AIMA Journal
The Global Forum for the Alternative Asset Management Industry
Cover story:
Opportunities in a
volatile market p30
AIMA editorial: Why we
need to understand what
the public thinks about
hedge funds p4
AIMA's quarterly Regulatory
Update (members only) p9
Q1 2016
Number 106
Confidence to grow
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At Deloitte, we understand the importance of having confidence in your people, your
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processes, and your reporting. We help our clients act decisively through connectedness —
bridging markets and market developments, managers and managed solutions, and business
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leaders and balance sheets. Our global, multidisciplinary Hedge Fund practice empowers our
clients to go beyond the ledger, merging worldly awareness and local smarts to spot for new
opportunities and deliver disciplined growth.
No matter how complex the issues you are facing — and no matter where they arise —
Deloitte has the resources and answers you need to move forward.
To learn more about our hedge fund services, please visit www.deloitte.com/im
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Contents
AIMA updates
04
The importance of improving public opinion about
our industry
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06
Regulatory and tax submissions and papers in Q1
09
AIMA Regulatory update
25
Forthcoming AIMA events
27
AIMA news
69
AIMA's sponsoring partners
70
New members of AIMA
78
Contact AIMA internationally
From our members
30
COVER STORY
Opportunities in a volatile market
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34
Not digital, not emotional, not aligned – why longonly funds are eating your lunch
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37
Implementation considerations within discretionary
global macro
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40
MiFID II and paying for research: To bundle or
unbundle? That is no longer the question
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Tradebook
43
Implementing SFTR – what is required for hedge
fund managers?
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The changing landscape of major shareholding
reporting in Europe
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51
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key employment risks
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54
ESMA Q&A on the application of the UCITS V Directive:
Some breathing space to address compliance with
the new rules?
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57
Section 871(m) - New US Withholding Tax on Dividend
Equivalent Payments
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Rum punch and taxes – Puerto Rico may serve as an
island escape
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The AIMA Journal is published quarterly by the Alternative Investment Management Association Ltd (AIMA). The views and
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is given by AIMA. © The Alternative Investment Management Association Ltd (AIMA) 2016. All rights reserved.
AIMA Journal Q1 2016
3
Address from the CEO
The importance of improving public opinion about our industry
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will include additional educational material about
alternative asset managers and funds.
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already. But this is an uphill battle - and there is a
long way to go. To help us to understand the scale
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into public perceptions of hedge funds. The research
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benchmark levels of favourability and test with the
public whether our arguments about hedge funds truly
resonate with them.
What we have found (not surprisingly) is that a
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people were found to be neutral or undecided. And the
research also provided evidence that many sceptics
could be won over if they better understood hedge
funds’ relevance and value to them.
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and the general public have questioned the social
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in particular. This public discourse has impacted
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post-crisis regulation of our industry and even swayed
the investment decisions of pension funds and other
investors.
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offer to the “real economy” and society. We have
carried out research into the employment the industry
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together many of the key facts and arguments.)
We have also stepped up our engagement with
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this interview I gave recently to The Independent
newspaper in London) and have increased our activity
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AIMA Journal Q1 2016
Why did we choose to measure public perceptions? Had
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hedge fund industry has grown at about 10% a year since
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high levels of client satisfaction.
We also did not poll the regulatory community
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Brussels whom we did approach were clearly reassured
by increased levels of regulation and transparency.
But it is vital that we better understand why there
are negative public perceptions if we want to
prevent disproportionate or unworkable regulation or
politically-motivated investor redemptions.
