino tells.

Continuing on the theme of his career, Cottino explains that he quickly set-up a structure in Luxembourg thanks to the investors who cashed excellent returns and supported him. He started his new venture in Real Estate by applying Private-Equity techniques. In 1999, he began doing investments in Baltics States, in Hungary in Italy and in Côte d Azur. He divorced from his partner in mid-2007 and took an extended period of sabbatical leave until 2010.

“Meanwhile, the world went bankrupt, the RE bubble deflated and prices dropped. When the economic recovery shyly restarted in 2010, the banks had no money to finance RE investments, promoters were in search of Equity Partners, but I was ready and rested not stressed. It was the perfect timing for a second round. Since end 2010 up to today I have launched 21 investments across Europe, estimated at 340 Million Euro and I’m expecting to reach 1 Billion global Investment at the end of 2016” Cottino continues.

How has the firm has changed?

Since Cottino has worked at M&A Property Investors, “the industrial world has changed after the great turmoil. Many factors have contributed to complicate our daily life” says. Developing this point, he goes on to say bureaucracy has
increased and “more heavy financial transactions are more complicated than ever, we may say we do live in a world of Compliance officers, legions of controllers, banks become policemen, there is less room for business or improvisation
as there was preciously. Jumping on a good deal is now harder, and this makes Cottino really worry for future generations.

M&A Property Investors’ financial performance

When asked about M&A Property Investors’ financial performance and the reasons behind its success, Cottino says we have seeded in 2011 and had a harvest in 2015 in Prague, the result being a compounded return of 21.3% yearly on equity-investment. “We at M&A Property are fast growing because we were able to invest in the right place at the right moment, in some growing market niches as Prague where the market is growing consistently, in Portugal where the country is recovering, in Luxembourg a crumb in the heart of Europe growing at two digits and in Switzerland before the country collapsed. Once more, big appraisers edit excellent intelligence reports but ‘smaller’ has still a great role and in
M&A Property” Cottino reveals.

Challenges working across the European market

Concerning the challenges and opportunities M&A Property Investors face working across the European market, the response from Cottino is that it is less complex now as the firm mainly deal with a network of business lawyers established in all the main capitals. He goes on the say that their partners in Israel, Portugal, Russia and Germany share the same sentiments with his native country Luxembourg. “Is beautiful work all together among different cultures, in this old Europe with his values and contradictions. In M&A team we have 5 different nationalities including an American, probably the most integrated person everywhere” Cottino says which is frankly “a miracle”.

Company ethos and culture

When asked about the ethos behind the firm and whether there is a certain culture that defines the company and how to do you ensure these values are maintained, Cottino responds by saying, “the question is profound and deserves attention, I have Jewish origins and culture. My ancestors have travelled centuries ago from Turkey to Thessaloniki, to Genoa via Istanbul or Alexandria to Rotterdam with perennial virtues on their heart, as well as modesty and respect for the world. With these values you can challenge the world for ever, that’s why I am impressed to teach to my team to transmit these values to our partners. The response is worth more than a greedy investment.”

The future

While Cottino does not consider M&A Property Investors to be unique, he does underline that he probably runs one of the leading-hedge firms who specialise in alternative investments as real-estate, but he still has a lot to learn from his numerous competitors. Developing this remark, he says, “each one has its own skill, the market is wide and great for everybody. Every year new competitors come-out, others die, but we survive and our partners make the difference among the crowd.”

The last word must surely go to Cottino who outlines his future aspirations, “my team and I aspire to reach 1 Billion global “Capex” across Europe by the end of the year, which mean managing global investments for such a target by injecting one-third of equity. Beyond 2016 we will consider listing the company in the London AIM market.

“Work with serenity, bet on the mid-long term targets, share values, abandon greedy methods, create tangible economy, we have assisted in the II° half 2000 at the wildest ravage of the greedy way-of-management, the world economy went partially destroyed. We have a long way ahead to regain, so let’s change the approach. “

Contact Details


Name: Marc E. Cottino

Email: [email protected] 

Web Address:


Immeuble Liberté, 4,Place de Paris – 4th floor, L-1930

Telephone: +352 661 32 50 16





Hedge Funds Ended 2015 2.42% up

Hedge Funds Ended 2015 2.42% up

AIMA says the analysis, based on returns reported to HedgeFund Intelligence (HFI) by funds with total assets under management (AUM) of around $1.1 trillion, represented one of the most comprehensive assessments of the global hedge fund industry’s performance in 2015.

The analysis includes the first measurement of the industry’s risk-adjusted performance in 2015. Risk-adjusted returns are closely watched by institutional investors such as pensions and endowments since they measure both the total return and the volatility of those returns. AIMA’s analysis also contains an extensive breakdown of returns by the different hedge fund investment strategies.

According to AIMA:

– Hedge funds on average outperformed stocks and bonds on both a headline and risk-adjusted basis;

– Hedge funds globally finished the year up 2.42% net of all fees;

– Around two-thirds of funds (65.30%) reported positive returns;

– Risk-adjusted returns were positive, as measured by a Sharpe ratio of 0.52;

– The best performing strategies were equity market neutral / quant (up 10.44%), long/short equity (up 6.79%) and multi-strategy (up 5.65%).

Jack Inglis, CEO of AIMA, commented:

“While 2015 will not be remembered as a vintage year for the industry, the majority of hedge funds still produced positive returns amid challenging market conditions, beating stocks and bonds on both an absolute and risk-adjusted basis and preserving capital for pension funds and other investors. Given that this period of market volatility is set to continue during 2016, we remain confident that hedge funds will continue to meet their investors’ expectations for competitive, diversified and low-volatility returns.”























