Regulation Boosts European Industry Prospects

12 SPONSORED Q&A

The introduction of the Alternative Investment Fund Managers Directive Regulation boosts (AIFMD) in Europe is a game changer not only for the industry, but for European industry Amundi Alternative Investments prospects

HEDGE FUNDS REVIEW: Amundi was HEDGE FUNDS REVIEW: Did Amundi one of the first to try and position itself have to change much to come into line for the introduction of the Alternative with the directive? Investment Fund Managers Directive Laurent Guillet: Yes, we did a lot of things. (AIFMD). Why was that? First, all our funds were domiciled – as with Laurent Guillet: First, we were very much anybody else in the industry – offshore. We involved in alternative investments. Once had two platforms of managed accounts. the financial crisis occurred, our analysis One was based in Bermuda, and the other was that part of the problem was a lack one in the Cayman Islands. We decided, of regulation, transparency and security. just after the crisis, to migrate the two Therefore, we were happy to participate in platforms to Ireland, which we merged and moving the world towards more regulation. regrouped into one platform. Our funds of Because we are working on the Continent, funds are also now in Ireland, with some in we have been extremely successful in Luxemburg. Now everything is onshore. selling and promoting Ucits products. Our experience of regulation was a very positive HEDGE FUNDS REVIEW: With 100% of one, so at the very start we considered your funds onshore, does that pose this new regulation as a positive for these any challenges? alternative products. Laurent Guillet: It does not, because AIFMD does not impose any constraints. We are HEDGE FUNDS REVIEW: Do you think the not under obligation to comply with any directive is going to be a game changer for constraints so far. The main change is for Europe and for Amundi? our funds, where we have an obligation Laurent Guillet: Absolutely. The directive to introduce a custodian. That benefits the must be implemented by July 22 and there investors because they have another layer of will be strong pressure on the institutions security – people watching where the assets and institutional investors to buy regulated are. This is good. products. Therefore, you will be confronted The other obligation is that you need the with a situation where, if you are not approval of the regulator, for example, the regulated, you will be at a disadvantage Central Bank of Ireland, for the manager. That compared with your competitors. There is is additional security for investors because, a need for having more – more regulation, beyond our own due diligence, the regulator, more transparency, more security. There is a which is totally neutral and independent, will need from the investors themselves to get all also approve (or not) the manager, looking at of these features into a product. his reputation, the management company’s We are at an interesting point in time. reputation, activity, and so on. The regulators want to do something to avoid repetition of crisis and, at the same HEDGE FUNDS REVIEW: Amundi runs a time, investors are demanding to go back to managed account platform (MAP). Do you alternative investments, but with maximum think a MAP is a good way to tempt the Laurent Guillet, chief executive officer, Amundi protections. It will be interesting to see if this institutional investors back into London Branch and Amundi Alternative Investments directive will facilitate both. hedge funds? 139

Amundi Alternative Investments

Laurent Guillet: It is a good way, but it is not the only way. What we will offer for European, Asian and Latin American investors is something similar to the Ucits model. Investors from Asia are investing into Ucits, as are those from Latin America. What Europe wants to do is to create another brand name [like Ucits] to secure investors. That is one motivation of the directive. Although a platform is a way to secure investors, it can still be offshore. There are industry MAPs that are still offshore and, despite the fact that they are offshore, they can still be secure. However, as an investor, if you want to be totally secure, you can add the protection provided by a platform under the AIFMD. That will give you two layers of protection. Investors can still be in a commingled onshore fund without having to go onto a MAP, or they can opt for the total security that comes with a MAP that is also AIFMD-compliant. Therefore people took a step back from what Another is that people are waiting to see if HEDGE FUNDS REVIEW: Many investors FoHFs could bring in terms of value to the the AIFMD will create the environment they have been complaining about fees. Do you investors. The temptation just after the crisis need to find a real alternative. That is what think doubling the protection level comes was to go direct to single funds. The fact that we are talking about: alternatives to more with a cost? the AIFMD is going to provide extra layers of traditional assets, such as bonds and equities. Laurent Guillet: You are perfectly right to protection could reinforce this trend. If alternatives can deliver, there will be huge ask that question because that is the core of That is one of the problems that FoHF opportunities because the market conditions the question of investors – what they have to professionals will have. But people will have are pushing a lot of big institutions into consider if they decide to go down that route. to think in terms of portfolio, construction alternative investment solutions. That platform can also be seen as a buying and the combination of various strategies platform. To that extent the platform has together with hedge funds. They will HEDGE FUNDS REVIEW: Looking at enough size and volume to negotiate cuts discover that it takes resources, time, means Amundi, how do you want to see the in the management and performance fees. and skill to construct a hedge fund portfolio. company positioned? The idea is to absorb part of the hedge fund So they will go back to FoHFs. Laurent Guillet: Amundi is a very large costs through the platform in order to make animal. It is managing $1 trillion worldwide. it more acceptable from the investor’s point HEDGE FUNDS REVIEW: You have a good That makes us number five in the world of view. overview of the industry globally and as far as institutional money is concerned, within Europe. How do you see hedge and number two in Europe. So Amundi’s HEDGE FUNDS REVIEW: Are MAPs going funds developing over the next 12 to 18 managed account platform, together with to be the preferred route for European- months? the FoHF business, is ranked number 15 based investors, or do you think they will Laurent Guillet: There are challenges and globally in terms of FoHF, and number six in gradually move into direct allocation to opportunities. The challenge first of all is terms of MAPs. hedge funds? performance. We have to start with that Where do we want to go? We want to Laurent Guillet: That is one of the lessons because that is what people want from us, grow bigger because, compared to the we can draw from the crisis. The funds of and what they expect from the alternative parent company, we have a lot still to do. hedge funds (FoHFs) business model has industry, is performance. What people want Our territory is going to be Europe and been called into question. There were two is return. probably more northern Europe than main criticisms. First, an absence of due By this I mean hedge funds with the southern Europe for structural reasons – the diligence as demonstrated in the Madoff capacity to deliver, on a regular basis, presence of pension funds and big insurance case. Even the most known FoHF houses performance of around 6% or 7% net of fees, companies in northern Europe and Asia – were trapped – but not Amundi. with volatility of around 5% and the absence because it also corresponds to the strategy The second negative lesson was that of correlation – a real absence of correlation. of Amundi and to where the money is. FoHFs and hedge funds were not supposed If you consider 2011 or 2012, performance to be correlated with the other assets. was not good enough. People have a lot of At the end of the day, everything went expectations in that direction. That is the To view the full recorded proceedings of the down, assets were frozen, gated, and so on. first challenge for the industry. Q&A, visit: www.risk.net/2263079