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step will be to develop a programme of engagement
that is impactful and resonates with the general
public. We will know we are making progress when
more members of the public believe that the success
of the alternative asset management industry is in
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AIMA Regulatory Update
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DATE
AUTHORITY
18 March
DESCRIPTION
AIMA position paper - Securitisation
16 March
CFTC
8 March
FCA
AIMA response - Regulation Automated Trading
Joint AIMA/MFA response - CP15/43 MiFID II Implementation
Consultation Paper 1
AIMA summary - Algorithmic trading and HFT regulation
3 March
26 February
SEC
Joint AIMA/MFA response - Reg ATS Proposal
24 February
MAS
AIMA response - Proposed Amendments to Reporting of Derivatives
Contracts
12 February
FCA
AIMA response3URSRVHGJXLGDQFHIRUÀQDQFLDOVHUYLFHVÀUPV
outsourcing to the ‘cloud’ and other third party IT services
5 February
BIS
AIMA response&DSLWDOWUHDWPHQWIRU´VLPSOHWUDQVSDUHQWDQG
comparable” securitisations
4 February
FCA
AIMA summary - MiFIDII Implementation Consultation Paper 1
3 February
HMRC
AIMA response - Carried interest draft Finance Bill legislation
3 February
HMRC
AIMA response on behalf of the Alternative Credit Council (ACC) Carried interest draft Finance Bill legislation
1 February
ESMA
Joint AIMA/MFA response - ESMA Consultation Paper on the Review
of Article 26 of RTS No 153/2013 with respect to MPOR for client
accounts
29 January
EC
AIMA response - Call for Evidence on the EU Financial Services
Framework
22 January
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EIOPA
AIMA response - Joint Guidelines under Article 17 and 18(4) of
Directive (EU) 2015/849
15 January
EC
AIMA response - Public consultation on CRD IV remuneration
continuedŹ
AIMA Journal Q1 2016
6
AIMA Regulatory Update
continuedŹ
DATE
AUTHORITY
DESCRIPTION
14 January
HMT
AIMA response7D[GHGXFWLELOLW\RIFRUSRUDWHLQWHUHVWH[SHQVH
13 January
SEC
AIMA response - Proposed Rule on Open-End Fund Liquidity Risk
Management Programs
8 January
EC
AIMA response&RPPRQ&RQVROLGDWHG&RUSRUDWH7D[%DVH
31 December
SFC
AIMA response - Consultation Paper on Short Position Reporting
The global forum for the alternative
investment management industry
The global forum for the global
hedge fund industry
AIMA Journal AIMA Journal
How derivatives
market reforms
affected clients p25
New: Quarterly AIMA
Regulatory Update p7
AIMA's CEO looks
back at 2015 p4
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by the end of April at dtonner@aima.org.
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AIMA Journal Q1 2016
7
See potential
from every angle
The right combination
unlocks hidden value
willistowerswatson.com
AIMA Regulatory Update
AIMA Regulatory Update
An update from AIMA’s Government and Regulatory Affairs Team
The AIMA Regulatory Update strives to provide a succinct
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in greater detail. The issues treated in the update do not
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Contents
•
•
•
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CFTC Reg AT proposals
EU rules on benchmarks
Hong Kong - short position reporting
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Tax
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company
Asset management regulation
• Remuneration
• UCITS V
• AIFMD
• Securitisation
• Loan origination
• Anti-money laundering
• SEC
• Shadow banking
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•
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funds
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Markets regulation
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• SEC Reg ATS proposals
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Union
Asset management regulation
Remuneration
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The European Banking Authority (EBA) has published its
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the Capital Requirements Directive (CRD IV) along with
an Opinion on proportionality. The EBA has stated that
the Guidelines are to be applied in a manner and to
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permit neutralisation of certain requirements. In its
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continuedŹ
AIMA Journal Q1 2016
9
AIMA Regulatory Update
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its view that the application of the ‘bonus cap’ should
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The UK Prudential Regulation Authority (PRA) and
Financial Conduct Authority (FCA) have QRWLÀHG WKH
EBA that the regulators will comply with all aspects of
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remuneration
Counterparty Risk for UCITS (ESMA/2013/1950). This
document is intended to be continually edited and
updated as and when new questions are received.
The FCA has published ÀQDO UXOHV DQG JXLGDQFH
LPSOHPHQWLQJ ÀIWK 8QGHUWDNLQJV IRU &ROOHFWLYH
Investment in Transferable Securities (UCITS V)
Directive. The FCA’s policy statement (PS 16/02) sets
out Handbook changes which will affect managers
and depositaries of UCITS and alternative investment
funds (AIFs) and give the FCA’s response to the
feedback received on their consultation regarding the
implementation of the UCITS V requirements. The rules
and guidance will come into force on 18 March 2016.
AIMA submitted a response to the European
Commission’s public consultation on impacts of
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AIMA noted that compliance with the bonus cap by CRD
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the best staff.