Focus Starts 2016 Strong by Helping its Partner Firms Close Three

Legg Mason Announces Combination of EnTrust Capital and Permal Group

Legg Mason Announces Combination of EnTrust Capital and Permal Group

Legg Mason, Inc. announced it has entered into a definitive agreement to combine Permal, Legg Mason’s existing hedge fund platform, with EnTrust Capital. EnTrust is a leading independent hedge fund investor and alternative asset manager headquartered in New York with approximately $12 billion in total assets and complementary investment strategies, investor base and business mix to Permal.

The business combination will create a new global alternatives firm with over $26 billion in pro-forma AUM1 and total assets of $29 billion2. The firm will have a diverse offering of proprietary investment products with a significant number of institutional and high net worth investors. As a result of the combination, Legg Mason will own 65% of the new entity, branded EnTrustPermal, with 35% being owned by Gregg S. Hymowitz, EnTrust’s Co-founder and Managing Partner.

EnTrustPermal will be led by Mr. Hymowitz, who will become the Chairman and Chief Executive Officer of EnTrustPermal. Key investment and business professionals from both firms will continue to serve the investors of the new organization. EnTrustPermal will have the global infrastructure, resources, investment professionals and underlying investment managers to source, research and structure investment opportunities worldwide on behalf of its international client base.

The combination creates a platform with the necessary scale and leadership team to significantly expand and evolve its multi-alternative capabilities and offerings.

Joseph A. Sullivan, Chairman and CEO of Legg Mason, said, “The combined EnTrustPermal brings together two leading names in the alternative space, creating a significant potential growth engine for Legg Mason. The team at EnTrust has a proven track record for driving significant organic growth through product innovation, with over 20% growth annually since the financial crisis. We see meaningful opportunities to combine this innovation with Permal’s blue chip client base, product offering and global footprint.”

Gregg S. Hymowitz, Managing Partner of EnTrust, said, “The combination of EnTrust and Permal creates a powerful organization in the hedge fund universe. EnTrustPermal’s scale, resources and global investment talent will be able to deliver market differentiated proprietary investments to our over 700 combined institutional accounts and significant number of high-net worth investors. The complementary nature of our investment strategies, geographies and global investor/partner base dramatically springboards us over our competition. The EnTrust and Permal teams are eager to start delivering for our loyal investor base.”

Sterling Capital Funds Rank at Top of Lipper Peers

Sterling Capital Funds Rank at Top of Lipper Peers

Twelve separate Sterling Capital Funds, representing over 70 percent of the funds’ assets under management in the Sterling Capital Fund family, finished in the top one-third of their peer group for the 10 years ended December 31, 2015.

The Sterling Capital Special Opportunities Fund (BOPIX) finished number one in the Lipper Multi-Cap Core category for 2015 and the Sterling Capital Total Return Bond Fund (BIBTX) finished in the top quartile for 1, 3, 5, and 10-years.

Lipper is a Thomson Reuters subsidiary and currently provides information and analysis of over 117,000 mutual funds, globally. Lipper Classification Methodology is holdings-based,with data taken as of six points in time – the current observation, as well as the past five semi-FiscalYear-End dates.

More emphasis (40 percent weight) is assigned to the current observation, decreasing down to a 7 percent weight for the oldest date analyzed. A Lipper universe benchmark compares the performance of a portfolio versus similarly managed products available in the marketplace (similar- as defined by Lipper). These universes represent the opportunity set for a prospective investor in a particular investment style.

Basel III Reforms - Fundamentally Changed how Asset Managers are Connected to the Financial System

Basel III Reforms – Fundamentally Changed how Asset Managers are Connected to the Financial System

Jack Inglis, CEO of AIMA, commented:

“There is no doubt that the Basel III banking standards are having a significant impact on hedge funds and other alternative asset managers. Financing costs are rising and the fund manager / prime broker relationship is changing fundamentally. It is our hope that this timely and important report will provide clarity and direction to those who have felt the impact of the recent regulations, and to give context to issues that are being felt across the industry.”

Bob Sloan, CEO of S3 Partners, commented:

“New bank capital regulations are creating downstream financing challenges and opportunities for asset managers and hedge funds. The survey clearly shows how plugging into the financial power grid is getting more expensive.
“Managers of all shapes, sizes and strategies now seek to answer the question: How can we maintain access to the grid, while optimizing for the right amount of efficiency? As the survey results show, access to unbiased data, comprehensive Return on Assets/Return on Equity analytics, and a common language are critically important towards determining fairness – as rates, margin, spreads and contracts will be a key determinant for an asset managers’ success.”


Excessive Charges for Accessing a Pension pot Early will End

Excessive Charges for Accessing a Pension pot Early will End

Speaking at Treasury Oral questions in the House of Commons, the Chancellor George Osborne said:

“The pension freedoms we’ve introduced have been widely welcomed, but we know that nearly 700,000 people who are eligible face some sort of early exit charge.The government isn’t prepared to stand by and see people either ripped off or blocked from accessing their own money by excessive charges.

“We’ve listened to the concerns and the newspaper campaigns that have been run and today we’re announcing that we will change the law to place a duty on the Financial Conduct Authority to cap excessive early exit charges for pension savers.

“We’re determined that people who’ve done the right thing and saved responsibly are able to access their pensions fairly.”

The new duty, introduced through legislation, will form part of the response to the government’s Pension Transfers and Exit Charges consultation, and will help people take full advantage of the new flexibilities.

FCA data collected through the consultation showed that nearly 700,000 (16%) customers in contract-based schemes who are able to flexibly access their pension could face some sort of early exit charge, including a significant minority who faced charges that were high enough that the government consider that they effectively put them off accessing their pension flexibly.

