HFMWEEK SPECIAL REPORT MANAGED ACCOUNTS PLATFOMS 2015

CUSTOMISATION Providing tailored solutions GROWTH Securing the future of the platform COMPLIANCE Meeting regulatory standards

FEATURING Alternative // Deutsche Bank Fund Services // HedgeMark // Innocap // Lyxor Asset Management // Man FRM // Morgan Staney // Permal Group FundLogic Alternatives Platform Liquidity. Access. Oversight.

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FundLogic Alternatives Platform refers to FundLogic Alternatives plc, an open-ended investment company with variable capital and segregated liability between sub-funds established as an authorised by the Central Bank of Ireland. This document is issued and approved by Morgan Stanley & Co. International plc (25 Cabot Square, Canary Wharf, London E14 4QA), authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This document is intended exclusively for use by and is directed to Eligible Counterparties and Professional Clients. This document has been prepared solely for informational purposes and is not an offer to buy or sell any financial instrument or participate in any trading strategy. This material was not prepared by the Morgan Stanley research department. Morgan Stanley is not acting as your advisor (municipal, financial, or otherwise) and is not acting in a fiduciary capacity.

© 2015 Morgan Stanley. All rights reserved. MANAGED ACCOUNTS 2015 INTRODUCTION

his year’s update on managed account platforms provides unique and crucial perspectives from some of the industry’s key players. The report considers just how relevant the managed account platform has become, the potential for its growth in the years ahead and what is required of the industry to secure this growth. Perhaps now more than ever, responding to the needs of clients and to trends in investor behaviour is crucial. We offer Tdiscussion of the importance of providing a tailored offering to clients in an ever more demanding environment. The language of managed account platforms is rich and varied, and it is clear that how industry members communicate is vital for the success of the platform. From managers to clients, if we begin to talk at cross purposes we limit the platform’s potential for growth. Some of the discussion in this report looks to overcome the obstacle of poor communication, and attempts to clear up some inconsistencies in industry jargon. HFMWeek Managed Account Platforms Report 2015-2016 provides an insight into the combined experience and technical know-how of some of the industry’s most knowledgeable members. HFMWeek is hopeful that this year’s edition will assist in building yet another successful year for the managed account platform.

Mike Sheen Report editor

REPORT EDITOR Mike Sheen T: +44 (0) 20 7832 6628 [email protected] HFMWEEK HEAD OF CONTENT Paul McMillan T: +1 646 891 2118 [email protected] HEAD OF PRODUCTION Claudia Honerjager SUB-EDITORS Luke Tuchscherer, Mary Cooch, Alice Burton CEO Charlie Kerr GROUP COMMERCIAL MANAGER Lucy Published by Pageant Media Ltd Churchill T: +44 (0) 20 7832 6615 [email protected] SENIOR PUBLISHING ACCOUNT MANAGER Tara Nolan +44 (0) LONDON Third Floor, Thavies Inn House, 20 7832 6612, [email protected] PUBLISHING ACCOUNT MANAGERS Amy Reed T: +44 (0) 20 7832 6618 a.reed@ 3-4 Holborn Circus, London, EC1N 2HA hfmweek.com; ; Alex Roper T: +44 (0) 20 7832 6594 [email protected] CONTENT SALES Tel: +44 (0) 20 7832 6511 T +44 (0) 20 7832 6500 [email protected] CIRCULATION MANAGER Fay Muddle T: +44 (0) 20 7832 6524 [email protected] NEW YORK 200 Park Avenue South Suite 1603, NY 10003 HFMWeek is published weekly by Pageant Media Ltd ISSN 1748-5894 Printed by The Manson Group © 2015 all rights reserved. No part of this publication may be reproduced or used without the prior T +1 646 891 2110 permission from the publisher

HFMWEEK.COM 3 MANAGED ACCOUNTS 2015 CONTENTS

05 TACTICS FOR WINNING THE GAME will drive the managed accounts assets’ growth in the short to Omar Kodmani, CEO of the Permal Group, describes seven areas that midterms. he believes investors in hedge funds should consider in order to help them achieve highly effective results 19 DEFINING PLATFORMS Andrew Lapkin and Josh Kestler, CEO and President & COO of 08 MOVING FORWARD WITH MANAGED ACCOUNTS HedgeMark respectively, discuss dedicated managed account Kristin Castellanos, director of Deutsche Bank Fund Services, solutions and clear up some marketplace misconceptions. discusses the development of managed accounts and their potential for future growth 22 SYNERGIES OF IN-HOUSE LEGAL COUNSEL Poseidon Retsinas, legal counsel at Innocap, discusses the firm’s 11 AHEAD OF THE CURVE customised managed accounts offering and the importance of its Daniele Spada, head of managed account platform at Lyxor Asset dedicated in-house legal counsel Management, discusses developments in the firm’s offering in response to industry trends 24 THE ADVANTAGE OF MANAGED ACCOUNT PLATFORMS 14 MANAGED ACCOUNT SOLUTIONS FOR INVESTORS Stephane Berthet, executive director at Morgan Stanley, talks to Michael Turner, chief operating officer at Man FRM, talks about HFMWeek about his take on managed account platforms providing managed account solutions to investors

17 BESPOKE SOLUTIONS Michael Hart, deputy CEO at Amundi Alternative Investments, discusses how capabilities in customisation and structuration

4 HFMWEEK.COM MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

TACTICS FOR WINNING THE HEDGE FUND GAME OMAR KODMANI, CEO OF THE PERMAL GROUP, DESCRIBES SEVEN AREAS THAT HE BELIEVES INVESTORS IN HEDGE FUNDS SHOULD CONSIDER IN ORDER TO HELP THEM ACHIEVE HIGHLY EFFECTIVE RESULTS

Omar Kodmani ith hedge funds becoming increas- downside. In a multi-manager portfolio, such changes can is chief executive of ingly mainstream, the bar has been make a significant change to the portfolio’s returns, but Permal Group. Before raised significantly for investors in at the same time the diversification in a multi-manager joining Permal in 2000, Mr. these funds to add greater value in portfolio can help weather the increased risk should an Kodmani spent seven years their approach. The last few years investment turn sour. with Scudder Investments have seen increased availability and Themes are investment ideas that are likely to drive in London and New York accessibilityW of hedge funds in institutional and private changes in markets in the short-to-medium term. Idea where he developed the wealth circles, the rise of direct programs from insti- generation comes from investors themselves, since they firm’s international mutual tutional investors, as well as the growth of advisory or have a top-down open-architecture vantage point, based fund business. ‘assisted-direct’ propositions from consultants and other on discussions with not only managers, but also independ- intermediaries. Many of the original professional alloca- ent research firms, and other sources in their network. tors to hedge funds, namely the multi-manager investment Once a view has been formed, the search then starts firms, have had to redefine their raison-d’être and make for the optimal ways to express that view, which may well the transition from allocator to investor. include a generic off-the-shelf investment with a man- Drawing inspiration from the famous self-improvement ager or something that is more customised and tailored book by Stephen Covey, The 7 Habits of Highly Effective to the investor’s individual requirements. These custom- People, we have listed seven key areas that investors in ised solutions are typically structured in consultation with hedge funds should consider in order to help them achieve the underlying manager, while execution is often through highly effective results. Conveniently these fall under the multiple-managers. acronym ‘TACTICS’. A: ACTIVE T: THEMATIC A buy-and-hold, or index approach, to hedge funds can is the concept of constructing port- potentially leave a lot of money on the table given the flux folios around particular investment themes rather than in global markets, as well as changes inside hedge funds the more traditional approach of utilising managers as themselves. An investor should be active in adjusting man- building blocks. With this approach, the investor takes a agers, as well as strategy weightings. more concentrated bet on specific market moves, with the At the strategy level, investment themes and market potential for greater upside, as well as the chance of greater cycles have an impact on which strategies work. For exam-