AIMA submitted a brief response to the UK HM Treasury
(HMT) consultation on amendments to the UCITS
Directive to implement UCITS V ,Q WKH UHVSRQVH
AIMA agreed with HMT that a copy-out approach is
the correct way to implement the UCITS V provisions
for depositary liability and that the provisions for the
distribution of assets upon insolvency do not require
substantial changes to the law. AIMA also commented
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negotiate the details of their depositary agreements.
•
•
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ) and
Anna Washington (née Berdinner) (awashington@
aima.org)
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ) and
Anna Washington (née Berdinner) (awashington@
aima.org)
UCITS V
AIFMD
The European Securities and Markets Authority (ESMA)
has published a document setting out questions and
answers (Q&As) on the application of the Undertakings
for Collective Investment in Transferable Securities
(UCITS) Directive. The document provides responses to
questions posed by the general public and competent
authorities in relation to the practical application of
the UCITS framework and consolidates into a single
document and replaces all Q&As relating to the UCITS
Directive previously issued by ESMA i.e. the Q&As on:
(i) the Key Investor Information Document (KIID) for
UCITS (2015/ESMA/631); (ii) ESMA’s guidelines on ETFs
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competent authorities (ESMA/2012/428); and (iv) Risk
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The European Securities and Markets Authority (ESMA)
has published an updated version of its Questions and
Answers (Q&As) on the Alternative Investment Fund
Managers Directive (AIFMD). The document adds a
new Q&A stating that the depositary liability regime
does apply to those assets for which a depositary has
safe-keeping duties on a look-through basis according
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sub-paragraph of the AIFMD Level 2 Regulation. This
document is intended to be continually edited and
updated as and when new questions are received.
•
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ) and
Anna Washington (née Berdinner) (awashington@
aima.org)
continuedŹ
AIMA Journal Q1 2016
10
AIMA Regulatory Update
Securitisation
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consideration by the European Parliament. AIMA has
submitted a position paper to key parliamentary
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Securitisation Regulation as well as (i) including the
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investors. AIMA has produced draft amendments
to these ends and is now following up directly with
the relevant MEPs. The timeline for the passage of
the Securitisation Regulation is anticipated to be
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until January 2017.
•
AIMA contacts: Simon Horner (shorner@aima.org)
and Jennifer Wood (MZRRG#DLPDRUJ)
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produced by the ESAs under the Fourth AML Directive.
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should be encouraged to take a holistic view and
that the presence of isolated risk factors should not
necessarily move a relationship into a higher or lower
risk category. AIMA commented that it is imperative
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diligence in a manner that is commensurate to the risk
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of their processes will be assessed by competent
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should only be included in the Guidelines where they
relate to an issue which would always indicate a higher
or lower ML/TF risk and where they are directly related
to the guideline to which they attach and that terms
such as “offshore” should be avoided where a more
VSHFLÀFVWDQGDUGFDQEHUHIHUHQFHG
•
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ) and
Anna Washington (née Berdinner) (awashington@
aima.org)
Loan origination
The Italian government has passed a law decree
that will permit EU AIFs to lend directly to Italian
corporates without the need of an Italian banking
licence or partnership with an Italian fronting bank.
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closed- ended way and that other laws on AIFs in that
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to Italian law. The Bank of Italy will now produce
secondary regulations which we hope will bring further
clarity on this decree. In particular it will provide
more detail on equivalence. AIMA is compiling a note
to set out where we feel further detail is necessary to
increase certainty and will submit this to the Bank of
Italy and Ministry of Finance.