The independent FCA will be responsible for setting the level of the cap and will consult fully on this in due course

The new pension freedoms, which came into effect on 6 April 2015, represent the most significant pension reforms for a generation. They allow people who have worked hard and saved all their lives to access their savings how and when they want.

So far almost 400,000 pension pots have been accessed flexibly under the new freedoms with many providers offering their customers a range of options.

The government will shortly publish its formal response to the Pension Transfers and Exit Charges consultation, which also looks at ways of making the process for transferring pensions from one scheme to another quicker and smoother.
FCA investigations have shown that 670,000 consumer aged 55 or over faced an early exit charge. Of these, 358,000 faced charges between 0-2%; 165,000 faced charges between 2-5%; 81,000 faced charges between 5-10%; and 66,000 faced charges above 10%.

Banks Offer Improved Deal on Mortgages for Armed Forces Personnel

Banks Offer Improved Deal on Mortgages for Armed Forces Personnel

The commitment from the UK’s biggest high street banks will benefit almost 265,000 people in the UK and abroad, including Forces families. The move comes ahead of an Armed Forces Covenant roundtable meeting of banking chiefs and Ministers at No.10 Downing Street yesterday (Thursday 14 January) where a range of further measures to help service personnel and their families will be discussed.

Currently, members of Armed Forces who rent out their homes during deployment have to change their residential mortgage to a buy-to-let mortgage, often incurring new product charges and an increased rate of interest. Under the new agreement they will no longer have to change their mortgage product, saving them time and money.

Barclays, HSBC, Lloyds Banking Group, Santander UK, Royal Bank of Scotland and Nationwide – the UK’s biggest building society – will all offer the support.

Defence Secretary Michael Fallon said:

“Looking after your home and your money can be more of a challenge when deployed on operations or serving abroad. This is a welcome first step from the major banks and financial institutions to help our servicemen and women get a better mortgage deal.

“I look forward to further pledges from across the financial services sector to support the Armed Forces Covenant after today’s roundtable.

Anthony Browne BBA CEO said:

“Members of our Armed Forces work all over the world to look after us, so it’s only right that we look after them. The extra support proposed by the banks and the Ministry of Defence will make sure service personnel and their families are not disadvantaged for working aboard and make their mortgages and credit history fairer.”

Of the nearly 800 business signatories of the Armed Forces Covenant, 29 are from the financial services sector.
Other measures being discussed at the roundtable are aimed at meeting the unique pressures of service personnel and their families, whose jobs require them to relocate and move more often than in civilian life Problems can arise because the financial services sector has difficulty recognising the postcodes of UK military bases abroad – the British Forces Postal Order index provided for free by the Royal Mail – as UK addresses. Time spent serving their country from UK military bases abroad can affect the Forces community’s credit history, and cause difficulties when applying for products that civilians take for granted, for example mortgages and bank accounts. The Forces can also lose out on benefits and cost savings, like no claims bonuses and discounts, which is being discussed with the insurance industry.

Sara Baade, Chief Executive of the Army Families Federation, said:

“What this recognises is that military families often have limited choice in where they are sent to live. They go overseas because the country needs them to. It will mean a lot to those that have bought their own homes to know that the challenges of service life are beginning to be understood by our banks.

“This is an issue Army Families Federation has campaigned on and we look forward to informing future financial measures that will counter the very real disadvantage families experience as a result of their service.”

FCA Reveals New Retirement Income Market Data

FCA Reveals New Retirement Income Market Data

The FCA collected data from retirement income providers covering an estimated 95% of assets in contract based pensions to enable it to monitor and track changes in the market. The information is helping to inform the FCA’s approach to regulation of the market.

The Government’s pension reforms brought about significant changes in the way consumers can access their pensions and the data provides insight into how people are using the new freedoms.

The report covers:

• Choices made by consumers accessing their pensions;
• Guaranteed annuity rates – levels taken up and not taken up;
• Levels of pension withdrawals for customers making a partial withdrawal;
• Use of regulated advisers;
• Consumers’ stated use of Pension Wise;
• Whether consumers change providers when accessing their pensions.

Retirement income market data will be published quarterly. The data published today concerns the second quarter following the pension reforms and may not reflect longer term trends.

Women and Pensions 2016 Survey Launched in UK

Women and Pensions 2016 Survey Launched in UK

The survey recently launched looks at confidence and empowerment of female pension savers, exploring attitudes and beliefs about planning for retirement.

While the survey is aimed at “Women and Pensions”, we are aware that many factors highlighted in the survey, which influence saving amongst women, also affect other genders. The service therefore welcome views from all genders within the world of pension planning.

Michelle Cracknell, Chief Executive of the Pension Advisory Service said:

“We know that women face significant barriers to achieving a good retirement income; on average lower levels of income throughout their working life, impact of career breaks and carer responsibilities and lower levels of confidence around financial products.

“Women and Pensions survey’s conducted by TPAS have previously focused on knowledge, whereas this latest survey looks more specifically at women’s attitudes, beliefs and rationale for financial decision making. The results of this survey will help us to really appreciate what women need from the pensions world, so that they can plan their pension provision confidently.”

If you are interested in taking part please click here.

Hedge Fund Manager of the Year - 2015

Hedge Fund Manager of the Year – 2015

Congratulations on Absolute Value Capital Management being named Hedge Fund Manager of the Year – 2015
Thank you.

The U.S. stock market was down a bit last year. Bonds aren’t yielding much these days. How does one achieve triple digit returns in such an environment?

Back in early 2011 I saw commodities markets were peaking and being on the verge of a long nasty bear market. I wanted to go on record as predicting the end of the secular bull market in commodities so that when I turned bullish I would have established a bit of credibility. So I started writing articles for a financial news website. Commodity cycles seem to have a pattern. Commodities do not do much for a long time. Then there is a fantastic spike up for nine years. Then there is a crash. Lather, rinse and repeat.