HFMWEEK.COM 5 MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

ple, if you look at the four broad hedge fund strategies tools that enable you do so efficiently, allows for a far as defined by Hedge Fund Research (equity long/short, more robust risk management. At the manager level, this macro, relative value, event driven) the range or difference enables granular monitoring for style drift and particular between the best performing strategy and the worst per- exposures. At the portfolio level, you can take an inte- forming strategy is, on average, about 14% a year. grated portfolio level view of risk exposures and liquidity. This figure hides the true picture, for it is just focusing It also gives an investor a far greater degree of confidence on broad strategies. Once such descriptions were the case, of where they should be rebalancing a portfolio, as well as but today hedge fund strategies have become far more understanding areas where they can implement thematic focused and specialised. Long/short funds are no longer investments or customised mandates without unduly the generalists of old, but vary based on sub-sectors, such skewing the mandate. Additionally, through more concen- as technology or healthcare; they also vary between long- trated mandates, you can better manage potential overlaps biased, variable bias or market neutral; and they vary by in manager positioning. Transparency, when it is achieved region. Event driven has similar specialities, with some through managed accounts, also provides the opportunity funds activist, others distressed, and others merger arbi- to intervene in a crisis situation. trage. Macro funds can be discretionary, systematic or commodity focused. So rather than looking at the broad I: INCUBATE level, when you focus on the sub-strategy level, the range There is a longstanding debate on whether emerging of returns becomes significantly wider, with an average managers offer superior risk-adjusted returns over estab- difference of 53.3%. lished hedge funds. Both have merits, but a new fund is So being active at the strategy level, whether making clearly out to make their name, and is therefore prone to short-term tactical or more long-term strategic changes, take more risk, as well as having an untested infrastruc- really does matter. ture, while an established manager is already proven, but Actively changing managers is also helpful in achieving because of their size may well have reduced their risk. It better returns. The typical hedge funds goes through a does not have to be an either-or decision. With appropri- cycle from emerging/ start up, to a growth phase (if per- ate operational due diligence, proper oversight and robust formance is good) to maturity, and finally - for many - the managed account infrastructures, one can ‘incubate’ or period of decline. In fact, the average life of a hedge fund invest with emerging talent in a secure operational envi- is between three and five years. Looking for such signs as a ronment. This opens the door to newer potentially higher fund moves through these stages is critical. performing investment talent while mitigating their opera- Various quantitative tools allow us to deconstruct tional risk, a reason often cited as a major cause of failure returns of a hedge fund portfolio to show the alpha that amongst small hedge funds. comes from manager selection, strategic (long-term) asset allocation shifts, and tactical (shorter-term) asset alloca- C: CONCENTRATE tion. Historically, hedge fund investment portfolios relied Concentrate in this instance is about building portfolios heavily on manager selection, while strategic shifts were with fewer managers. With greater control of underly- slightly additive, and tactical allocations detracted from ing investments through thematic portfolio construction performance. Today the more successful portfolios derive and customisation of mandates, as well as full transpar- their value added from multiple sources, including tactical ency - all traits of managed accounts - investors can afford investment. to take more concentration risk with particular manag- ers. Idiosyncratic risks (i.e. manager specific/operational C: CUSTOMISED issues) are mitigated via the operational safeguards of Hedge fund managers are generally running lower risk managed accounts. Systematic risks (market-related) can portfolios as they seek to cater to institutional clients. also be managed more closely and effectively from the The consequences have become diluted returns, overly top-down. diversified portfolios and a greater overlap with peers. To be more effective, investors in hedge funds should start S: SAVE thinking about customising investments to correct for Negotiating lower fees where possible is clearly a source this. Consequently, customisation often means directing of value added, not just at the manager level, but for all managers to a more focused mandate, either specific sub- service provider costs. One of the many advantages of sector where they have an edge, or a higher conviction managed accounts is that each account’s fees are individu- portfolio with fewer names. It can also mean structuring ally negotiated with the underlying managers. Investors mandates with higher target volatility, or perhaps sizing can use their scale and infrastructure economies to help one particular investment in a co-investment structure. deliver enhanced returns through cost savings. The value-added from customisation can be measured by Each of the seven TACTICS provides the potential for calculating the alpha of the customised mandate relative to higher returns from hedge fund investing. While some the manager’s flagship strategy. This annualised alpha can investors may have success in implementing one or two potentially average 2-3%. TACTICS, the greatest impact comes from being able to engage in all seven. This requires substantial investment T: TRANSPARENT and operational experience, resources, as well as global Position-level transparency in portfolios was generally not presence and infrastructure (especially related to risk man- available a few years ago. Today, by having the ability to agement systems). A sophisticated managed account plat- look through a portfolio on a daily basis, and having the form is also a key attribute to effective implementation. Q

6 HFMWEEK.COM ENTREPRENEURIAL ASSET MANAGEMENT

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MOVING FORWARD WITH MANAGED ACCOUNTS KRISTIN CASTELLANOS, DIRECTOR OF DEUTSCHE BANK FUND SERVICES, DISCUSSES THE DEVELOPMENT OF MANAGED ACCOUNTS AND THEIR POTENTIAL FOR FUTURE GROWTH

HFMWeek (HFM): You could say that managed If you take a look at managed accounts now, they can accounts really put Deutsche Bank Fund Services on mean different things to different people, usually based the global stage in terms of large, institutional man- on the driver of why an investor does not want to invest dates. How has this impacted your business? What in a manager’s commingled portfolio. changes have you seen since you started servicing A managed account can be a customised portfolio managed accounts? solution managed by a fund of hedge funds (FoHF) Kristin Castellanos (KC): Absolutely; shortly after we manager; a FoHF manager may offer access to individ- formed DB Fund Services we became the administra- ual hedge funds through feeder vehicles thereby allow- tor of one of the largest managed account platforms in ing investors to help guide the investment allocation the world. Because we needed to deliver T+1 indica- of their portfolio. This gives the investor three distinct tive NAVs from the beginning, we had to invest heavily advantages: oversight by a professional investor, access Kristin Castellanos in a robust technology platform and develop a ‘follow to hedge funds through a feeder which requires a much is the global head of the sun’ operating model so that the risk managers in lower minimum investment and asset allocation control Deutsche Bank Regulatory Europe had reconciled position reports by London’s to prevent being over or underweight on specific strate- Fund Services and is open. Operating a daily environment taught us to be gies based on their overall investment platform. responsible for the design extremely disciplined and has had a big impact in terms A managed account can also be a separate trading and delivery of products of our development roadmap. account at one or more prime brokers that is ‘managed’ by that help alternative In terms of changes, we have seen managed accounts a third party platform. These platforms generally serve as investment managers morph from a single, well under- the manager of a fund in the sense address their regulatory stood model into a number of that they arrange for the structur- reporting requirements. different structures. I think that ing, incorporation and administra- She is an alternative managed accounts used to be tion of the managed account as a investments industry defined as a very specific account THERE ARE A NUMBER commingled . But specialist with over 18 vehicle which has evolved; the also delegate portfolio manage- years’ experience in hedge term ‘managed account’ now OF TRENDS WE ARE ment to a ‘trading advisor’ (i.e., funds, private equity and seems to be almost as amorphous the hedge fund manager to which funds of funds, the last 7 of as ‘hedge fund’. OBSERVING IN THE the investor seeks access). These which have been spent at platforms provide investors with Deutsche Bank. ALTERNATIVE INVESTMENT access to world-class hedge fund HFM: What kinds of changes managers with many of the same have you seen to managed INDUSTRY THAT I THINK benefits as the FoHF customised accounts and managed account portfolio solutions but can also platforms? WILL SUPPORT THE include better liquidity terms KC: Well, to go back in time a bit, and even more control. Many of in the 2000s a managed account GROWTH OF MANAGED these managed accounts give the was generally a separate trading platform the ability to shut a fund account at a prime broker man- ACCOUNTS down immediately (permit closing aged pari-passu to a hedge fund orders only) in the event that they manager’s core strategy. This was wish to terminate the account. a time when many hedge fund managers used a single prime bro- HFM: There has been a great ker. Generally, they were owned ” deal of discussion that the alter- by a single that did not want to native investment industry may double in size over invest in a manager’s commingled vehicle for a variety of the next 10 years; do you think the growth of man- reasons such as transparency, control or better liquidity aged accounts will keep pace? terms. For the manager, it would only make sense if the KC: I do. There are a number of trends we are observing size of the account and corresponding fees were large in the alternative investment industry that I think will enough to compensate for the additional operational support the growth of managed accounts. Two of which burden of managing a side by side portfolio. are an influx of investments from accredited investors

8 HFMWEEK.COM FINANCIAL SERVICES

and increased sophistication of multi manager/FoHF a scalable technology platform and a high degree of auto- investors. mation and straight through processing of data, the cus- As hedge funds have become more accessible to retail tomisation should be a onetime configuration exercise investors through liquid alternative funds, there has been rather than a departure from a standard operating model. also been increased interest from individual investors As we built our technology platform to be extremely flex- who, while they are accredited and can purchased 3(c)1 ible, we have been able to provide customised reporting shares, may not be able to directly invest in a diversi- based on our standard servicing model which has made fied portfolio of hedge funds because of the minimum a big difference. investment amounts. Managed account platforms are beginning to recognise this growing market and offer HFM: What advice do you have for managers that are managed account solutions through private banks and considering managed accounts? investment advisers which provide access to this large KC: Understand the drivers of your investors and how universe of investors. this relates to your investment strategies. Are they look- Also, as foundations, endowments and other natural ing for greater control over the asset allocation, and why? buyers of FoHFs become more sophisticated on the Will they be validating your investment decisions or do investment characteristics of asset classes and types of they need to ensure that your investment strategy will hedge funds, they seek to have greater input in their not under or over weight investments in the context of manager selection and allocation. By working with a their overall investment program? Are they looking for seasoned FoHF manager, they can help devise a custom- greater transparency, and why? Does this pose a risk if ised managed account of hedge funds that follows their your portfolio is concentrated in thinly traded or illiquid investment parameters more closely in terms of diversi- securities? Are they looking for greater liquidity, and fication and liquidity. why? If your positions are fairly illiquid, how will that impact your trading? Will it impact the way you manage HFM: By their definition, managed accounts are gen- your portfolio? erally specific to an investor; from a servicing side, From a servicing standpoint, make sure that your does that mean that you have to customise the admin- service providers have the necessary infrastructure and istration for every managed account? Does this get technology platform to support whatever complexities operationally difficult? the managed account may pose and also understand KC: Managed accounts are either specific to an investor how this will impact your regulatory reporting. Managed or, in cases of some managed account platforms, specific accounts can be a great way to deliver value to your inves- to a hedge fund manager. Although some will present tors but thinking through the operational considerations challenges in terms of bespoke requirements, if you have from the start is critical. Q

HFMWEEK.COM 9 YOU STEER. WE NAVIGATE.

Enabling & protecting your investment decisions.

