Newsletter - March 2018

In this month’s newsletter:

 New Stakeholders  SBAI creates North American Committee  SBAI in New York and Toronto  Upcoming events

New Stakeholders

We are delighted to welcome new additions to the SBAI family

Signatories

 Dorsal Capital Management LLC (USA)  PIMCO (USA)  Shanghai Topfund Investment Management (China)  Voss Capital (USA)

SBAI creates North American Committee

The SBAI has established a North American Committee of leading alternative investment managers and institutional investors to direct the SBAI’s efforts in the region.

Members of the North American Committee include:

 Jane Buchan, CEO, PAAMCO  Clint Carlson, President & CIO, Carlson Capital  John Claisse, CEO, Albourne Partners  Thomas DeVita, COO & CFO, MKP Capital Management  Samantha Foster, University of Southern California  Edward O'Reilly, Senior Managing Director, Citadel  Russell Read, CIO, Alaska Permanent Fund Corporation  John Richardson, COO & General Counsel, Ionic Capital Management  Scott Taylor, Managing Director, Canada Pension Plan Investment Board  Karl Wachter, General Counsel, Magnetar Capital

The committee will direct the SBAI’s efforts in North America, including identifying local issues for inclusion in the SBAI’s studies and working groups, supporting the SBAI’s North American roundtables, communicating with SBAI members, and driving increased participation in the SBAI among North American alternative investment managers and institutional investors.

To read the press release in full, please click here.

SBAI holds Big Data/AI Roundtable in New York

The SBAI held its second roundtable dedicated to “big data and artificial intelligence” in asset management. Over 70 industry participants gathered at the event to hear leading practitioners from the US, Canada, Europe and China discuss the current state of innovation in this area. They also discussed the legal and compliance challenges that can arise when using new “alternative” data sources.

Key observations from the roundtable included:

 Despite the name “Artificial Intelligence” implying that computers can operate flexibly on their own, today, AI programmes can only do specific, narrow tasks. Humans are required to direct the programmes and judge whether the output makes sense.  Assembling and cleaning alternative data sets is still labour intensive, requiring a combination of human judgement and computer processing.  AI itself is not new; what has changed is the amount of data and computing power. This is allowing managers to rapidly process unprecedented amounts of new information.  Explaining the attribution from AI-directed investment strategies can be challenging, because trading programme decisions can blur the lines between fundamental, technical and macro analyses.  When acquiring data sets from vendors, it is critical to perform thorough due diligence to ensure the data does not violate personal privacy and that the provider of the data has the legal right to sell it. This means that it is very important that managers perform an end-to-end analysis to ensure they understand every step of the process used to assemble the data.  Some companies are selling data arising from their business; as a result, managers should ensure that the data does not inadvertently contain insider information.  Regulators are taking an interest in Big Data and AI and starting to get up the steep “learning curve”. During regular exams, they are likely to start exploring what data sets a manager uses and how the manager ensures that using this data does not violate securities regulations.

The SBAI would like to thank Eric Albert (BlueMountain Capital Management), Sebastian Bea (BlackRock), Henrik Grunditz (Hivemind), Erin Miller (Winton Group), Jonathan Streeter (Dechert), Dr. Dox Wang (Jasper Capital International Ltd.), Nicola Watson (Winton Group), Jamie Wise (Periscope Capital) and Zhijie Sabrina Zhou (Man Numeric) for their invaluable contribution to the discussion; a special thank you to Winton Group for hosting the event.

SBAI Institutional Investor Roundtable in Toronto

The SBAI held its second Institutional Investor Roundtable in Toronto.

The panel “Operational due diligence – evolving investor expectations” focused on the following topics:  SBAI Standard Total Expense Ratio (STER): inclusion of the calculation in Administrator Transparency Reports (ATRs) provides independent and timely reporting and facilitates the on-going monitoring of costs by investors.  Fund Governance—structuring of directorships in multiple funds (within the same manager): pros and cons of using the same the directors across most funds – synergies / cost efficiencies vs. potential conflicts of interest / dependence / loyalty.  Culture (or lack thereof): how to assess a firm’s mind-set towards culture during due diligence meetings.

The event also brought together leading investment practitioners to explore topics such as factor-based investing, big data/AI, insurance-linked securities (every storm has a silver lining…) and a perspective on the impact of the current market environment on different investment strategies.