So what you want to look for is a big 9 year spike in commodities. The biggest one was 1613-1622 when commodities went up 254%. That immediately led to a 50 year 78% bear market.

Number two on the list is 1938-1947 when commodities went up 240%. Commodities went down 16% in 1948, down 19% in 1949, up 58% in 1950 and peaked in January 1951. Then they had a 39% 18-year bear market. Therefore, in the quarter century after the 1947 signal, the upside was 12% (January 1951) and the downside was 32% (August 1968). Coming in at #3 is 2001-2010. Commodities went up 238%. They peaked in April 2011 and have since declined by 48%. From 1910-1919 commodities went up 202%. They peaked in April 1920 and then went into a 13-year 74% bear market. From 1971-1980, commodities went up 198%. Commodities immediately went into a 19-year 45% bear market. Furthermore, over the last century or so, the timing of these commodity cycles has been regular.

The major peaks in commodities were April 1920, January 1951, November 1980 and April 2011. The tops are roughly 30 years apart. So at the end of 2010, you had a situation where, going back to 1259 (the starting point of my data), the maximum historical upside was quite limited. Not only that, but a top was overdue with respect to the 30 year cycle.

I am getting the sense you were not bullish on commodities last year. 

This has been the worst commodity bear market in the last 83 years. The Barron’s Gold Mining Index recently hit the worst bear market in history mark. The inception date of this index is in 1938. The previous bear market record was -82% from 1980-2000. The bear market which started in 2011 is already down 85%.


Prior to 1938 the data gets rather dodgy, but it looks like this is the worst gold stock bear since at least 1920. So over 95 years. The junior gold mining stock ETF, GDXJ, has already gone down by over 90%. During the early 2000’s tech crash, an Internet index went down 95% and a telecommunications index dropped by 93%. The Russian stock market went down 93% in less than a year in 1997-98. The internet and telecom indices subsequently rallied 410% and 271% from their bottoms over the next 5 years. The Russian stock market went up by 6,384% in less than ten years!

However, before you mortgage the house, be aware the Baltic Dry Index is still down by 97% from its 2008 high as of late January 2016. There are two commodity indices that I follow. The ^CCI is an equal weighed commodity index and the ^CRB has more of a “real world” (i.e. energy) weighing. In January 2016, the ^CRB index hit its lowest level since 1973!

How low can commodities go?

Since 1933, we have had bear markets of -36%, -39%, -23%, -45%, -47% and the current one is -48% as of this interview. But if you look at 1622 to 1933, we had commodity bear markets of -78%, -77%, -68%, -79% and -74%.

Why were the pre-1933 bear markets more draconian in nature? A major reason is FDR took the US off the gold standard in 1933. From 1665 to 1932, the annualized inflation rate in the United States was 0.16%. From 1932 to today it is 3.49%. If you look at charts from the 1200s to 1932, they looked like a sine wave. Post 1932 the charts look like a sine wave tilted up to the right.

So the question is will the current commodity bear act like a typical post-1933 commodity bear? In that case the downside is limited. But if you look at pre-1933 scenarios it can get much worse. In light of this ambiguity, the short side in commodities is not as exciting as it was back in 2011 or even a year ago. But there are a lot of other indicators giving off interesting readings right now. For example, two indicators have given off signals which have led to triple digit gains in one asset each time they have gone off. I am excited about 2016.

Company: Absolute Value Capital Management
Name: James Debevec
Email: [email protected]
Web Address:
Telephone: 001 (954) 973-1428

New Swedish Real Estate Joint Venture
FundsReal Estate

New Swedish Real Estate Joint Venture

The listed property company Balder has together with the Third Swedish National Pension Fund decided to enter into a joint venture for investments in residential properties in Sweden. Housing market forecasts shows a great demand for residentials

The new residential company will focus primarily on investments in new production of rental properties in growth areas in Sweden. Except the three metropolitan regions, also growth areas with positive population development are in focus. The residential properties that are produced shall focus on environmently friendly production.

“It is very positive and important to co-invest with a player as the Third Swedish National Pension Fund that has a long-term view on investments as we have”, says Erik Selin CEO and main owner in Balder.

AP3 doesn´t have investments in residential properties today, despite being a large player in the real estate sector.

­”We see good opportunities in developing our Swedish property portfolio with residential together with Balder, which is a well established company in the sector. The strong population growth expected in Sweden means a great need for new production of residentials”, says Kerstin Hessius, CEO Third Swedish National Pension Fund.

The deal is subject to approval from the Swedish Competition Authority and the deal is expected to close during the first quarter in 2016.

Balder in brief. Fastighets AB Balder is a listed real estate company which shall meet the needs of different customer groups for premises and housing through local support. Balder’s real estate portfolio had a value of SEK 39.9 billion as of 30 September 2015. The Balder share is listed on Nasdaq Stockholm, Large Cap.

Third Swedish National Pension Fund (AP3) is one of five buffer funds in the Swedish national pension system. The fund has the Riksdag’s mandate to manage the Fund’s assets to the greatest possible benefit for the pension system creating a high return at a low risk level. AP3 has a return of 9.3 percent on average per year over the last five years. The corresponding figure for the income index is 2.4%, which means that AP3’s return has greatly contributed to the pension system. As of 30 June 2015 the fund managed SEK 304 billion.

Taurus acquires PFS software

Taurus acquires PFS software

Taurus Administration Services, the accounting and fund administration provider, has acquired Pacific Fund Systems’ PFS-PAXUS integrated share registry/fund accounting platform to support its expansion into the European market, which it expects to grow as a result of the Alternative Investment Fund Managers Directive.