1 INNOCAP $ Bn

3.6 CELEBRATES A $ 3.6Bn 3.4 64% GROWTH 3.2 3.0 OF ITS ASSETS 2.8 2.6 UNDER MANAGEMENT 2.4 + 2.2 IN 2 YEARS 2.0 January 2013 – June 2015

innocap.com

1 Refers collectively to Innocap Inc. (“IIM”) together with Innocap Global Investment Management Ltd (“IGIM”). The assets under management, including their growth, disclosed herein are those of both IIM and IGIM collectively. This report does not constitute and should not be construed as an offer or solicitation to enter into any transaction in a jurisdiction where such offer would be unlawful under the laws of that jurisdiction. MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

AHEAD OF THE CURVE DANIELE SPADA, HEAD OF MANAGED ACCOUNT PLATFORM AT LYXOR ASSET MANAGEMENT, DISCUSSES DEVELOPMENTS IN THE FIRM’S OFFERING IN RESPONSE TO INDUSTRY TRENDS

HFMWeek (HFM): How has Lyxor’s managed account than Ucits, but we do have a number of clients who want off ering evolved in the past year? to invest in regulated alternative funds that are not neces- Daniele Spada (DS): First, we expanded our existing sarily constrained by Ucits regulation. off ering of managed accounts by adding new Ucits and Th e second major thing we have done is to be inno- AIFMD managers. vative in the way we propose our services and range of Ucits funds have raised a lot of assets in the past 12 expertise. Our platform and the expertise we can off er to months, and we have responded to this trend by launch- our investors now go beyond alternatives. ing three new Ucits funds. We aim at building a compre- Over the past couple of years, more and more of our hensive investment platform rather than just distributing clients have been asking for broader support than sim- funds. Th is means we prefer quality over quantity and are ply providing managed accounts. So we have adapted our strongly focused on providing access to a small number organisation and off ering to meet this request. We now Daniele Spada of the highest-quality managers, running strategies that have a manager selection team of 30 analysts, comprising is head of managed our clients are asking us about and that make sense in the 20 covering hedge funds and ten covering mutual funds, account platform at Lyxor, current market environment. and we have put all of them together, even those not where he is in charge Our strategy is to fi nd managers and strategies that you covering funds on our managed account platform. Th is of the development would not be able to fi nd on other platforms. In the Ucits means that we can now give investors the option to in- and management of universe, you will see a majority of multi-asset funds or vest not only via our platform (both in a commingled or the platform, including long-short equity managers mainly focusing on Europe dedicated framework), but if they want to invest direct in hedge fund and mutual while our new Ucits launches, for instance, include a other managers we can help them select the right one for fund selection, due long-short credit strategy, a long-short US equities and a them and follow up on their investment on their behalf. diligence, and customized long-short emerging markets equities. In the fall we will And if they need long-only rather than or in addition to infrastructure services. be launching a US special situations manager. We want alternative exposure, that is something that we now can our platform to be fully representative of both the invest- advise with too. Our information systems are also well ment universe and the strategies that our investors need, designed to off er comprehensive and transparent invest- and all accessible in a Ucits or AIFM format. ment and risk reports to investors with diversifi ed alloca- We have also launched three AIFMD managers on the tions in mutual and hedge funds and answer to all recent Lyxor platform. Th is regulation is currently less popular regulatory requirements.

HFMWEEK.COM 11 MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

We have particularly played on the convergence be- We have not made so many adaptations to our infra- tween alternative and traditional investments by trying structure or offering on the AIFMD side, mainly be- to anticipate those future needs. It is all about capi- cause the operational set-up of our managed account talising on the long and solid history of our managed platform was already compliant with the level of trans- account platform and adding new expertise that we parency required by this regulation. It is just a matter believe investors want in the current environment and of setting up a new platform in a different jurisdiction, that is essential for us to diversify our offering. which obviously takes some time. Solvency II is all about providing transparency in HFM: What new industry trends are you having to terms of risk – both at the aggregate level and on all react to and what new challenges do they represent? underlying investments. Again, we have been doing this DS: Well, another clear trend that we are seeing is an in- since before the regulation came in. What we have done creasing number of institutional investors that go down is developing specific reporting for some investors on the route of “CIO outsourcing”. Such clients do this our platform (mainly insurers) to help them monitor because they want a unique platform provider that is and reduce significantly their Solvency Capital Ratio able to provide them with all of their investment needs consumption associated to their alternative invest- from A to Z – helping them select the right managers ments. This has proved quite effective. What is crucial (both alternative and long-only), run the investment here is the technology needed to process all the data and operational due diligence, risk modelling and man- at the fund level and produce transparent, detailed or agement tailored to all of their individual investments, aggregated reporting, but again that is nothing new for provide with aggregated reporting for all of their invest- Lyxor. We have been doing it for a long time. ments, and also guaranteeing that all their underlying Our aim is always to maintain standards that surpass investments are valued by the same administrator with what current regulation requires, and this means that the same pricing policy. these regulations have not led to any hurdles for This is precisely what we have been working us to get over. But of course we are always on towards at Lyxor for the past 15 years, and with the lookout for new ways to improve our pro- the recent changes we have made to our organi- cesses ahead of new requirements. sation we are even more equipped to meet these new needs. To be successful in this respect it is WE NEED TO ENSURE HFM: What new innovations are in Lyxor’s not only about performance, it is about selecting pipeline for the coming year? the right managers, managing risk, providing the WE PROVIDE THE RIGHT DS: Our challenge for the next 12 months is, as right customised operational set-up and advising ever, to identify early on the alternative invest- investors over time. We need to be able to offer an SET OF MANAGEMENT, ment strategies that have the scope to perform integrated, but modular, front to back set of ser- well against the current backdrop, to select the vices and expertise, so that our clients can pick INFRASTRUCTURE, best managers of those strategies, and to pack- and choose what they need. We have to ensure age their products to make them available to we provide the right set of management, infra- SELECTION AND ADVISORY our clients on our managed account platform. structure, selection and advisory services that The Ucits phenomenon in particular shows can meet the demands of some very sophisticated SERVICES TO ENSURE no signs of slowing, and will require a lot of institutional investors. research and energy on our side. We will also WE CAN MEET THE capitalise on the new expertise in selecting mu- HFM: Of the three major EU regulatory de- tual funds in order to spot managers and strate- velopments of the moment (the AIFMD, Ucits DEMANDS OF SOME gies that could perform very well in the current and Solvency II), which is causing you the most market environment. concern and why? VERY SOPHISTICATED One development of particular interest is DS: These regulatory developments are not that we are about to launch a multi-manager necessarily “challenges” for Lyxor, because we INSTITUTIONAL INVESTORS managed account. This is basically a managed already have the systems and processes in place account with different buckets, each of which to comply with them. Rather, we see them as an is managed by a different hedge fund manager. opportunity. The allocation between each pocket is either Ucits is an area of great interest to both our decided by our clients, or by Lyxor on behalf of institutional and distribution clients, so we have ” each client based on their individual guidelines. been developing our offering in this field for some This is essentially a new and evolved version of the time. We launched our first Alternative Ucits fund back old fund of hedge funds. It is a way to be more reactive, in 2013 and experienced great success last year with providing diversification of strategies, but in a more a merger arbitrage fund in particular, raising a large cost-efficient way because there is only one layer of fees amount of capital. We are still working to bring new as it is run as a single fund. managers to our Ucits platform, focusing on launching There is been a great deal of interest in this kind of so- a small number of high-quality managers rather than a lution from our clients. It is very attractive to distribu- large volume. By the end of this year we should have a tors in particular, because if you package it with a Ucits comprehensive Ucits range with around ten funds that wrapper, it provides a similar level of concentration as should enable our investors to build a diversified and a fund of hedge funds but in a format now available to performing allocation. any investor. Q

12 HFMWEEK.COM Amundi, the No.1 European asset manager(1)

Earning Alternative Investments Pioneering in alternative products since 1992, your confi dence Amundi reveals the power of its EU-regulated Multi-management expertise & Managed by being a trusted Account Platform.(2) Through a bespoke consultative-approach partner whatever rather than a one size fi ts all product offering, Amundi partners with its clients to provide your needs. suitable alternative investment solutions.

alternatives.amundi.com

Amundi AI is AIFM licensed. (1) No.1 European asset manager based on global assets under management (AUM) and the main headquarters being based in Europe - Source IPE “ Top 400 asset managers” published in June 2015 and based on AUM as at December 2014. (2) AIFMD: Alternative Investment Fund Managers Directive which came into force on July 22, 2013. Aims to create a comprehensive regulatory framework for hedge fund managers that reconciles investors’ protection (mandatory segregation of administration/custodian and valuation duties from fund management, new prescriptive rules aiming to prevent excessive risk taking, such as on remuneration), while preserving the necessary fl exibility in the “performance engines” with no prescriptive constraints imposed on investment guidelines, type of instruments used, level of leverage. Also, the AIF passport will allow to market alternative products within the EU for professionals investors, outside of the private placement regime. There is no capital or performance guarantee. This publication cannot be reproduced or passed onto third parties, in whole or in part, without our permission. Published by Amundi Alternative Investments, SAS - Simplifi ed Joint Stock Company with capital of €4,000,000 - Registered offi ce: 90, boulevard Pasteur, 75730 Paris Cedex 15 - Portfolio Management Company registered with the ‘AMF’ (French Financial Markets Authority) under no. GP 01.044. Paris Register of Companies no. 439 614 553. This publication is intended for professional investors only. The information contained in this publication is not intended to be distributed or used by any person or entity in a country or court where such distribution or use would be contrary to legal or regulatory provisions or which would compel Amundi Alternative Investments, SAS or its affi liated companies, to comply with the registration obligations of the said countries. The data and information contained in this publication are supplied for information purposes only. Nothing in this publication constitutes an offer or request by any member of the Amundi Alternative Investments group, to provide advice or an investment service or to buy or sell fi nancial instruments. The information contained in this publication is based on sources which we consider to be reliable, but we cannot guarantee that it is accurate, comprehensive, valid or relevant. July 2015. Photo credit: Corbis. | MANAGED ACCOUNTS 2015

