Some of the largest hedge fund managers such as BlueBay Asset Management LLP, Marshall Wace LLP and Brevan Howard are piling in to the liquid alternative fund space as demand shows no sign of abating reported Bloomberg this week.
A survey by Deutsche Bank AG, which canvassed opinion from 86 hedge fund managers overseeing USD6tn in assets, found that 42 per cent currently offer liquid alternative products; up from 27 per cent last year.
A quarter of managers said that they planned on launching at least one alternative UCITS product over the next 12 months. To underscore just how fast this sector is growing, alternative UCITS assets have grown over 40 per cent annually, while the hedge fund industry has grown 13 per cent.
Anita Nemes, head of capital introduction at Deutsche Bank, said: “Liquid alternatives are the fastest growing part of the asset-management industry. I can’t think of any other area that has experienced 40 percent compounded growth in assets under management.”
The alternative UCITS market has grown from EUR36bn in December 2008 to EUR236bn as of June 2014. The report said that if growth rates remain constant, the alternative UCITS industry had the potential “to grow to almost 30 per cent of the size of the hedge fund industry by 2019”, up from 11 per cent today, and 3 per cent in 2008. Bloomberg reported that BlueBay, Brevan Howard and Marshall Wace LLP are the three biggest hedge fund managers running UCITS funds, running approximately USD13.4bn in assets.
Bovill, a specialist financial services regulatory consultancy firm, has issued an alert on the publication of the UCITS V Directive, which was published in the Official Journal of the EU on 28 August 2014. The Directive goes live 20 days after publication and each EU Member State has 18 months to transpose the new Directive into national law.
This means that managers will need to start to comply with UCITS V from 18 March 2016 onwards.
Bovill identifies three areas of particular change under UCITS V relating to the depositary function, manager remuneration and sanctions:
- Only national central banks, credit institutions and 730k regulated firms with adequate infrastructure and policies will be eligible as UCITS depositaries.
- The depositary's liability has been strengthened. The depositary will be liable to both the UCITS and its investors for any loss of financial instruments held in custody. The depositary is also liable to the UCITS, and its investors, for all other losses suffered by them as a result of the depositary's or its delegates' negligent or intentional failure to properly fulfill its obligations. Given the changes, existing depositaries have been granted a further two years to become compliant.
- Managers will need a remuneration policy, and practices that are consistent with and promote, sound and effective risk management, writes Bovill. They should not encourage undue risk taking nor impair compliance with a manager’s duty to act in the best interest of the fund. Transparency will also be increased, with details being included in the prospectus, KIIs and the annual reports.
- The sanctions regimes of Member States will be harmonised. Firms can be de-authorised and fined up to 10% of annual turnover or €5m. Individuals can be banned and also fined up to €5m. Alternatively, the fine can be twice the profit made.
Neuberger Berman has registered nine of its funds in South Korea to extend the scope of its UCITS fund range in Asia, reported FundSelectorAsia this week. This follows the firm’s decision in April this year to make 11 funds available to Hong Kong’s retail investor market and three funds in Singapore. As of July 2014, Neuberger Berman managed over USD18bn in assets across its Ireland-domiciled UCITS fund range.
Part of the attraction to tap into Korea is that its asset management industry is going, wrote FundSelectorAsia. They noted that the total assets under management of 86 fund companies totaled USD630bn through the first half of 2014; a 2.9 per cent increase on the previous year. The figures cited were based on data from Korea’s Financial Supervisory Service
.
Tokyo-based Ryo Ohira, managing director and head of East Asia at Neuberger Berman, was quoted as saying: “I believe it will be another excellent opportunity for us to introduce our products, and in particular, help us build deeper relationship with investors in Korea.”
The nine funds in question are as follows:
Neuberger Berman High Yield Bond Fund
Neuberger Berman US Multi Cap Opportunities Fund
Neuberger Berman China Equity Fund
Neuberger Berman US Small Cap Fund
Neuberger Berman Short Duration High Yield Bond Fund
Neuberger Berman Emerging Market Debt – Hard Currency Fund
Neuberger Berman Emerging Market Corporate Debt Fund
Neuberger Berman US Strategic Income Fund
Neuberger Berman US Long Short Equity Fund
Silver Time Partners, an independent alternative asset management company, has selected CACEIS as the global asset servicing partner for its first Luxembourg-domiciled SICAV: Silver Time LOQ Equity SICAV, which launched on 5 September 2014.
CACEIS will provide a full range of services to the SICAV including: custodian and depositary functions, fund administration, foreign exchange, transfer agent and act as the domiciliary agent for the SICAV. Listed derivative execution and clearing services are also provided.
Paris-based Silver Time Partners obtained its management company passport for the AMF this June.
CEO Olivier Nobile stated: "We have selected CACEIS as a partner to support the launch and international distribution of our first UCITS investment vehicle because of its vast experience of European markets. Its comprehensive service offering, from execution to custodian services, meets all our operational needs perfectly. Entrusting our business to a first-rate service provider is a hallmark of quality and of security for our investors."