Taurus will target start-up and sub-US$100 million funds often regarded as being too small by the larger fund administrators. Taurus has been appointed administrator to three alternative investment funds and has seen its assets under administration grow over the last two years from US$80 million to US$192 million in 11 funds. It has offices in Madrid, Geneva and the Cayman Islands and is looking to open a new office in Europe in 2016.

Nicholas Calleja, Chief Financial Officer, MPG, commented: “The UCITS regulations require funds to invest in funds that are highly liquid, which means mainstream assets such as equities, bonds and foreign currency only. But that does not
help investment professionals who want to construct diversified portfolios that include less liquid alternative assets.

“Thanks to the AIFMD the alternatives market in Europe is now potentially huge – the fund industry is gearing up to deal with demand for alternatives pursuant to the directive. However, most of the fund administrators in the market are so large they have no interest in start-ups or funds with less than $100m. A lot of boutique managers that struggle to find administrators still want to grow in size and Taurus is extremely well placed to provide the services they need.

“The selection of PFS-PAXUS has been mainly due to the integrated nature of the system where the share registry is fully integrated with the system’s general ledger. We are focused on growing our business and in deploying PFS-PAXUS we are confident that this strategic decision will assist us in doing so.”

Taurus, a subsidiary of the Managing Partners Group (MPG), Taurus currently administers a diverse portfolio of investment funds and entities including hedge funds, mutual funds, UCITs, property funds, feeder funds, multi-share
class funds, and funds with various segregated portfolios that follow various investment strategies.

Slocum Implementing New Risk Analytics Platform

Slocum Implementing New Risk Analytics Platform

Slocum has adopted RiskFirst’s real-time analytics and reporting platform, PFaroe. The investment advisory firm – which serves more than 125 institutional clients with total invested client assets of approximately $120bn – will use PFaroe to help inform strategic asset allocation decisions and implement dynamic de-risking strategies.

Nicole Delahanty, Principal at Slocum, comments: “We will always strive to be a firm that takes a big picture or qualitative view of the market when setting long-term asset allocation strategy for our retirement plan clients. But a dynamic pension landscape also calls for the ability to view pension risk on a frequent basis – we need to stress-test our views and ensure that they meet the needs of our clients from a funded status, cash and expense perspective. PFaroe is an important addition to our toolkit – allowing us to evaluate clients’ risk from multiple perspectives and to perform real-time scenario stress-testing.”

Delahanty adds: “More and more of our clients are also implementing LDI or de-risking programs – particularly those with frozen plans who want to reduce funded status volatility as their funded status improves. To do this efficiently and effectively, we need a robust and real-time system – cue PFaroe.”

Matthew Seymour, Managing Director, RiskFirst, comments: “It is clear that de-risking is swiftly moving up the agenda for US pension plans, large and small, and we are delighted that the industry is turning to real-time analytics to improve efficiency and effectiveness of such solutions. Slocum is a firm that takes a highly customised approach to developing asset allocation and risk management for clients, which marries perfectly with PFaroe’s holistic and flexible approach.”

ARC Real Estate Income Fund Completes $359mn Exit Transaction
FundsReal Estate

ARC Real Estate Income Fund Completes $359mn Exit Transaction

The fund’s sponsors are Al Rajhi Capital Company and RA Bahrain B.S.C.(c) (formerly known as Arcapita Bank).

Since its inception in 2010, the fund acquired assets in the logistics, retail and warehousing sectors in United Arab Emirates and Saudi Arabia. In the last two years, the fund delivered an average annualized yield of 7.2 percent and distributed an annual yield in excess of 9 percent, with approximately 18 percent growth in net asset value.

The King & Spalding team on the sale transaction was led by New York and Dubai partner Benjamin Newland and included Dubai and Riyadh partner Nabil Issa and Abu Dhabi counsel Moustafa Said. All are members of the firm’s Middle East and Islamic Finance Group.

Celebrating more than 130 years of service, King & Spalding is an international law firm that represents a broad array of clients, including half of the Fortune Global 100, with 900 lawyers in 18 offices in the United States, Europe, the Middle East and Asia. The firm has handled matters in over 160 countries on six continents and is consistently recognized for the results it obtains, uncompromising commitment to quality, and dedication to understanding the business and culture of its clients.


BATS ETF Marketplace Welcomes MomentumShares ETF

BATS ETF Marketplace Welcomes MomentumShares ETF

BATS Global Markets (BATS), the #1 U.S. market for the trading of exchange-traded funds (ETFs), today welcomed the MomentumShares U.S. Quantitative Momentum ETF , which began trading today on BATS Exchange.

The MomentumShares U.S. Quantitative Momentum ETF invests primarily in U.S. equity securities that the Adviser believes has positive momentum. MomentumShares is advised by Alpha Architect, an SEC-registered investment firm that seeks to design affordable, active-management strategies for ETFs and Separately Managed Accounts. Alpha Architect’s strategies are rooted in the science of behavioral finance with a goal of beating behavioral bias. Alpha Architect has two of its ValueShares ETFs also listed on BATS Exchange.

“We were thrilled when Alpha Architect selected BATS as the listing destination for their ValueShares ETFs last year and we are pleased to further grow our partnership with the launch of their first MomentumShares ETF,” said Laura Morrison, Senior Vice President and Global Head of Exchange-Traded Products at BATS. “Through innovative products such as QMOM, Alpha Architect is providing investors with new ways to reach their investment goals.”

BATS ranks as the top exchange operator for ETF trading with the BATS Exchanges – BYX, BZX, EGDA, EDGX – executing 26.5% of all ETF trading in November. BATS has been the #1 U.S. market for ETF trading for every month of 2015 and the #2 U.S. market for overall equities trading.