MANAGED ACCOUNT SOLUTIONS FOR INVESTORS

MICHAEL TURNER, CHIEF OPERATING OFFICER AT MAN FRM, TALKS ABOUT PROVIDING MANAGED ACCOUNT SOLUTIONS FOR INVESTORS

anaged accounts or “MACs” aim to value of their hedge fund investments. We can, for exam- provide bespoke, cost-eff ective solu- ple, help tailor the hedge fund selection to compliment tions for a number of diffi cult challeng- an entire investment portfolio, and over time dynamically es faced by global hedge fund investors. adjust the allocation as market conditions and the client For a start, MACs are designed to in- portfolio evolve. crease the effi ciency and transparency FRM has built and run full service MACs for very dif- ofM hedge fund investments. What is more, a MAC seeks to ferent types of clients. We have provided solutions globally help an investor exercise eff ective control over their hedge for European insurers as well as Japanese and US investors fund assets as well as to understand the liquidity profi le of and UK pension funds. We have designed specific report- their investments. ing programmes (covering, for example, SRI and Solvency Man FRM (FRM) began building MACs for its own II) and are well versed in working with clients to articulate Michael Turner hedge fund investments in the mid- their particular data requirements is chief operating officer 1990s. Since then we have devel- (covering, for example, positions, of Man FRM and a member oped a broad range of skills, which performance and risk) and then of FRM’s Management we believe may be of benefit to many developing customised MAC solu- Committee. He is also different types of investors rang- tions. As part of our hedge fund responsible for investment ing from pension funds to insurers SINCE THE FINANCIAL investment offer, MAC clients are infrastructure within FRM and other financial services provid- provided with FRM’s online risk and oversees the teams ers and consultants. We believe the CRISIS, WE HAVE SEEN A analysis tool, Clarus. Although a responsible for quantitative sophistication of our in-house infra- highly analytical system, Clarus analysis, managed account structure and our hedge fund invest- NUMBER OF SUBSTANTIAL was designed to have an extreme- transparency and ing skill distinguishes us from other ly intuitive user interface. With operations, and client MAC providers. We believe we are INSTITUTIONAL INVESTORS Clarus, users can translate daily services equally adept at helping investors position level data into informa- to model and risk monitor manag- PIVOT FROM CO-MINGLED tion clients can use to monitor and ers at either end of the complexity risk manage their MAC exposures spectrum – ranging from complex INVESTMENTS TO within their overall portfolio. credit and relative value strategies The FRM Full Service Solution to managed futures and equity long ALLOCATING TO HEDGE MAC platform is investment led, long-short funds. so we only open MACs with man- In this article, we want to high- FUNDS DIRECTLY agers in whom we have confidence light two specific ways we can pro- to invest capital. We built our vide MAC solutions to investors. MAC platform to better under- The first is for investors that need stand the managers we allocate to a broad, full-service solution. The ” as hedge fund investors. Our aim second is for investors that want an infrastructure provider today remains the same: to construct better portfolios, to build and run MAC solutions for them. exercise control of the assets and create better transpar- ency and risk analytics around hedge fund investments. FULL SERVICE MAC SOLUTIONS FRM continues to develop new ways to supply the In every mandate investors want to take advantage of FRM MAC platform to investors. A recent example of this is infrastructure, and what we believe to be industry-wide the scalable and cost-effective MAC solution we built for credibility, in hedge fund investing. This can result in a local government pension scheme (“LGPS”) in the UK. potential cost savings on fees and provide investors with In this case, we developed a solution to build a diversified tools, which are designed to increase the performance and hedge fund portfolio customised for the particular invest-

14 HFMWEEK.COM FINANCIAL SERVICES

ment mandate and requirements of the LGPS member. At clients receive the full firm-wide benefits of Man Group’s the same time, however, the program we developed allows expertise and global scale. As investors ourselves, we very all of the LGPS’ underlying funds using the FRM MAC clearly understand the challenges that investors face. It platform to benefit from a sliding management fee scale also means that as investors we can insight and per- based upon their collective assets. Consequently, spective, and collaborate with clients as investors. all of the LGPS funds are treated as a single investor From first contact, FRM facilitates detailed and with regard to the pricing of the MAC programme, collaborative discussion to understand each inves- while each scheme is treated individually and given tor’s specific MAC needs. Jurisdictional require- a customised solution. ments are assessed as are operational, structural By using an FRM MAC, each LGPS fund can WE BELIEVE MACs MAY and other factors. exercise full ownership over its hedge fund invest- The aim of all this is to set the client up to focus ments and have greater transparency over the OFFER A COMPELLING on the investment decision making. FRM puts underlying holdings. In addition, each LGPS fund in place the technology and processes to facili- can also benefit from the sliding management fee SOLUTION FOR VIRTUALLY tate the operational heavy lifting in setting up the structure, which we believe provides a real collabo- MAC solution. Our collaborative approach and ration opportunity for all of the LGPS funds that ANY TYPE OF INVESTOR commitment to facilitating client requirements is invest in hedge funds. designed to provide a major boost in end-investor capabilities and control. INFRASTRUCTURE MAC We believe the benefits of these synergies Since the financial crisis, we have seen a number of ” to investors are often considerable. Indeed, we substantial institutional investors pivot from co-mingled believe that an investor that opts to set up an infrastructure investments to allocating to hedge funds directly. To max- MAC could see a positive impact on performance largely imise transparency and control these investors are increas- due to anticipated savings from negotiating lower man- ingly looking to use MACs to allocate to their hedge funds. agement and performance fees. Furthermore, we believe But this presents a challenge as setting up a MAC platform that annual operational fee reductions obtained through a takes specialist skills, is complicated to do and is expensive MAC can produce additional savings for an investor. to build. FRM’s substantial infrastructure capability with MACs is complimented by Man Group’s global infrastruc- THE OUTLOOK FOR MACs ture, trading platforms, legal expertise and outreach. Many investors may be attracted to the long-term benefit For new sophisticated investors looking to build man- of building partnerships around terms, strategy develop- aged account platforms, FRM offers a suite of customised ment, implementation and ideas sharing. Others may be and innovative solutions across the MAC interface. Areas looking for a pure, cost-effective infrastructure solution. of particular expertise include: We think the hedge fund market place shows that MACs • Legal structuring are playing an increasing role at either end of the complex- • Negotiation of trading agreements ity spectrum. • Risk monitoring, reporting and analytics via Clarus We believe MACs may offer a compelling solution for • Portfolio optimisation virtually any type of investor. They can provide customised • Systems development and operational integration Solvency II reporting for insurers and through enhanced • Project management to launch the MAC and full analytics capabilities aid pension funds to improve asset lifecycle support of it. allocations by selecting more granular return-drivers. At FRM, we work with clients to design and create Yet beyond this agile skill set, it is important to remember MAC solutions. We aim to empower investors with the that FRM is not a service provider. Rather we bring the tools and operating expertise they need to achieve better perspective of a hedge fund investor to MACs and our risk adjusted returns from their hedge fund investments. Q

HFMWEEK.COM 15 Deutsche Bank Global Transaction Banking

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This advertisement is for information purposes only and is designed to serve as a general overview regarding the services of Deutsche Bank AG and any of its branches and affiliates. The general description in this advertisement relates to services offered by Deutsche Bank AG Global Transaction Banking and any of its branches and affiliates to customers as of July 2015, which may be subject to change in the future. This advertisement and the general description of the services are in their nature only illustrative, do neither explicitly nor implicitly make an offer and therefore do not contain or cannot result in any contractual or non-contractual obligation or liability of Deutsche Bank AG or any of its branches or affiliates. Deutsche Bank AG is authorised under German Banking Law (competent authority: German Banking Supervision Authority (BaFin)) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are available on request. Copyright © July Deutsche Bank AG. All rights reserved. MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

BESPOKE SOLUTIONS MICHAEL HART, DEPUTY CEO AT AMUNDI ALTERNATIVE INVESTMENTS, DISCUSSES THE ADVANTAGES OF MANAGED ACCOUNT PLATFORMS AND HOW THEY ARE HOLDING THEIR OWN DESPITE THE RISING TREND FOR USING UCITS FUNDS

HFMWeek (HFM): Is there a possibility of the ris- the traditional advantages of liquidity, transparency Michael Hart ing trend of Ucits funds being the demise of the and control. Obviously this must begin with being ex- is deputy chief executive managed account platform? tremely competitive in terms of platform fee and prov- officer and global head Michael Hart (MH): It is true that regulatory changes ing out capabilities in negotiating fees with hedge fund of business development in the last four to five years have forced some hedge managers. at Amundi Alternative funds to go down the route of Ucits. The result of this Investments. He is also a growing regulated offering in the industry is that the HFM: You say the future of MAP businesses is not member of the Executive key advantages of managed account platforms may be simply replicating and distributing products. What Committee, the New seen as less appealing. should be done? Product Committee, the But it seems unlikely that this marks the demise of MH: Amundi Alternative Investment’s culture is asset Compliance Committee, the managed account platform. They are two complete- management and that is the reason we believe the future and the Risk Committee. ly different animals. Obviously the biggest advantage of the managed account platform business is not simply Michael has more than you have with a managed account platform rather than replicating and distributing products. The future of the 20 years of experience in going with Ucits is you have the additional safety net. business is structuring and customizing the hedge fund the alternative investment Managed account platform providers and special- portfolios we have selected to work for our platform. space. ists such as Amundi Alternative Investments must of- In terms of investment strategy, we tend to look fer ‘something else’ to clients. We have to go beyond ahead 12 to 24 months. If you become part of this rising

