One of the new mantras in the asset management sector is the convergence between traditional and alternative asset management styles.
One of the new mantras in the asset management sector is the convergence between traditional and alternative asset management styles. Today, investors are becoming more literate on how to invest and on product options that generate higher returns quicker and in a safely-regulated environment. This evolution is one that poses various challenges for fund administrators and custodians, especially if they seek to accommodate different types of investment strategies on the same platform.
Indeed, a fund manager can find it very hard to differentiate himself from his peer group when managing long-only funds. These funds perform the same way and hardly beat the index. Thus, it can be a big challenge to control the growing hunger of investors seeking returns, especially when the expertise of the long-only houses is in long-only products. While traditional asset managers have kept the two strategies separate until recently, this is now changing. They are now taking advantage of changes in legislation governing funds to employ techniques hitherto confined to alternative managers and vehicles.
Regulators have understood these changing needs and opened new limits to traditional asset managers with the prime objective to protect investors. One of the new techniques available is to go short using derivatives, which has prompted many big investment houses to offer 130/30 funds and other short extension strategy variants. At the same time, alternative asset managers are grasping the opportunity to reach a wider audience such as institutional investors and/or well-informed investors by using regulated fund vehicles and eschewing the traditional offshore hedge fund domiciles of the Caribbean and the British Isles for European Union member states such as Luxembourg. Investors can now fully benefit from new regulated investment schemes using complex alternative strategies in a protective environment.
Funds today, whether they are run by traditional managers going alternative or hedge fund managers seeking a mainstream clientele, are increasingly bringing together a mix of assets ranging from well-established blue-chip equities to extremely exotic derivatives. Administrators are increasingly being called upon to deliver a platform that can straddle these extremes and deliver NAV production whatever the fund’s asset mix.
We are also witnessing growing public interest in other alternative investments such as private equity and real estate, areas in which Fortis Prime Fund Solutions is a leading service provider.
How can administrators support the needs inherent to alternative funds or hybrid funds including alternative strategies? At Fortis Prime Fund Solutions, we are convinced that part of it can be achieved by a global IT infrastructure that brings a 24/7 servicing model. This calls for the building of additional pricing capability to encompass automatic feeds for both straightforward and highly complicated assets from diverse sources. Fortis Prime Fund Solutions has built an efficient data management system that can, in addition to other functionalities, obtain pricing for a comprehensive range of securities and could be upgraded to handle future market developments.
In changing times, a helping hand is required. Fortis Prime Fund Solutions can offer a set of value added services that can contribute to generate higher returns for asset managers and the vehicles they are managing, by tailored cash management solutions, securities lending and borrowing, bridge and leverage financing, to name but a few.
By Luc Leleux, Global Head of Market Positioning, Fortis Prime Fund Solutions