Survey on Hedge Funds Finds Managers and Investors Hold Simular Views

Survey on Hedge Funds Finds Managers and Investors Hold Simular Views

Since the 2008-09 global financial crisis, regulators rolled out multiple, substantial regulations aimed at mitigating systemic risk. Over time, popular opinion has held that investors largely favor the new rules while managers of hedge funds uniformly oppose them. However, a survey from Northern Trust Hedge Fund Services reveals that investors and fund managers express surprisingly similar views on regulation.

In a white paper about the survey findings, Minimizing Risk or Missing the Mark, Northern Trust Hedge Fund Services found that managers actually voiced slightly more optimism than investors about the effectiveness of the regulations adopted in the last five years. 

Fifty nine percent of managers said they believe at least some of the regulations implemented over the past five years have helped decrease the likelihood and severity of another financial crisis, while 53% of investors held that view. Forty percent of investors said the new rules haven’t done anything to reduce the chance of another financial calamity or its severity versus 34% of managers.

“The widely held belief that investors and investment managers hold conflicting views about regulation emerged because the regulations typically fell into two camps,” said Peter Sanchez, head of Northern Trust Hedge Fund Services. “They either changed market practices to limit what market participants can do, or they demanded more disclosure as a means of managing systemic risk. Dig a little deeper, however, and you discover – as the survey did – a far more nuanced and complex picture.”

At the same time, regulations vary widely both in terms of whom they affect and how they are implemented. These differences impact how market participants on both sides view them, the study indicates. Some changes are seen as providing benefits to managers and investors alike.

Managers indicated they are especially concerned about the impact of new rules when they are implemented by multiple regulators. An example is central repository requirements for derivatives. Since derivatives are a complex instrument and many countries or jurisdictions have varied rules and procedures around them, these regulations can pose compliance challenges. While these regulations have the goal of limiting market risk, they can also dampen potential industry innovation.

Morningstar Reports U.S. Mutual Fund and ETF Asset Flows for October 2015

Morningstar Reports U.S. Mutual Fund and ETF Asset Flows for October 2015

Morningstar analysts have also published a research paper analyzing long-term investors’ mutual fund preferences as expressed in monthly asset flow data. The paper examines equity, fixed-income, and balanced funds globally to draw conclusions about how investors make investment decisions.

Highlights from Morningstar’s report about U.S. asset flows in October:
– Despite stock-market gains worldwide, taxable-bond funds led all asset classes in October with inflows of $16.6 billion, the highest intake for the category group since March 2015. Passively managed funds drove these inflows; active taxable-bond funds saw a $1.5 billion outflow.
– All category groups experienced active-fund outflows with the exception of municipal-bond and alternatives funds. International-equity funds continued to receive steady inflows, although smaller in magnitude than those seen earlier this year.
– In a complete reversal from September, high-yield and intermediate-term bond were among the top five categories with the greatest inflows after landing on the list of categories with the greatest outflows a month ago.

Each of the top-five actively managed funds in terms of October inflows were fixed-income funds: Fidelity Advisor® Total Bond, DoubleLine Total Return Bond, PIMCO Income, Northern High Yield Fixed Income, and Metropolitan West Total Return Bond.

Franklin Templeton slipped from the sixth to seventh spot on the list of largest asset managers after 11 consecutive months of outflows. BlackRock/iShares, with $15.0 billion, edged out Vanguard, with $14.7 billion, in terms of passive flows for the second straight month.

Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETFs by computing the change in shares outstanding. 

Key findings from the “What Factors Drive Investment Flows?” report:
– U.S. investors strongly prefer low-cost funds, but these preferences are virtually nonexistent outside of the United States.
– Indexed equity funds receive higher flows at the expense of active equity funds. The trend reverses for fixed-income and balanced funds, as investors globally favor active strategies.
– Investors expressed a strong preference globally for funds that invest in a socially conscious manner. Globally, equity funds that self-identify as socially responsible receive 0.40 percent greater flows per month than funds that do not.
– Investors globally respond to Morningstar ratings—both the quantitative Morningstar Rating™ (the “star rating”) and the qualitative Morningstar Analyst Rating™. Funds with a higher Morningstar Rating attract greater inflows than funds with lower ratings. The five-tiered Analyst Rating scale has three positive levels, indicating Morningstar Medalists—Gold, Silver, and Bronze—and has proved to be a strong asset flow indicator as well.
– Investors seek out funds from higher-quality firms, and a notable relationship exists between asset flows and portfolio manager tenure. Investors favor long-tenured managers and visible continuity of fund management, suggesting that funds with co-management and internal promotion practices are better insulated from the adverse effects of manager departure.

TMX Group to Introduce a New Mutual Funds Platform

TMX Group to Introduce a New Mutual Funds Platform

TMX Group has announced that it is expanding its services into a new business area that will extend the efficiencies of equities trading and settlement to the mutual fund industry. The TSX NAVex Platform will facilitate purchases and redemptions of mutual funds using TMX’s proven equities trading, clearing and settlement infrastructure.

By leveraging connectivity, systems and processes well established in the industry, the new platform will provide registered dealers with easy access to a broad range of investment funds. Mutual funds posted on the TSX NAVex platform will be visible to all participants who currently trade TSX-listed equities and ETFs, which coupled with inherent support for bulk trading, creates a new, efficient distribution channel for mutual fund manufacturers.

With over 160 years of experience in establishing and operating innovative market models, TMX is uniquely positioned to facilitate the next transformation in mutual fund processing. The concept behind TSX NAVex was developed in collaboration with select industry participants. To ensure that the final solution meets industry-wide needs and reflects industry best practices, TMX recently formed the TSX NAVex Working Group, which will help finalize the details of the offering.