HFMWEEK.COM 17 MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

WE CAN BE ALL THINGS TO ALL PEOPLE, BECAUSE WHAT WE OFFER IS FAR MORE FLEXIBLE AND MODULAR ” trend of Ucits, you are just going in to an existing strat- relatively low, because it takes a great deal for a manager egy. Whereas what we are putting together for clients is to get on to our platform. Not only from an investment a customised solution, which is something you will not risk point of view, but from an operational business risk get with Ucits. point of view. As a result we have never had any issues Hedge funds should never be looked at in isolation. with any existing managers. Especially with how the markets are going at the mo- Where we differ from rent-a-platform is we are offer- ment. For example, the biggest risk to pension plans is ing investment solutions rather than simply plug-and- the impact of changes in US monetary policy, Eu- play. This could be through direct access to the ropean stability and what has been happening in managed account platform, a simple advisory the Chinese stock market. solution, or a dedicated mandate. If you look at returns, what has We can be all things to all people, because happened in the past is that investors have be- MANAGED ACCOUNT what we offer is far more flexible and modular. come accustomed to looking into equities for Whereas with a rent-a-platform you are very growth. Now they need to lock in some of these PLATFORM PROVIDERS limited. We are not simply selling managed ac- gains. This is where we can address those con- counts, we are partnering with our institutional cerns with our managed accounts platform, and AND SPECIALISTS SUCH clients and we are positioning ourselves as an help them reduce the volatility of their overall extension of their in-house teams. We accom- pension fund. AS AMUNDI ALTERNATIVE pany our clients not only on the operational Pension funds need to close the funding gap. aspects of a managed account platform, but also But they need to do that while staying within their INVESTMENTS MUST OFFER on investment aspects respective risk tolerances. At the moment they are fi nding their asset values falling while their liabili- ‘SOMETHING ELSE’ TO HFM: How can non-EU hedge fund manag- ties are rising. So they need to look for uncorre- ers leverage your MAP tool? lated, or relatively market neutral, products. What CLIENTS. WE HAVE TO GO MH: The realities of entering Europe have be- is going to provide that in the safest possible envi- come increasingly onerous. The advantage for ronment is a managed accounts platform. BEYOND THE TRADITIONAL some American managers, particularly emerg- ing to mid-size managers, is that the prohibi- HFM: How you would you define your man- ADVANTAGES OF LIQUIDITY, tive costs can be reduced by working with our aged account offering? How is it different managed account platform and partnering with from a ‘rent-a-platform’ style product? TRANSPARENCY AND us. They can then access large central European Our managed account platform differentiates it- clients in a cost-effective and timely manner. self from others because it was developed from CONTROL The European market is growing, so it is a the clients’ perspective and for the clients’ ben- market non-EU managers do not want to ig- efit. So unlike many others, we are not just a dis- nore. But the regulatory realities can be off- tribution platform. putting. It is our job to make it is as painless as Our fund managers go through a very stringent ” it possibly can be. due diligence. This is because we principally launch Non-EU managers can partner with Amundi in order managed accounts for our existing client use. This is to leverage off our AIFMD-compliant managed account what clients and potential clients really like about us. platform in Ireland, or our Luxembourg Ucits platform. We are investing alongside our existing clients, which This partnership for those managers is a way of access- means our interests fully align with theirs. ing products which fit marketing rules in the European What this also means is that our manager turnover is market quickly, easily and cheaply. Q

18 HFMWEEK.COM MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

Andrew Lapkin is chief executive officer and is responsible for overall management of the firm. Prior to joining HedgeMark in 2011, Lapkin was the co- founder, president, and chief operating officer of Measurisk, a JP Morgan company that was formerly affiliated with The Bear Stearns Companies. DEFINING PLATFORMS ANDREW LAPKIN AND JOSH KESTLER, CEO AND PRESIDENT & COO OF HEDGEMARK RESPECTIVELY, DISCUSS DEDICATED MANAGED ACCOUNT SOLUTIONS AND CLEAR UP SOME MARKETPLACE MISCONCEPTIONS

HFMWeek (HFM): What is a hedge fund dedicated single institutional investor who ultimately owns and con- managed account? trols the account. A DMA removes co-investor risk, pro- Andrew Lapkin (AL): Dedicated managed accounts vides the investor with much more control than a CMA (DMAs) are typically single-investor hedge funds estab- and allows the investor to customise the account structure, Joshua Kestler lished for the exclusive use of, and owned and controlled service providers and investment strategy. is chief operating officer, by, an institutional investor, such as a public or private AL: While DMAs provide a number of advantages over overseeing all departments pension plan. a CMA, DMAs require a significant investment per fund, associated with legal/ The term ‘managed account’ is the source of significant often $100m or more. As such, many investors will seek compliance, operations and confusion in the hedge fund space. Investors often think of the benefits of managed accounts by investing in a spon- business development. this term in the context of traditional investments where it sored CMA. Prior to joining HedgeMark means giving a manager trading authority over a broker- in 2012, Kestler was a age or custody account. In the hedge fund context, we are HFM: Is a ‘fund of one’ the same thing as a managed director of Deutsche Bank’s almost always referring to a fund or other special-purpose account? X-Markets Hedge Fund vehicle when discussing a managed account. The use of AL: No; a ‘fund of one’ generally refers to a fund created Platform and head of leverage and short-selling by hedge fund managers can and controlled by a hedge fund manager for a single inves- managed account platform result in liabilities that exceed the amount of investment. tor. In a fund of one structure, the manager rather than the operations in the United As a result, a limited liability vehicle is typically used to investor typically controls the service provider relation- States. house hedge fund managed account investments. ships such as the administrator and auditor used for the fund. The manager would continue to have authority over HFM: What is the difference between a commingled key operational functions such as the ability to move cash managed account and a DMA? and to value securities. While a fund of one can remove Josh Kestler (JK): A commingled managed account co-investor risk, it does not achieve all of the benefits (CMA) is a pooled vehicle generally set up by a managed of a managed account, including limiting the manager’s account provider who is offering a range of individual authority to trading authority only. managed accounts covering multiple hedge fund strate- gies to institutional and high-net-worth investors. These HFM: Is a managed account a type of vehicles or ‘funds’ are sponsored and controlled by the DMA? platform provider who is responsible for oversight of the JK: No. A customised fund of funds product is often con- funds. fused with a managed account. A custom fund of funds is a A DMA is typically set up by a platform provider for a dedicated vehicle whereby a fund of funds manager invests

HFMWEEK.COM 19 MANAGED ACCOUNTS 2015 FINANCIAL SERVICES

in several different underlying manager-sponsored hedge not have the expertise to perform these functions inter- funds on behalf of a single investor. This structure nally, and hiring external counsel is not a com- does not typically provide any of the tradition- plete solution. There are providers that do not al benefits of managed accounts – transparency, offer all of the operational support necessary to liquidity, governance or control. A custom fund UNFORTUNATELY, THERE run anything other than the simplest hedge fund of funds is equivalent to an investor making direct strategies, leaving these functions with either the investments into traditional hedge funds under an REMAINS A GREAT DEAL investor or hedge fund manager which defeats the advisor’s guidance. purpose of having a DMA. AL: We are, however, seeing a new trend where- OF CONFUSION IN THE We have found that certain providers hold by fund of funds managers are using managed themselves out as DMA providers, but in reality accounts as the building blocks for client port- INDUSTRY GENERALLY their services are limited to processing data and folios. Fund of funds managers are beginning to delivering some risk reporting. We believe that understand the additional value that they can pro- REGARDING THE DIFFERENT institutional investors are looking for substantially vide to clients by having position-level transpar- more from their providers than this. The ability ency, applying investment guidelines and main- TYPES OF MANAGED for investors to differentiate among providers with taining control over the underlying assets. barely any publicly available information regard- The use of managed accounts by these managers ACCOUNT PROVIDERS AND ing the specific services offered or an industry changes and enhances the value proposition that standard service model remains a major struggle fund of funds can offer clients including the crea- THE SERVICES THAT THEY for the managed account industry. tion of unique products that may meet investors’ There are several fund of funds businesses demands for liquidity, asset control and transpar- EACH OFFER that have developed their own internal managed ency. It seems reasonable to expect that an advi- account platforms. Most of these platforms are sor can substantially improve their investment and used by the fund of funds as building blocks for risk management processes with complete daily various products and advisory portfolios. These position-level information as opposed to limited platforms are typically commingled from the exposure level information on a monthly lag. ” investor’s perspective and the underlying funds are gener- ally not offered on a stand-alone basis, but rather as a part HFM: Can you discuss the different types of hedge of a broader product or portfolio. The fund of funds plat- fund managed account platform providers and wheth- forms are offering investment advisory products and solu- er they all offer the same services? tions; whereas most of the pure managed account provid- AL: The hedge fund managed account industry has ers are offering a utility or service to facilitate investment evolved significantly in the last several years and we management by the investor or its advisor. believe that it will continue to mature. Unfortunately, there remains a great deal of confusion in the industry gen- HFM: Is an administrator a type of managed account erally regarding the different types of managed account platform provider? providers and the services that they each offer. Currently, AL: No. Unfortunately, we have found this to be a source of every different type of provider seems to get lumped into major confusion and misinformation in the marketplace. the same category and compared on an apples-to- Managed account services and fund administra- apples basis when in reality the comparison is often tion services are different. These services are com- apples to oranges. plementary rather than competitive. Since a hedge JK: There is not currently one industry standard fund managed account is almost always structured service model. There are several types of provid- A DMA REMOVES in a fund format, every managed account requires ers: the most well-known providers are historically a fund administrator to calculate an NAV, maintain the CMA platforms, which effectively select and CO-INVESTOR RISK, the fund’s books and records, produce financial distribute hedge funds in a managed account for- statements etc. mat. This model was really the first phase of the PROVIDES THE INVESTOR A managed account provider performs various hedge fund managed account industry and persists non-investment functions that would have been today. Many of the CMA Platforms have now also WITH MUCH MORE performed by the hedge fund manager, not the delved into the DMA space as the demand for fund administrator, in a commingled, manager- customised, dedicated accounts has been a growth CONTROL THAN A CMA sponsored fund structure. The managed account trend. platform provider is typically responsible for co- Pure play DMA providers such as HedgeMark AND ALLOWS THE ordinating fund set-up; co-ordinating counterpar- exclusively support institutional investors in the ty agreement negotiations and account openings; structuring, operational oversight and risk moni- INVESTOR TO CUSTOMISE overseeing the administrator including reconcili- toring of custom, private managed account plat- ation reviews, review and approval of the NAV forms. Some providers do not offer structuring THE ACCOUNT STRUCTURE, produced by the administrator, cash movements services which tends to be critical for many insti- for trade-related payments, expense payments and tutional investors who do not have the expertise SERVICE PROVIDERS AND margin movements; co-ordinating the audit pro- to perform these functions internally and hiring cess; and risk analytics and performance report- external counsel is not a complete solution. This INVESTMENT STRATEGY ing. Most administrators either do not have the component of the DMA service offering tends to expertise or the willingness to perform many of be critical for many institutional investors who do these services. Q 20 HFMWEEK.COM ” SUBSCRIBE TO