The SBAI would like to thank John Allan Dacres (Caisse de dépôt et placement du Québec (CDPQ)), Joan Lee (Unigestion), Sidney Ma (Springs Capital), Nicolas Papageorgiou (Fiera Capital), John Richardson (Ionic Capital Management), Abdalla Ruken (Polar Asset Management Partners), Marc Stern (Nephila Advisors), Scott Taylor (CPPIB), Jamie Wise (Periscope Capital) and Sara Yarmand (CPPIB) for their insightful and timely contributions. A special thank you to CPPIB for hosting our event at their offices.

Upcoming events

 22-25 April, GAIM Ops Cayman (third-party conference): There will be two SBAI stakeholder panels at this conference. Topics to be covered include the SBAI’s work on the Standard Total Expense Ratio (STER) and due diligence case studies, with speakers from Caisse de dépôt et placement du Québec, Howard Hughes Medical Institute, Napier Park Global Capital and PAAMCO Prisma.

 9 May, Singapore: SBAI Institutional Investor Roundtable: Speakers include senior representatives from Albourne Partners, Caisse de dépôt et placement du Québec Asia Pacific, Capital Fund Management, Dymon Asia Capital, Fullerton Fund Management Company, Government of Singapore Investment Corporation Pte Ltd and PAAMCO Asia.

 10 May, Hong Kong: SBAI Big Data and Artificial Intelligence Roundtable: Speakers include senior representatives from Canada Pension Plan Investment Board, GCM Grosvenor, Herbert Smith Freehills, Jasper Capital International Ltd., Man Group Asia, Northwest Investment Management, Springs Capital and the Securities & Futures Commission.

 30 May, New York: SBAI Annual North American Stakeholder Forum

 19-20 June, London: EuroHedge Summit 2018 (third-party conference): Keynote remarks by Dame Amelia Fawcett, Chairman of SBAI; SBAI Allocator Panel on Responsible Investment/ESG with speakers from Church Commissioners for England and Varma Mutual Pension Insurance Company.

 Week of 20 August: Melbourne (21 August), Sydney (22 August), Auckland (tbc): SBAI Institutional Investor Roundtables.

 26 September, London: SBAI Annual General Assembly

 27 November, Montreal: SBAI Institutional Investor Roundtable

The full event schedule is available here.

APPENDIX

Dorsal Capital Dorsal Capital is an equity long/short hedge fund based in Silicon Valley, California with a focus Management LLC on TMT and consumer companies. Employing low net exposure and a comprehensive risk- management program, Dorsal’s team strives to generate positive returns in all market environments through single-stock alpha generation grounded in deep fundamental research. Co-founded by CIO Ryan Frick in 2009, the firm currently employs 17 individuals and manages about US$2.3 billion. The firm’s investor base includes major pensions, endowments and family offices. The firm has been closed to new investors since 2015.

PIMCO PIMCO is one of the world’s premier fixed income investment managers. Launched in 1971 in Newport Beach, California, PIMCO introduced investors to a total return approach to fixed income investing. In the 45+ years since, it has continued to bring innovation and expertise to its partnership with clients seeking the best investment solutions. Today PIMCO’s professionals work in 12 offices across the globe, united by a single purpose: creating opportunities for investors in every environment. PIMCO is a company of Allianz.

Shanghai Topfund The China-dragon investment team of Shanghai Topfund Investment Management Co. Ltd Investment (based both in Shanghai and Hong Kong) was initially built up in Y2003. It has the longest Management investment record history among all hedge funds of local China with awards consistently from local and international rating agencies. As one of the first long-only fund manager in local China, the China-dragon investment team insists value-investing philosophy, and dedicated to seek fairly valued and undervalued firms with sustainable competitive advantage or improving fundamentals, pursuing maximum alpha. The key members of China-dragon team have on average over 20 years of experience in China A-share market and cover most sectors. Currently, asset under management by our team has more than 1.8 billion USD. The clients China-dragon team have served include high net worth individuals, commercial banks, insurance companies, local campus funds, FOF, QFII & RQFII etc." Voss Capital Voss Capital is a contrarian, value-oriented long/short equity fund based in Houston, Texas. Voss seeks to identify out-of-favor companies or misunderstood, under-followed special situations, aiming to act when sentiment is at an extreme. The Fund employs a long term, private equity- like approach by conducting extensive primary due diligence and fundamental research, particularly for core positions with the potential to double in value within a three-year time frame. Investment due diligence emphasizes cash flow generation ability, scuttlebutt research, management and competitor interviews, quality of earnings and management’s track record of capital allocation. Voss's portfolio is constructed using a bottom-up approach with emphasis on asymmetric risk/reward, downside protection and capital preservation.

To unsubscribe from this newsletter email: [email protected]