•
AIMA contact: Simon Horner (shorner@aima.org)
Anti-money laundering
AIMA has responded to the Joint Committee of the
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and ESMA - ESAs) public consultations on two sets of
SEC
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has published a proposing release entitled “The Use
of Derivatives by Registered Investment Companies
and Business Development Companies”. The proposed
rules are meant to reduce the level of risk to investors
associated with leverage from investments in
derivatives and have three elements:
•
A portfolio limitation: The proposal would place
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GHULYDWLYHV LQVWUXPHQWV $ IXQG ZRXOG EH VXEMHFW
WR HLWKHU DQ H[SRVXUHEDVHG RU D ULVNEDVHG
OLPLW 7KH H[SRVXUHEDVHG OLPLW ZRXOG FDS D
IXQG·V DJJUHJDWH QHW H[SRVXUH WR GHULYDWLYHV DQG
FHUWDLQ RWKHU ÀQDQFLDO FRPPLWPHQW WUDQVDFWLRQV
LH UHYHUVH UHSXUFKDVH DJUHHPHQWV WR RI
WKH IXQG·V QHW DVVHWV $ IXQG·V ´H[SRVXUHµ IRU
this purpose generally would be calculated as
the aggregate notional amount of its derivatives
WUDQVDFWLRQV WRJHWKHU ZLWK LWV REOLJDWLRQV XQGHU
ÀQDQFLDO FRPPLWPHQW WUDQVDFWLRQV DQG RWKHU
senior securities transactions. The risk-based
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continuedŹ
AIMA Journal Q1 2016
11
AIMA Regulatory Update
H[FHVV RI WKDW SHUPLWWHG XQGHU WKH H[SRVXUH
based portfolio limit where the fund’s derivatives
WUDQVDFWLRQVLQDJJUHJDWHUHVXOWLQDQLQYHVWPHQW
SRUWIROLRWKDWLVVXEMHFWWROHVVPDUNHWULVNWKDQLI
WKH IXQG GLG QRW XVH VXFK GHULYDWLYHV HYDOXDWHG
using a test based on value-at-risk. A fund electing
the risk-based portfolio limit generally would be
UHTXLUHG WR OLPLW LWV H[SRVXUH XQGHU GHULYDWLYHV
WUDQVDFWLRQV ÀQDQFLDO FRPPLWPHQW WUDQVDFWLRQV
and other senior securities transactions to 300% of
the fund’s net assets.
•
•
Asset segregation requirements: A fund
engaging in derivatives transactions would have to
segregate assets in the amount of the sum total
RI L WKH GDLO\ PDUNWRPDUNHW DPRXQW DQG LL
a risk-based coverage amount. The risk-based
coverage amount would be determined based on
a reasonable estimate of the assets necessary to
unwind a derivative position if the fund had to do
VR XQGHU GLVWUHVVHG FLUFXPVWDQFHV ,Q DGGLWLRQ
a fund could satisfy the segregation requirement
only by segregating cash and cash equivalents; and
A risk management program: The proposed rule
ZRXOGUHTXLUHWKHERDUGVRIIXQGVWKDWH[FHHGD
WKUHVKROGRIQRWLRQDOGHULYDWLYHVH[SRVXUHRUKROG
FHUWDLQFRPSOH[GHULYDWLYHVLQVWUXPHQWVWRHVWDEOLVK
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addressed to derivatives. The fund board would
have to approve policies and procedures reasonably
designed to prevent violations of derivatives rules
and appoint a designated individual to act as
derivatives risk manager. The board would have
to regularly review the risk manager’s report and
reapprove the policies and procedures.
Comments on the proposal were due on 28 March
DWWKHWLPHRIZULWLQJ$,0$LVLQWKHSURFHVVRI
GHYHORSLQJDMRLQWUHVSRQVHZLWKWKH0)$
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ)
Shadow banking
The EBA has published guidelines entitled ‘Limits
RQ H[SRVXUHV WR VKDGRZ EDQNLQJ HQWLWLHV ZKLFK
carry out banking activities outside a regulated
framework under Article 395(2) of Regulation (EU) No
575/2013’. The publication of the Guidelines follows
the consultation paper LVVXHG HDUOLHU LQ WKH \HDU
to which AIMA responded 7KH (%$ KDV PRGLÀHG LWV
comments set out in the consultation paper that all
alternative investment funds (AIFs) and UCITS that
are money market funds should be considered to be