7 August 2014 ISSUE 349

WHEN THE www.hfmweek.com GOING GETS TOUGH... HOW CAN HEDGE FUNDS 21 05 BEST PREPARE FOR FEATUREA of it NEWS short FUTURE CRISIS? and the long The 09 NEWS

BNP PARIBAS SWOOPS FOR ADMIN UNIT E 10 Latest administration deal expected to complete in H1 2015 TH LAUNCH QUARTER OF DEPOSITARIES AWAITING FCA APPROVAL ALPHAPIPE- Twelve out of 44 applications to regulator still pending HFMWEEK EX-GRAHAM CAPITAL AND AHL PAIR PLAN LAUNCH Simon Crooks and Lee Bostock line up London fi rm SERVICE PROVIDER New Mexico pension drops APSHOT June this year, and marks a rap- SN id change in attitude to hedge hedge fundsfunds by the pension fund. NMERB had a 7% target US state’s $10.1bn Educational allocation to hedge funds as Retirement Board removes recently as last year, but has hedge funds as asset class since dropped that target to 3% and intends to get to zero with a Q2:14 BY ALEX CARDNO EducationalThe series of fresh redemptions. long and the So far, NMERB has with- THE BEST NEW MEXICO short drawnof it from Austin Capital data on the top 20 admins, Retirement BoardCITI (NMERB) RESTATES COMMITMENTManagement, TO ADMIN Gottex AS TRIOFund JUMP TO SS&C has dropped hedgeUS bank funds “deeply as an committed” Management, to space following TAG departuresand Deut- HFMWeek 16 asset class and is pulling most sche Bank’s Topiary Fund. www.hfmweek.comauditors, custodians and primeFEATURE brokers of its investmentsAQR HIRES in the FORMER sector WINTONIts CAPITALremaining GENERAL FoHFs, COUNSELGAM following an asset allocation Move comes as Arrowgrass complianceand Benchmark head joins Plus, CQS have been for SEC-registered hedge funds review. issued with redemption notices. The $10.1bn pension fund CIO Bob the Jackshapension toldfund 14 FINANCE AUTHOR LAUNCHES HEDGE FUND WITH HUSBAND previously held investments in has HFMWeek NEWS Yasmine Hayek and Nabil Kobeissi start LTW Capital Partners 07 six FoHFs with mostHFMWeek of those retained some hedge fund03 ISSUE 350 8/ 214014 August 16 2014 relationships dating back to investments in other asset classes 05/0 2006/07. But NEWS – namely Bridgewater’s 09 COST OF learned it has decided to with- Pure Alpha Fund and a draw its allocations. COMPLIANCE It follows a review completed NEW RULES MEAN NEW Fears mount overLAUNCH by the investment committee 10 COSTS – BUT WHO alongside consultants NEPC in Emir reporting A WAKE-UP CALL TO THE HEDGE FUND INDUSTRYSHOULD PAY? COMMENT responsibility FEATURE 19 s indd 1

z Many managers still facing DTCC problems 21 August 2014 z New requirements ISSUE 351ers must check the data passed intensified issue on Monday on by trade repositories. BY MAIYA KEIDAN Most managers spoken to READ IN THE by HFMWeek FEARS ARE GROWING DTCC to provide have the appointed data but among hedge funds tradingCHOOSING many managers A have faced prob- www.hfmweek.com OTC derivatives over the PLATFORMcon- lems LOOKS acquiring AT the data to check.

tinued failure of trade reposi-HFMWEEKThe issue intensified this tory DTCC to reliably provideTHE PROSweek whenAND newPITFALLS daily valuation crucial data required by new and sporadic collateral report-19 03 OF PARTNERING WITH A of it European regulations. ing requirements FEATUREkicked in, short SEARCH PLATFORM and the Under Emir rules, which significantly adding to the vol- long went live on 12 February but umes DTCC is dealing with. The 07 NEWS only became effective on 22 A spokesperson for DTCC KILLING OF THE July for non-EU funds as part of admitted it had “experienced TEXAS ERS TO RAMP UP HEDGE FUND INVESTMENT the AIFMD, managers can del- challenges with some aspects of $21bn US pension fund plans two new allocations next year egate08 reporting of OTC deriva- reporting” but was working to INVESTORtives to their prime broker but address the issues, while keep- FLASH BOYS? DEUTSCHE BANK’S PRIME CONSULTING CHIEF LEAVES remain liable for its accuracy, ing regulators informed. Chris Farkas departs as JP Morgan raids Barclays for talent with Esma stating that manag- Allan Yip at Simmons & Regulators, politicians and legislators HFMWEEKSimmons said almost every ALLOCATORS WEIGH IN ON LGPS CIV PROPOSALS delegated reporting have HFT in their sights – but what COMMENT agreement he has seen Majority believe it is too early to judge the impact of CIVs EXPLORES THEwill be the outcome? GETTING YOUR AIFMD ANNEX IV REPORTING RIGHT 50 STATES03 001_0 HFM 03_HFM350_News.indd 1 investigates FEATURE HEDGE FUND Highbridge’s 16 London hiring 14 what the firm perceives as huge The long opportunities in the European spree continuesand the short ofcredit it and private and public equity sectors. 12/08/2014 16:50 More than two-fifthsMAN GROUP’S of SIMON WHITEFifteen RETIRES of Highbridge’s AFTER 19 36YEARS Geoff Galbraith to take on role of COO US firm’s 36 FCA-approved London-based employees reg- www.hfmweek.com personnel are newly istered with the FCA have been registeredARIZONA this year PSPRS MULLS DISTRESSEDadded in 2014, CREDIT with ALLOCATION just three Pension plan could invest $75m in Davidsondeparting Kempner its fundUK-regulated BY WILL WAINEWRIGHT PEOPLE MOVES entities. ISSUE 352 A minority of the 15 are 03 4 September 2014 EQUINOXHIGHBRIDGE TO DEBUT IS RAMPING ASPECT CAPITAL digs down into the current London trend giant’s fi rst standalone ’40 existingAct offering Highbridge staff trans- up its European expansion ferred from other divisions, HFMWeek KEEPING IT 16 drive, with its London office INVESTOR most notably its global head08 significantly increasing head- of investment strategy Kevin exposure levels of publicPERSONAL pensionFEATURE funds count this year. RELATIONSHIPS, HOBBIES, The $29bn US manager has McNamara who has switched in states across the Western seaboard to the privateLAUNCHES equity-focused EXTERNAL COMMITMENTS: 10 Luxembourgmade several well-publicised bringsPrincipal Strategies unit. HOW DO YOU ENSURE14 recent hires analysisin Europe of filingsand But most have joined the HFMWeek INVESTORS AREN’T PUT OFF? JP Morgan-owned firm from03 underlines the scale of the INDUSTRY in tough AIFMDelsewhere, including Philip 19/08/2014 increase, finding that more than Moore who has joined FEATURE two-fifths of its FCA-registered Principal Strategies 19 remunerationLondon personnel were added rules since January. Its substantial growth push is designed to capitalise on Non-EU managers scrap DISTRIBUTING HEDGE FUNDS IN CANADA marketing plans due to onerous requirements COMMENTpublicise a raft of remuneration details through annual reports BY MAIYA KEIDAN or on their website. THE LUXEMBOURG The declaration has seen several managers halt moves tor is demanding non-EU man- to market in the region. One agers accessing investors regula-using lawyer, who did not wish to be GOLD private placement comply with named, said three clients who tough remuneration rules far had started the national private above what other European placement process have now jurisdictions are requiring, scrapped their plans due to the STAR HFMWeek remuneration requirements. The Commission can reveal. de Surveillance du Secteur However, sources close to the CSSF said it is just drawing Financier (CSSF) has added a managers’ attention to the cor- declaration in its private place- rect rules and if other regulators ment form that means the AIFM choose to disapply these rules it will need to comply with Section may lead to an Esma review. XIII of Esma’s remuneration guidelines, which includes a Section XIII is based on 2009 recommendations that other Texas’s fund industry is booming. requirement for managers to European countries have not HFMWeek applied to non-EU investigates the secrets COMMENT AIFMs. It requires of the Lone Star state’s success A RETURN TO PRE-2007 CREDIT03 MARKET BEHAVIOUR?

