James Williams, Hedgeweek

Lyxor extends physically replicated ETF range… FTSE Group licenses four additional indices to Vanguard

Sun, 26/05/2013 - 20:11

London remains Europe’s leading hedge fund capital, helped by the proliferation of UCITS-compliant hedge funds according to a new report by TheCityUK. The primary driver for this is the fact that such fund vehicles will escape being regulated by the upcoming Alternative Investment Fund Managers Directive; which is, in essence, UCITS-equivalent regulation applied to the alternative fund space. According to the report,

London remains by far the dominant centre in Europe, managing around 85 per cent of European based hedge fund assets. The city’s share of the hedge fund market has remained steady over the past four years despite fears over the impact of regulatory changes.
 


Chris Cummings, chief executive at TheCityUK, said: “It’s a testament to the European hedge fund industry, and London in particular, that the feared exodus of hedge funds to offshore locations ahead of AIFMD has not materialised. It’s also another great example of the key role London plays as Europe’s financial centre and a gateway to the single market. Over 600 hedge funds operate in London, attracted by the city’s support infrastructure and expertise, and the proximity of clients and markets.
 

 
“It is not yet clear exactly what will happen when AIFMD comes into effect, but we will follow developments closely and work hard to ensure the UK remains competitive.”
 

 
TheCityUK’s report suggests that the strong growth of UCITS-compliant hedge funds, which are not affected by AIFMD, is a key driver behind hedge fund assets remaining in Europe rather than disappearing offshore.
 
Many European hedge funds have recently launched UCITS hedge funds fund vehicles to the extent that they have increased more quickly than AIFs since 2008; at the end of 2012 they accounted for over a third of European industry assets. The UK is the dominant management location for these funds, accounting for nearly three quarters of assets under management and around half the funds. Luxembourg, meanwhile, remains the preferred domicile of choice for these funds. 
 

 
Lyxor is extending its physically replicated exchange-traded fund range by switching seven UCITS ETFs which track the EUROMTS Investment grade indices from synthetic to physical replication, reported ETFExpress this week.
For each underlying index, Lyxor provides the fund structure which optimises investment performance against each index. The funds will be managed using a full replication method: each fund will invest directly in investment grade Eurozone sovereign bonds across different maturities which comprise the respective EuroMTS Investment Grade Government Index, without any sampling, with the aim of achieving the best possible correlation between the funds’ performance and the performance of the indices.
 

 
Given that they will be physically backed means that securities lending will not form part of the funds’ management process. This is a benefit to investors because it helps to reduce counterparty risk in the funds.
 
FTSE Group, this week, announced that it had licensed four additional indices to Vanguard to form the basis of a new range of international ETFs. That brings the number of ETFs provided by Vanguard to 11 in total; the total number of ETFs based on FTSE indices globally now exceeds 200. The four indices to be adopted by Vanguard, one of the three largest US asset management firms, include:
 

  • FTSE Developed Europe Index
  • FTSE Developed Asia Pacific ex Japan Index
  • FTSE Japan Index
  • FTSE All-World High Dividend Yield Index

FTSE’s focus on providing the highest quality indices, coupled with its dedication to service provision, tradability and index governance “makes FTSE a natural choice for ETF issuers who want to give investors better choice, no matter where in the world they are, or where they want to invest”, commented Jonathan Horton, President, FTSE Americas and head of FTSE’s ETP Service Unit.
 
Rasini Fairway Capital has re-domiciled its Stafford SICAV – Global Equity Fund to Luxembourg in a UCITS regulated format using the Alceda UCITS Platform (AUP), reported Hedgeweek this week.
Rasini Fairway Capital has offices in Zurich and London and boasts a 20-year track record of managing long/short equity fund-of-hedge funds (FoHF).
 

 
The Stafford SICAV – Global Equity Fund is Rasini Fairway’s flagship fund. It was formerly a British Virgin Islands-domiciled fund.
 
UCITS vehicles continue to attract global interest and growth, as evidenced in the 2013 Credit Suisse Global Survey of Hedge Fund Investor Appetite and Activity. The survey showed European investors as the most active in UCITS with 32 per cent planning to increase their allocation. It also revealed a strong demand for long/short equity strategies, with net demand up 24 per cent from last year, making it the most sought after strategy. The Stafford SICAV stands to be a beneficiary of this clear trend.
 

 
Francesco Andina, partner, Rasini Fairway Capital, commented: “By investing in the Stafford SICAV-Global Equity Fund investors will receive the opportunity to extend their traditional equity allocation. With a track record of 20 years of investing in long/short equity, Rasini Fairway Capital has demonstrated that its fund-of-hedge funds can keep pace with markets, while de-risking the portfolio during inevitable market setbacks.”
 
Helmut Hohmann, managing director, Alceda Fund Management, added: “We enable fund and asset managers such as Rasini Fairway to deepen their investor base under the badge of an onshore UCITS structure and are delighted that they have chosen the Alceda UCITS Platform to onshore their flagship Stafford SICAV fund.”
 


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