James Williams, news editor, Hedgeweek

RMG Wealth Mgt and BlackRock launch new funds, net sales for UCITS climb in EFAMA report, while top lawyer voices concerns over derivatives trading between US banks and UCITS funds

London-based RMG Wealth Management is apparently planning to launch its inaugural UCITS fund for UK clients before year-end reported FT Adviser this week. The onshore regulated product will be based on its existing Guernsey-domiciled RMG Real Return fund said the group, with Dublin or Luxembourg the likely preferred locations. Stewart Richardson, partner and investment manager at RMG, will manage the fund along with co-manager Howard Jones. The multi-asset absolute return fund would have a minimum investment of GBP10,000 and target annualised returns of 5 to 7 per cent. Richardson said having a UCITS product would make it easier to work with advisers. David Man, partner and head of business development at RMG, was quoted as saying: “I don’t think as a firm we can be in a position to ignore advisers. We need to put ourselves in a position where we can work with onshore clients.” The firm said it would look to roll out further UCITS funds based on demand from advisers, with a US equity product a likely option given the signs of economic growth stateside.     

Continuing with the launch theme, it was also announced this week that BlackRock will be launching a UCITS global absolute return bond fund under the stewardship of fixed income manager Ian Winship, a former employee at hedge fund Brevan Howard. As Citywire Global reported, the BlackRock Absolute Return Bond Fund has been available to UK investors since last September. It will now be made available to European investors through a Lux-domiciled structure which is expected to go live by the end of May subject to regulatory approval. In that sense it will be no different to the current fund, focusing on flexible asset allocation across a range of fixed income strategies. Before joining BlackRock in October 2010 Winship was head of absolute return at Brevan Howard.

In a rather worrying regulatory development, it seems the Volcker rule, which has seen its intrinsic value strengthened thanks to the USD2billion splash made by the JP Morgan whale last week, could actually prevent major US banks doing derivative trades with European UCITS funds if proposals remain in their current guise according to a top lawyer. Speaking at the Inside ETFs Europe event Simon Gleeson, a partner at Clifford Chance, said the current Volcker rule would give major institutions only two years to close global derivative trading with most funds, including UCITS funds reported Citywire Global.

Apparently, the rule stipulates that no part of a US group, globally, can enter into certain trades including transactions with a covered fund; UCITS are a form of covered fund, so the implications are potentially huge. Of course, there are still two years for the rule to be tweaked and amended, but the current impact this would have on managers running UCITS products could be highly negative.

Said Gleeson: “If it is not changed then these institutions could have two years to close global derivative trading with most funds including UCITS.” The rule could also impact on ETFs and cause major US banks to close down their synthetic ETFs, which use derivatives to generate returns through total return swaps as opposed to physically holding the underlying securities. It’ll be interesting to see how the debate pans out on this derivatives issue as the deadline for introduction of the Volcker rule draws nearer.       

Harcourt, the Zurich-based alternative investment firm and subsidiary of Vontobel Asset Management, has moved to strengthen its expertise in alternative investments with the announcement of two new appointments this week. Jan Viebig is to become Head of Alternative Investments, with Georg Wessling as Deputy Head of Alternative Investments. Viebig joins from Credit Suisse where he is currently Head of Emerging Market Equities. He brings over 12 years’ investment experience in alternative investments and emerging markets to the table. Viebig replaces the former CEO of Harcourt, Stephan Fritz, and will assume his new responsibilities as of September 2012. Wessling has 17 years’ investment experience and currently heads up Hedge Fund Advisory at Harcourt. Alex Schwarzer, Head of Vontobel Asset Management, was quoted as saying: “These appointments reflect the commitment to our clients and the ambition to further strengthen and expand our capabilities as Alternative Investments Manager [sic].”

Finally, EFAMA this week published its latest Investment Fund Industry fact sheet on investment sales and asset data for March 2012. The figures show a healthy improvement month-on-month with UCITS enjoying a surge in net inflows of EUR47billion. This compares to just EUR19billion in February and brings YTD net sales to EUR90billion. The major driver for this increase was due to allocations to bond UCITS, which attracted EUR26billion compared to EUR9billion in February. Money market funds also witnessed a significant improvement, attracting EUR15billion in net sales compared to a paltry EUR1billion the previous month. Total net assets in UCITS enjoyed a 0.8 per cent increase, month-on-month, climbing to EUR5.86trillion. Commenting on the figures, Bernard Delbecque, Director of Economics and Research at EFAMA said the surge in demand for UCITS in March “found its origin in the easing of tensions in bond markets on the back of the second ECB long-term refinancing operations at the end of February and the completion of the Greek debt restructuring in early March. However, the demand for equity funds continued to be low, signaling remaining concerns about the downside risk to the growth prospects.” 

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