¶VKDGRZEDQNLQJHQWLWLHV·EXWVWDWHVWKDW´WKH(%$LV
of the view that only AIFs with limited leverage could
EHFRQVLGHUHGWRIDOORXWVLGHWKHGHÀQLWLRQRI¶VKDGRZ
EDQNLQJ HQWLWLHV·µ ,Q DGGLWLRQ WR WKLV FRQGLWLRQ RQO\
AIFs which are not allowed to originate loans or
SXUFKDVH WKLUG SDUWLHV· OHQGLQJ H[SRVXUHV DQG DGG
WKHPWRWKHLUEDODQFHVKHHWVZRXOGEHH[FOXGHGIURP
WKHGHÀQLWLRQRI¶VKDGRZEDQNLQJHQWLW\·
•
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ) and
Anna Washington (née Berdinner) (awashington@
aima.org)
EBA report concerning categorisation of
LQYHVWPHQWÀUPV
The EBA has published a UHSRUW RQ LQYHVWPHQW ÀUPV
in response to the Commission’s call for advice of
December 2014 on the suitability of certain aspects
RI WKH SUXGHQWLDO UHJLPH IRU LQYHVWPHQW ÀUPV 7KH
UHSRUW SUHVHQWV WKH (%$·V ÀQGLQJV DQG PDNHV FHUWDLQ
recommendations that the EBA believes will lead
to a more proportionate and risk-based prudential
UHJLPH IRU LQYHVWPHQW ÀUPV )RU H[DPSOH WKH (%$
recommends a new categorisation of investment
ÀUPV GLVWLQJXLVKLQJ EHWZHHQ V\VWHPLF DQG ¶EDQNOLNH·
LQYHVWPHQWÀUPVWRZKLFKWKHIXOO&DSLWDO5HTXLUHPHQWV
Directive (CRD)/Capital Requirements Regulation (CRR)
requirements should be applied; other investment
ÀUPV ¶QRQV\VWHPLF· ZLWK D PRUH OLPLWHG VHW RI
SUXGHQWLDO UHTXLUHPHQWV DQG YHU\ VPDOO ÀUPV ZLWK
‘non-interconnected’ services.
%RWKIRU$,0$PHPEHUVZKRDUH0L),'ÀUPVUHJXODWHG
E\&5'DQGIRUWKRVHWKDWDUHQRWWKLV(%$DGYLFHKDV
the potential to induce the Commission to change the
SUXGHQWLDO WUHDWPHQW IRU WKHLU W\SHV RI ÀUPV HLWKHU
to be more or less onerous. AIMA is engaging with
members to collate feedback on the current regime
and potentially submitting a short paper designed to
shape the EBA’s thinking when it comes to creating any
new regulatory regime that would apply to this new
FDWHJRU\RILQYHVWPHQWÀUP
•
AIMA contacts: Jennifer Wood (MZRRG#DLPDRUJ) and
Anna Washington (née Berdinner) (awashington@
aima.org)
continuedŹ
AIMA Journal Q1 2016
12
AIMA Regulatory Update
Australia - Portfolio holdings disclosure for
super funds
In welcome news for Australian superannuation
IXQGV DQG WKHLU LQYHVWPHQW PDQDJHUV WKH $XVWUDOLDQ
Government has released H[SRVXUHGUDIWOHJLVODWLRQ to
UHÀQHWKHIUDPHZRUNIRUSRUWIROLRKROGLQJVGLVFORVXUH
for superannuation funds.
The release is a response to concerns about compliance
costs for the superannuation industry and the
FRPSOH[LW\RIWKHFXUUHQWGLVFORVXUHUHJLPHZKLFKOHG
to a deferral of the commencement date.
The requirements are currently proposed to come into
effect on 1 July 2016 and the trustee of a registrable
superannuation entity (RSE) (other than a pooled
superannuation trust) will be required to report details
of portfolio holdings twice annually (at each reporting
GD\RI-XQHDQG'HFHPEHURQLWVZHEVLWHZLWKLQ
90 days of the reporting day.
The proposal also means that parties to contracts
and arrangements in relation to the acquisition of a
ÀQDQFLDO SURGXFW XVLQJ DVVHWV GHULYHG IURP D VXSHU
fund (which may include investment managers in
some circumstances) would not have a legal obligation
to inform investee entities that the assets invested
derived from a super fund or to report information to
super funds for portfolio holdings disclosure purposes.
As some superannuation funds may also have sought
WRREOLJHLQYHVWPHQWPDQDJHUVXQGHUWKHLULQYHVWPHQW
PDQDJHPHQWDJUHHPHQWVWRSURYLGHUHSRUWLQJWRWKH
fund to assist with the portfolio holdings disclosure
REOLJDWLRQV WKH SURSRVDO PD\ DOVR HDVH FRPSOLDQFH
obligations for affected investment managers.
The Government is seeking to introduce legislation in
early 2016 with effect from 1 July 2016.