001_003_HFM352_News.indd 1 FEATURE 16

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SYNERGIES OF IN-HOUSE LEGAL COUNSEL

POSEIDON RETSINAS, LEGAL COUNSEL AT INNOCAP, DISCUSSES THE FIRM’S CUSTOMISED MANAGED ACCOUNTS OFFERING AND THE IMPORTANCE OF ITS DEDICATED IN-HOUSE LEGAL COUNSEL

ince June 2013, Innocap’s AuM (assets un- FOCUS ON LEGAL der management) has grown 67%, now Innocap’s dedicated in-house legal team has been at the standing at approximately $3.6bn. How? In forefront of these changes as creating and deploying new early 2013, under the leadership of François fund vehicles is quite legal-intensive. Rivard (CEO), Innocap began to expand its It is of significant benefit for a managed account plat- off ering and refi ne its mission. form to have a well-staffed, experienced and dedicated in- SThe first stages of this process involved creating work- house legal team as opposed to largely outsourcing the legal ing groups, which combined members from each of the function. A platform relies greatly on legal counsel when various teams at Innocap. The objective was to brainstorm launching and implementing a platform/fund vehicle. Once and share ideas about the firm’s strengths and weakness- a vehicle is launched, there is ongoing legal work involved Poseidon Retsinas es, where each team sees opportunity and how to best such as regulatory changes and interpreting/explaining con- joined Innocap in 2010. He serve clients. The theme of creating customised managed tractual terms. was formerly an associate accounts for asset owners (selecting hedge fund managers, With an experienced in-house legal team, a platform can in the Finance and Capital jurisdiction, legal structure, fund administrator and coun- leverage skills and expertise and seek external counsel as Markets Group at Clifford terparties) ran through all working groups. and when needed on particular issues. The benefit to asset Chance LLP in London The results and ideas from these working groups were owners is that fund structures can be deployed more quickly where he specialised communicated to senior management which decided to and efficiently with less legal work being billed to the fund in derivatives. He is a create a truly flexible and customised managed account (the work handled internally by legal is embedded in the member of the Quebec solution. platform management fee). Bar and holds an MSc At the time, Innocap had two fund structures (Maltese Strong synergies are created when legal sits alongside other in Law and Accounting and Canadian LPs) using two fund adminis- teams in that legal negotiation is focused on the terms which from The London School trators. Today, Innocap has five fund structures (Ucits, matter most. The result is to craft legal documentation which of Economics and law QIAIFs, Cayman Exempted Companies, Maltese Sicavs is tailored to best suit the needs of the organisation and ulti- degrees (B.C.L./LL.B) from and Canadian LPs) across four jurisdictions (Ireland, mately better protect the asset owner. Turnaround time for McGill University. Cayman Islands, Canada and Malta) with four fund legal work can be reduced since the legal team is in close com- administrators. A number of projects are in the pipeline to munication with business personnel and is ready to focus its add fund structures and administrators. expertise and knowledge on priorities.

22 HFMWEEK.COM LEGAL

LEGAL WITH INVESTOR RELATIONS documentation regarding strategy description. The business of a managed account platform is Legal can leverage the knowledge and expertise of substantially legal in nature since the product risk to negotiate better contractual protections tai- offered to asset owners is in large part a legal struc- IT IS OF SIGNIFICANT lored to the strategy and risk profile of the fund ture (for example a fund vehicle). From initial dis- (terms in investment management agreements with cussions with potential clients, Legal works with BENEFIT FOR A MANAGED trading advisors as well as in fund trading documen- Investor Relations in looking for creative solutions tation with counterparties). to meet asset owners’ needs. Legal is often involved ACCOUNT PLATFORM TO In the Ucits space, legal and risk often work in discussions with asset owners in customising a together to “Ucits-ise” a fund (onboarding a trading structure and post launch, asset owners have access HAVE A WELL-STAFFED, advisor whose strategy is not currently Ucits com- to Innocap’s in-house legal expertise. For instance, pliant into a Ucits fund structure). This involves an as asset owners’ needs evolve, Legal facilitates re- EXPERIENCED AND intimate understanding of the Ucits rules and the structuring their investment vehicle. Innocap’s phi- strategy of the trading advisor to create an invest- losophy of customised managed accounts contin- DEDICATED IN-HOUSE ment strategy which remains faithful to the flagship ues after an investment vehicle is launched. fund while being Ucits compliant. LEGAL TEAM AS OPPOSED LEGAL WITH INTEGRATION/ONBOARDING LEGAL WITH COMPLIANCE Once a fund structure has been agreed, legal is TO LARGELY OUTSOURCING Legal and compliance work hand-in-hand to deeply involved in the fund onboarding process ensure compliance with laws, regulations and (regulatory approval, licences, incorporation, THE LEGAL FUNCTION requirements. Innocap acts for funds in four juris- prospectus drafting, negotiations with trading dictions (Ireland, Cayman Islands, Canada and adviser, appointing service providers – fund Malta) and is registered as an AIFM, and is SEC- administrators, transfer agents, auditors – nego- and CFTC-registered. Legal and compliance often tiation with custodians, prime brokers, clearers work together in crafting comprehensive and prac- and counterparties). Often, each step along the path to ” tical policies and procedures that help ensure proper an eventual launch is interrelated and therefore close governance thereby reducing risk. Moreover, legal and ties between legal, operations, risk and investor relations compliance hold an open dialogue and meet at least once create synergies which make fund launches faster and a month to discuss current/future challenges. more efficient. Innocap’s Integration Manager serves as An example of the excellent partnership between legal the focal point and link between the different teams dur- and compliance is the implementation of Fatca (now mov- ing the onboarding phase. Legal works closely with the ing towards the Common Reporting Standard). Work on Integration Manager – from a project management point the Fatca project began shortly following the enactment of view, it helps to have a strong in-house legal function of initial US legislation in 2010 and involved reviewing as information flows more freely and quickly between the legislation, staying abreast of industry commentary and legal team and other teams within the organisation. monthly calls with fund administrators to follow progress. Legal and compliance collaborated to tailor a compliance LEGAL WITH OPERATIONS programme, policies and procedures; update all offering Legal works with operations in co-ordinating subscrip- documentation; and co-ordinate with fund administrators tions and redemptions, as well as in establishing rela- to ensure that adequate due diligence and reporting was tionships with fund administrators, auditors, in place. custodians and prime brokers among other ser- vice providers. Working closely with operations LEGAL WITH IT makes legal conscious of operational concerns. Innocap sees collaboration between legal and When poorly understood, subtleties can create THE BUSINESS OF A IT as the next step in the evolution of managing onboarding delays and result in operational risk. legal risk and legal information. Legal and IT are A simple example is the timing for margin calls – MANAGED ACCOUNT working together to code all fund agreements into many prime brokers and clearers will draft these Innocap’s proprietary information systems. provisions in their favour such that the fund must PLATFORM IS The contractual fields to be coded include agree- provide margin immediately following a demand. ment type, contracting party name, dates and key In reality, these transfers take some time to pro- SUBSTANTIALLY LEGAL terms such as termination/default provisions or cess and must fall neatly into the daily routine of margin timing. This codification process will make the operations team. In some cases, the parties IN NATURE SINCE THE information regarding contractual agreements read- must reach a common ground and accommodate ily available to all Innocap teams and be subject to one another to find a mutually agreeable solution. PRODUCT OFFERED TO deeper analysis. Moreover, it will allow markers to be added to information systems such that when LEGAL WITH RISK ASSET OWNERS IS IN key events occur, the impact on contractual agree- Early in the fund onboarding process, legal and ments can be highlighted and flagged quickly. This risk work together to draft the investment man- LARGE PART A LEGAL reduces the risk that an event will go unnoticed agement agreement, and in particular the invest- or unreported to legal and compliance. By having ment guidelines which a trading adviser retained STRUCTURE triggers and notifications in place, legal is better by the Innocap platform will adhere to. Legal ready to respond to contractual issues and provide and risk also collaborate in preparing offering solutions. Q

” HFMWEEK.COM 23 MANAGED ACCOUNTS 2015

THE ADVANTAGE OF MANAGED ACCOUNT PLATFORMS

STEPHANE BERTHET, EXECUTIVE DIRECTOR AT MORGAN STANLEY, TALKS TO HFMWEEK ABOUT HIS TAKE ON MANAGED ACCOUNT PLATFORMS

here has been increased interest in hedge account platform may be more practical as the platform fund investment, as investors become more manages the administration, governance and risk manage- familiar with the asset class and the strategies ment of the account on behalf of the investor. However, employed. when leveraging through the platform, an investor may One of the implementation structures that lose ownership of the assets. continues to grow in popularity is the man- Taged account platform. Morgan Stanley’s third-party man- HFM: What are the key benefits of managed account aged account platform has seen rapid growth in AuM over platforms? the past few years, currently $3.7bn (as of 15 May), as SB: By investing in managed accounts via platforms, the demand for diversified and uncorrelated strategies within investor may benefit in a number of key ways: portfolios has continued to generate interest. Greater transparency: full, unlimited access to portfolio Stephane Berthet holdings, and an ability to access frequent net asset valua- is head of Fundlogic HFMWeek (HFM): What are main characteristics of a tions. This transparency may be provided to the investor Alternatives platform managed account? and/or the platform provider. at Morgan Stanley. Stephane Berthet (SB): Managed accounts are segre- Improved governance: third-party service providers Stephane has 18 years of gated accounts beneficially owned by investors but are (auditors, administrators, independent board of directors, experience in structuring managed by an independent hedge fund or third-party etc) are used, as well as a platform provider, which are all and distribution of Fund manager. independent from the hedge fund manager. This mitigates Derivatives including While it is possible for investors to set up their own the occurrence of ‘Madoff-style’ fraud and risk events, which distribution of managed managed accounts, the use of an independent managed can occur where governance and transparency are poor. account platforms. Prior Improved risk management: operational and trading to joining the firm he strategies are both monitored by a third party and as such, worked for BNP Paribas risks are reduced. In addition, unlike traditional hedge where he headed up the funds, the portfolio strategy of the managed account must distribution of hedge fund- MORGAN STANLEY CAN OFFER comply with the Ucits regime. linked products and the Efficient and bespoke access: Morgan Stanley can offer Innocap managed account ACCESS TO THE MANAGED ACCOUNT access to the managed account via a total return swap platform. . which can provide an efficient delivery mechanism of VIA A TOTAL RETURN SWAP WHICH investing and depending on the need on the investors, can CAN PROVIDE AN EFFICIENT improve balance sheet, solvency and Basel requirements. HFM: What does Morgan Stanley bring to the man- DELIVERY MECHANISM OF INVESTING aged account space? SB: Traditional managed accounts typically require a AND DEPENDING ON THE NEED direct and fully funded investment by the investor into the managed account, which is managed by the selected hedge ON THE INVESTORS, CAN IMPROVE fund manager. In this case, the investor may need to be involved in various managed account-related agreements, BALANCE SHEET, SOLVENCY AND such as an IMA, custody agreement, prime brokerage agreement and fund administration agreements. BASEL REQUIREMENTS Morgan Stanley as platform provider will be dealing with all of the above agreements in addition to providing risk management and is also able to offer direct and indi- rect unfunded access to managed accounts. This in turn