“We are extremely excited to partner with a broad set of industry stakeholders and together create an industry-neutral solution that will benefit the whole market,” said Nick Thadaney, President & CEO, Global Equity Capital Markets, TMX Group. “We are very grateful for their ongoing insights, input and support.”

TMX’s centralized mutual fund solution, which is expected to launch in Q2 2016 subject to industry readiness, leverages the broad range of TMX’s assets and capabilities, including the settlement of transactions through CDS Clearing and Depository Services Inc. TMX Equity Transfer Services is also available to provide transfer agency services.

New Global Report Finds Advantage with Funded Pension Schemes

New Global Report Finds Advantage with Funded Pension Schemes

Emerging markets with funded government pension systems will enjoy important advantages over those with pay-as-you-go systems, according to a report from the nonprofitGlobal Aging Institute and sponsored by the Principal Financial Group®.

In order to realize their potential, funded pension systems must be well-designed because inadequate contribution rates, restrictive portfolio allocation rules, early retirement ages or the failure to provide for annuitization of account balances can all undermine the model’s adequacy, the report found.

Global Aging and Retirement Security in Emerging Markets: Reassessing the Role of Funded Pensions explores how today’s emerging markets will encounter many of the challenges that now confront developed economies, such as rising fiscal burdens, aging workforces and declining rates of savings and investment.

“If the challenge for most developed countries is how to reduce the rising burden that government retirement systems threaten to place on the young without undermining the security they now provide to the old, the challenge for many emerging markets is precisely the opposite,” said Richard Jackson, president of the Global Aging Institute and author of the report. “How do they guarantee a measure of security to the old that does not now exist, without at the same time placing a large new burden on the young?”

The design challenges can be addressed though relatively straightforward policy measures, according to the report. While emerging markets have much greater flexibility to design retirement systems that adapt to new demographic realities, failure to rise to the challenge could result in a humanitarian aging crisis of immense proportions.

“It’s clear that policymakers need to address the aging challenge and make it a priority,” said Luis Valdes, president and CEO of Principal International. “Unfortunately, regulations can get in the way of creating the right environment for retirement plan providers to be able to offer the right solutions. We continue to be proactive and advocate for further reforms around the globe.”

Funded pension systems alone do not add up to a complete solution, the report cautions. Emerging markets also need to support citizens by having a noncontributory old-age poverty protection program. This comes into play for workers who retire with inadequate benefits from their contributory pension system or with no benefits at all, which in some countries is the majority of workers.

Hedge Funds Confront Impact of Financial Market Regulations

Hedge Funds Confront Impact of Financial Market Regulations

Hedge fund managers are experiencing the ripple effects of new regulations on banks and prime brokers, with hedge funds facing increased trading fees and broader changes to business relationships. These dynamics place additional pressure on margins and are leading managers to seek new growth strategies, according to The evolving dynamics of the hedge fund industry, EY’s 2015 Global Hedge Fund and Investor Survey.

Regulations such as Basel III and Dodd-Frank have caused banks and their prime brokerage businesses to focus more closely on liquidity, balance sheet capacity and funding, resulting in changing economics for fund managers who finance trades through prime brokers. Twenty-nine percent of respondents said their prime brokers increased fees in the past year, and an additional 22% expect an increase in fees within the next year.

Fund managers using strategies such as distressed credit, fixed income and global macro, which can be balance-sheet intensive from the prime brokers’ perspective, have been among those who have experienced price increases the most. Respondents now expect price increases and broker limitations to change the way they trade, including moving toward swap-based trade execution and reducing repo financing and overall leverage.

Michael Serota, Global Leader, Hedge Fund Services at EY, says:

“These dynamics are the newest challenge to an industry that continues to grapple with margin compression, heightened competition for asset growth and ongoing requirements for technology investments. All forms of financing are becoming more expensive for a majority of managers, and these costs have a direct effect on overall trade economics. Investors will be indirectly affected by the increasing costs and will need to rely on communications from the manager to understand the full effect on the fund’s performance.”

Hedge funds expand their prime broker relationships

Regulatory changes have altered the traditional business relationship between prime brokers and hedge fund managers. Prime brokers have suggested that hedge fund managers concentrate more business with them, though 60% of managers affected by repricing have in fact added more prime broker relationships. Only 12% of respondents who have experienced repricing reduced their prime broker relationships.

Many prime brokers are becoming reluctant to hold cash for hedge funds because of how such balances are classified toward banks’ capital reserves under new regulations. Fifty-eight percent of hedge fund managers have moved cash to custodians as a result, while 35% have purchased highly liquid securities as cash alternatives.

Natalie Deak Jaros, Americas Co-Leader, Hedge Fund Services at EY, says: “Many hedge fund managers are larger and more complex, with increased financing needs. As many prime brokers have less capacity to offer than in the past, hedge fund managers are increasing the number of relationships they have to reduce counterparty capacity risk. We are also seeing the need for hedge funds to dedicate individuals to manage counterparty risk, collateral and treasury functions as a result of these shifting industry dynamics.”

Managers seek financing from non-traditional sources

Hedge fund managers are beginning to explore non-traditional financing sources outside of prime brokers. Thirteen percent of respondents are seeking or plan to seek financing from non-traditional sources in the next two years, from sources including institutional investors and sovereign wealth funds, custodians, or other hedge funds.

Asset growth remains top strategic priority

Achieving asset growth to counteract margin pressure is the top strategic priority for 57% of managers surveyed. New growth methods include adding new hedge fund strategies, identifying new investor bases and increasing penetration with existing investors.

New product launches, which was the top method for achieving growth in last year’s survey, has dropped to less than 20% this year. New products have presented opportunities for managers, but they also have come with challenges, as 24% of managers reported that new products had a negative impact on operating margins.

