James Williams, Hedgeweek

ESMA issues new guidelines on collateral management for UCITS funds… GLG shuts one EM fund and opens another...

This week the European Securities and Markets Authority ("ESMA") issued a final report containing new guidelines on collateral management by UCITS ("New Guidelines") (ESMA/2014/294).

As detailed by law firm Maples and Calder, the consultation was held to review the requirements in paragraph 43(e) of the Guidelines that collateral received by a UCITS should be diversified on a country/issuer basis and subject to a 20 per cent issuer limit.

The key points of the New Guidelines are summarised below:

(a) Paragraph 43(e) of the Guidelines is replaced with the New Guidelines to reflect that any UCITS may be fully collateralised in government bonds of one issuer. Previously there was a possibility that ESMA would only permit this for UCITS money market funds.

(b) UCITS availing of this facility will be required to diversify government bonds across at least six different issues and a maximum of 30 per cent in any one issue.

(c) UCITS availing of this facility will be required to:

(i) make a prospectus disclosure on this facility to be fully collateralised in the government bonds of one issuer and list the government issuers to which they may be exposed above the standard 20 per cent limit; and

(ii) make a corresponding disclosure in the UCITS' annual report.
The New Guidelines will apply two months after the publication of its translation into the official EU languages on the ESMA website. During the two-month period national competent authorities, such as the Central Bank of Ireland, must notify ESMA whether they comply or intend to comply with the guidelines.
 
GLP Partners has launched an alternative emerging market fund whilst simultaneously closing another alternative EM fund reported Citywire Global this week. The Dublin-domiciled GLG Global Emerging Market Macro Fund officially launched 13th March and is to be run by GLG’s Macro and Relative Value (‘MARV’) team. A spokesperson was quoted as saying: “The fund has been specifically designed to reflect the investment style of the portfolio management team going forward, and differs from the existing GLG Alternative EM funds by having a broader remit, permitting the fund to allocate to a wider range of assets both from a geographical and asset class point of view.” The fund being shut down is the GLG EM Diversified Alternative fund.
 
Bank of America Merrill Lynch (BofAML) and Sandell Investment Services L.L.C. (Sandell) this week announced the launch of the Merrill Lynch Investment Solutions – Castlerigg Equity Event and Arbitrage UCITS Fund.
 
The sub-fund, which merges Sandell’s successful Castlerigg Merger Arbitrage UCITS fund onto the Merrill Lynch Investment Solutions (MLIS) alternative UCITS platform, provides institutional investors access to a variety of announced equity event-driven and arbitrage opportunities in developed markets. The portfolio’s overall objective is to generate consistent net returns that are less dependent on systematic influences than traditional investments.
 
The Sandell fund was launched in October 2010 and joins the MLIS platform with approximately USD200mn in assets under management. Sandell will retain its role as investment manager of the sub-fund, offering access to its equity event and merger arbitrage strategies.
 
Sandell has a 16-year track record of managing event-driven strategies across equity special situations and credit opportunities. It combines a bottom-up approach with top-down analysis to create a portfolio with low downside volatility.
 
Philippe Lopategui, head of the Alternative Funds Platform and Global Financing Solutions at Bank of America Merrill Lynch, commented: “Tom Sandell has managed event driven situations across the world since the late 1980’s. We look forward to working in partnership with him and his team to provide investors access to a strategy that aims to generate consistent returns which are largely independent of market movements. This latest addition to our award-winning MLIS alternative UCITS platform provides a comprehensive investment solution with a singular focus on global, hard catalyst corporate events,” said
 
Tom Sandell, chief executive officer and portfolio manager at Sandell Asset Management, said: “We are thrilled to complete the merger of our Castlerigg Merger Arbitrage UCITS fund with the MLIS alternative UCITS platform. Philippe and his team have impressed us from the very beginning by pioneering their institutional quality infrastructure back in 2007 while emphasizing state-of-the-art technology and risk management at an extremely competitive cost structure. Our outlook for hard catalyst corporate events across the developed markets universe is robust, and we believe there is an abundant set of opportunities to choose from to meet our targeted return objectives.”
 
The sub-fund is a regulated, Luxembourg onshore vehicle, available for sale in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Norway, Portugal, Netherlands, Spain, Sweden and the United Kingdom.

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