24 HFMWEEK.COM ” FINANCIAL SERVICES

offers several advantages: recourse swap which can be particularly appealing for The investment itself is unfunded. For example, the insurance companies. hedge fund investment may be based on a total return The second leading trend is volatility control/target- swap based on the underlying hedge fund manager’s ing. When investing in a particular strategy, investors can returns. This means, other than margining requirements, choose to maintain a certain level of volatility. no funds are tied up. Lastly, there is basketing, a customisation solution The managed account structure can be tailored to meet that allows the investor to pool a group of hedge fund the risk and return appetite. For example, one can enter strategies into one basket from which the performance a total return swap on a basket of hedge funds to gain is delivered. Q exposure to multiple strategies or buy out options on the strategy to limit downside risk. Additional customisation Investor posts margin is also possible to increase diversification, reduce fees and MORGAN INVESTOR facilitate SRI compliance. STANLEY The customisation and transparency provided by this Receives performance unfunded structure can potentially be used by investors net of costs for a variety of other asset classes. These may include Invests in separately emerging market equities, credit and other return-seeking managed assets. An illustration of our managed account structure is account set out in the diagram (right).

HFM: What are the leading trends in the managed HF manager is named account space currently? investment manager SEPARATELY INVESTMENT MANAGED SB: Firstly, limiting downside risk/protection. Investors MANAGER under the investment ACCOUNT can limit their downside risk through the use of a limited manager agreement

HFMWEEK.COM 25 MANAGED ACCOUNTS 2015 SERVICE DIRECTORY

Michael Hart Deputy CEO, Global Head of Business Development T: +44 207 074 9402 E-mail : [email protected] // Amundi AI Client Ser- vices [email protected] +44 207 074 9319 Amundi Alternative Investments is the specialist alternative boutique of Amundi. With just above $8 billion in assets1, the firm has a strong expertise in hedge fund selection, as demonstrated by the creation of a Managed Account Platform in 2005, and in FoHF engineering, with a track record that began more than two decades ago. Amundi Alternative Investments has a strong expertise in providing bespoke holistic consultative approach, rather than a one size fits all product offering. Through its unique multi- management expertise, and its Managed Account Platform based in Ireland, Amundi partners with its clients to provide suitable alternative investment solutions for various risk, return, liquidity, transparency and decorrelation objectives, based on their needs. As a pioneer in EU-regulated alternative solutions, Amundi AI has embraced the AIFM & UCITS directives and made strategic choices in re-domiciling all its alternative investments in onshore places (France, Luxembourg, Ireland)2. 1 Amundi AI figures as of 30 June 2015. 2. Amundi AI has obtained its AIFM authorization in December 2013.

Mike Hughes, Managing Director | Global Head, Fund Services, [email protected]; T: +44 20 7547 6527 // Tim Fitzgerald, Head of Alternative Fund Services, tim.fi[email protected]; T: +44 20 7541 4318 // Simon Behan, Head of Alternative Fund Services Sales, [email protected], T: +44 20 7541 9296 Deutsche Bank offers a full range of fund administration, custody and banking services to traditional and alternative asset managers. Clients have access to a com- prehensive range of solutions during the entire lifecycle of a fund as well as value add services such as foreign exchange and credit that draw on the Deutsche Bank Group’s global expertise.

Andrew Lapkin, CEO, Main: (212) 888-1300 // Bill Santos, Managing Director, Global Head of Business Development, HedgeMark Advisors, LLC, 780 Third Avenue, 44th Floor, New York, NY 10017 Direct: (646) 845-3559 HedgeMark, a BNY Mellon Company, specializes in supporting institutional clients in the development and operation of their own private hedge fund dedicated man- aged account platforms. HedgeMark’s dedicated managed account services and position-level risk and performance analytics are aimed at institutional investors seeking increased customization, transparency, control and governance around their hedge fund investments. HedgeMark's team of investment, operational and risk professionals is led by well-established industry professionals with extensive experience in the structuring, operations, monitoring and oversight of hedge fund man- aged account structures.

François Rivard, President and Chief Executive Officer, [email protected] +1 514-879-6405 // Jean Baram, Managing Director, Business Development and Investor Relations, [email protected], +1 514-390-7388 Website www.innocap.com With more than a decade of experience in the hedge fund industry, Innocap1 operates a managed account platform across various jurisdictions. The firm designs, implements and operates dedicated investment infrastructures, all while providing rigorous risk management and to enable and protect asset owners’ investment decisions. 1 Innocap Investment Management Inc. together with Innocap Global Investment Management Ltd

Amber Kizilbash, Global Head of Sales & Client Strategy [email protected] +33142133131 Lyxor Asset Management Group Lyxor Asset Management Group (“Lyxor Group”) was founded in 1998 and is composed of two fully-owned subsidiaries1 2 of Societe Generale Group. It counts 600 professionals worldwide managing and advising $127.8bn* of assets. Lyxor Group offers customized investment management services in ETFs & Indexing, Alternatives & Multi-Management and Absolute Return & Solutions. Driven by acknowledged research, advanced risk-management and a passion for client satisfaction, Lyxor's investment specialists strive to deliver sustainable performance across all asset classes. www. lyxor.com *Source: Lyxor - Equivalent to 114.3bn - Assets under management and advisory as of June 30th, 2015 1 Lyxor Asset Management is approved by the «Autorité des Marchés Financiers» (French regulator) under the agreement # GP98019. 2 Lyxor International Asset Management is approved by the «Autorité des Marchés Financiers» (French regulator) under the agreement # GP04024.

Man FRM, Michael Turner, Chief Operating Officer, E: [email protected] Founded in 1991 and joining Man Group in 2012, Man FRM is a global alternatives investment specialist, with USD 10.5 billion of assets under management (31 March 2015) and 69 professionals located in London, New York, Tokyo, Guernsey and Switzerland. With a predominantly institutional client base, Man FRM is an open archi- tecture, full service hedge fund platform including commingled fund of hedge funds, customised and advisory solutions and outsourced research and consulting, all which can be enhanced by its investment driven managed account platform.

[email protected] Morgan Stanley is an American multinational financial services corporation that, through its subsidiaries and affiliates, provides securities products and services to customers, including corporations, governments, financial institutions, and individuals. The company operates in three business segments: Institutional Securities, Global Wealth Management Group, and Asset Management. Morgan Stanley operates in 42 countries and has more than 1300 offices and 60,000 employees.

Alastair Crabbe, [email protected]; // Roberto Giuffrida, [email protected] Permal is a leading global alternative asset manager with over 40 years’ investment experience. Managing over $20 billion, Permal offers a wide variety of invest- ment solutions through established funds and customised portfolios. Central to Permal is PMAP, a $9.2 billion buyside managed account platform, which is used to invest in pari passu and more bespoke investment vehicles.

26 HFMWEEK.COM Permal Managed Account Platform PMAP

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For professional investors only. Permal Investment Management Services Limited is authorised and regulated in the United Kingdom by the Financial Conduct Authority. *As of 31 March 2015. For further information contact [email protected]. Dedicated Managed Accounts Next Generation Hedge Fund Investing

BNY Mellon provides a Dedicated Managed Accounts Solution, supported by HedgeMark. HedgeMark, a wholly-owned subsidiary of BNY Mellon, is a specialist in the structuring, oversight and risk monitoring of hedge fund investments.

Our solution includes position-level risk and performance analytics and is aimed at supporting asset owners and asset managers seeking increased customization, transparency, control and governance around their hedge fund investments.

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An investment in hedge fund strategies is speculative, should be discretionary capital set aside for speculative purposes, involves a high degree of risk and is not suitable for all investors. Investors could lose all or a substantial portion of their investment and must have the financial ability, sophistication, experience and willingness to bear the risks of an investment long term. Hedge fund strategies may be significantly leveraged and performance may be volatile. Accounts pursuing hedge fund strategies commonly enter into swaps, futures, forwards, options and other derivative transactions for various hedging and/or speculative purposes that can result in volatile fund performance. No representation is made that any Dedicated Managed Account’s investment process, objectives, goals or risk management techniques will or are likely to be achieved or be successful or that any Dedicated Managed Account or any underlying investment will make any profit or will not sustain losses. The risks of investing in hedge fund strategies will not be negated or even mitigated by HedgeMark’s platform, analytic tools, compliance policies or monitoring and no assurance is given that any Dedicated Managed Account will not be exposed to risks of significant trading losses. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. HedgeMark Advisors, LLC is an SEC-registered investment adviser. ©2015 The Bank of New York Mellon Corporation. Services are provided by The Bank of New York Mellon and its various affiliates. All rights reserved.