Fiona Carpenter, EMEIA Leader, Hedge Fund Services at EY, says: “As the hedge fund business has evolved, increased competition, as well as heightened demands from investors and regulators alike, has compressed margins via the two-fold squeeze of lower top-line revenues and larger expenses. Growing assets to critical mass within a shorter timeline is critical for managers looking to run profitable organizations.”

Technology investments are critical for transformational change

Respondents plan to allocate 12.4% of their overall expense budgets to major technology expenditures over the next three to five years, similar to the amount budgeted over the past two years, as managers aim to develop robust infrastructures capable of supporting larger and more complex hedge funds. Seventy percent of managers expect to make major technology investments in the next two years, including investment management and trading operations, enterprise infrastructure, and risk management systems.

George Saffayeh, Asia-Pacific Leader, Hedge Fund Services at EY, says: “Today’s technology environment and the effect it has on the business is rapidly evolving. Managers are investing to develop tools that allow for more seamless front- to back-office data transmission, timelier and customized reporting to various constituents, and to deal with ongoing concerns over cybersecurity. The importance of being strategic with these investments has never been more critical.”

Charlemagne Capital Wins Two EM Equities Mandates

Charlemagne Capital Wins Two EM Equities Mandates

The first mandate is from a leading Scandinavian pension fund looking to gain exposure in Latin American equities; the second is from a European Asset Manager wanting to invest in Middle East and Africa equities.

Vicky Kydoniefs, Head of Institutional Business, comments:

“Whilst the environment for emerging market equities remains difficult, there are excellent opportunities for long term investing in quality stocks that have been pummelled by the overall negative sentiment in the asset class.

“Charlemagne Capital continues to produce long term alpha across its regional and global strategies investing in quality emerging market equity companies, also in the mid and small cap space. It is always difficult to call the bottom of any cycle but with three years of significant outflows from emerging markets, we may well be close to a point of change.

“With our very experienced investment team, we continue to focus on what we do best, which is to build concentrated portfolios of fundamentally good quality companies that have the ability and willingness to grow at a reasonable pace whilst keeping costs under control. We also seek out opportunities in exciting mid and small cap enterprises. We are not swayed by market gyrations and believe that this long term approach to investing will continue to produce strong long term outperformance for our clients.”

Corporate Pension Funded Status Improves by $25bn in October

Corporate Pension Funded Status Improves by $25bn in October

Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index, which analyzes the 100 largest U.S. corporate pension plans. In October, these pension plans experienced a $25bn increase in funded status based on a $33bn increase in asset values and an $8bn increase in pension liabilities. The funded status for these pensions increased from 81.7% to 83.3%.

“October was a great month for these pensions, but it may be too little too late as far as 2015 is concerned,” said John Ehrhardt, co-author of the Milliman 100 Pension Funding Index. “Overall funded status has improved by only 1.8% this year, and this would be worse if it weren’t for interest rates inching in the right direction to reduce pension liabilities.”

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.26% by the end of 2015 and 4.86% by the end of 2016) and asset gains (11.3% annual returns), the funded ratio would climb to 85% by the end of 2015 and 98% by the end of 2016. Under a pessimistic forecast (4.06% discount rate at the end of 2015 and 3.46% by the end of 2016 and 3.3% annual returns), the funded ratio would decline to 82% by the end of 2015 and 75% by the end of 2016.

Milliman is among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe.

Canada Pensions Consortium To Acquire Chicago Skyway Toll Road

Canada Pensions Consortium To Acquire Chicago Skyway Toll Road

A consortium comprising Canada Pension Plan Investment Board (“CPPIB”), OMERS and Ontario Teachers’ Pension Plan (“Ontario Teachers'”), together “the Consortium”, has announced that they have signed an agreement to acquire Skyway Concession Company LLC (“SCC”) for a total consideration of US$2.8 billion. SCC manages, operates and maintains the Chicago Skyway toll road (“Skyway”) under a concession agreement, which runs until 2104.
CPPIB, OMERS and Ontario Teachers’ will each own a 33.33% interest in SCC and contribute an equity investment of approximately US$512 million each. The transaction is subject to regulatory approvals and customary closing conditions.

Skyway is a 7.8 mile (12.5 kilometre) toll road that forms a critical link between downtown Chicago and its south-eastern suburbs. As an essential part of the Chicago road network, it delivers reliability and time savings for its users in one of the busiest corridors in the U.S.

“Skyway represents a rare opportunity for us to invest in a mature and significant toll road of this size in the U.S.,” said Cressida Hogg, Managing Director and Head of Infrastructure, CPPIB. “This investment fits well with CPPIB’s strategy to invest in core infrastructure assets with long-term, stable cash flows in key global markets. We are pleased to partner with OMERS and Ontario Teachers’ in this investment as like-minded, long-term investors.”

“We’re pleased to announce OMERS investment in Skyway, which aligns with our strategy to acquire assets that will generate stable, consistent returns, matching our long-term obligations to the pension plan’s members,” said Ralph Berg, Executive Vice President & Global Head of Infrastructure, OMERS Private Markets. “Our investment in Skyway also fits with our goal of growing our assets under management in the North American infrastructure space. We welcome the opportunity to partner with CPPIB and Ontario Teachers’ as co-investors in this acquisition.”

“Skyway is a critical asset for the Chicago region that will provide inflation-protected returns to match our liabilities and further diversify our infrastructure portfolio,” said Andrew Claerhout, Senior Vice-President, Infrastructure at Ontario Teachers’. “The long-dated nature of the concession closely reflects the investment horizon of Ontario Teachers’ and our partners at CPPIB and OMERS.”