•
AIMA contact: Kher Sheng Lee (kslee@aima.org)
The draft legislation proposes to:
•
Limit disclosure of a superannuation fund's
SRUWIROLR KROGLQJV WR DVVHWV WKDW WKH IXQG RU DQ
DVVRFLDWHGHQWLW\KDVGLUHFWO\LQYHVWHGLQLQVWHDG
of requiring disclosure for all fund assets on a 'lookthrough' basis with respect to multiple levels of
investment. The obligations to include information
DERXW ÀQDQFLDO SURGXFWV RU RWKHU SURSHUW\ WKDW
non-associated entities have directly invested are
proposed to be repealed;
•
Allow a superannuation fund to choose not to
disclose up to 5% of the assets attributable to
HDFKLQYHVWPHQWRSWLRQZKLFKSURYLGHVÁH[LELOLW\
WR H[FOXGH IURP GLVFORVXUH D OLPLWHG QXPEHU
of investments considered to be commercially
sensitive; and
•
Repeal the reporting obligations on parties to
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SURGXFW XVLQJ WKH DVVHWV RU DVVHWV GHULYHG IURP
DVVHWVRIDQ56(
The easing of a trustee's portfolio holdings obligations
VRWKDWWKH\DUHOLPLWHGWRWKHÀUVWLQYHVWPHQWE\WKH
fund in a non-associated entity or by associated entities
may facilitate super fund investment in certain funds
where public disclosure of underlying investments and
YDOXHV LV FRPPHUFLDOO\ VHQVLWLYH IRU H[DPSOH KHGJH
fund investments.
Hong Kong - New Professional Investor
Regime
$V D UHPLQGHU NH\ DPHQGPHQWV WR WKH &RGH RI
Conduct for Persons Licensed By or Registered with the
Securities and Futures Commission (the “Code”) takes
effect 25 March 2016. Key changes are as follows:
•
Intermediaries will no longer be able to waive
FHUWDLQLQYHVWRUSURWHFWLRQSURYLVLRQVRIWKH&RGH
including the requirement to ensure the suitability
RIDUHFRPPHQGDWLRQRUVROLFLWDWLRQZKHQGHDOLQJ
with professional investors who are individuals.
Such individuals are to be treated under the
new regime as non-professional investors for the
purposes of the Code.
•
)RU LQYHVWPHQW YHKLFOHV IDPLO\ WUXVWV DQG
corporate professional investors that are not
institutional investors (each referred to as
D &3, WKH LQWHUPHGLDU\ PD\ RQO\ GLVDSSO\
certain investor protection provisions if (i) the
HQWLW\ VDWLVÀHV D SULQFLSOHVEDVHG DVVHVVPHQW RI
NQRZOHGJHDQGLQYHVWPHQWH[SHULHQFHDOVRNQRZQ
DVDFRUSRUDWHSURIHVVLRQDOLQYHVWRUDVVHVVPHQWRU
CPI assessment) and (ii) has given its consent to be
treated as professional investors.
•
,QFRQGXFWLQJWKH&3,DVVHVVPHQWWKHLQWHUPHGLDU\
continuedŹ
AIMA Journal Q1 2016
13
AIMA Regulatory Update
should assess whether or not the CPI meets all
three of the following criteria:
i.
the CPI has the appropriate corporate structure
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KRZLQYHVWPHQWGHFLVLRQVDUHPDGHLQFOXGLQJ
whether the corporation has a specialised
treasury or other function responsible for
making investment decisions;
ii. the person(s) responsible for making
investment decisions on behalf of the CPI
KDVKDYH VXIÀFLHQW LQYHVWPHQW EDFNJURXQG
LQFOXGLQJ WKH LQYHVWPHQW H[SHULHQFH RI VXFK
person(s)); and
iii. the CPI is aware of the risks involved which is
considered in terms of the person(s) responsible
for making investment decisions.
•
´$UWLFOH([HPSWLRQµ
•
([LVWLQJ $UWLFOH ([HPSWLRQ ÀOHUV VKRXOG NQRZ
that:
Ⱦ
)URP 0DUFK WKH\ DUH VXEMHFW WR WKH QHZ
bookkeeping requirement and partially to the
standards of conduct imposed on licensed
Japanese investment managers.
Ⱦ
)URP0DUFKWKH\PXVWSURYLGHQRQSURIHVVLRQDO
investors with periodic investment reports.
Ⱦ
%\ $XJXVW WKH\ DUH UHTXLUHG WR
ÀOH D VXSSOHPHQW ÀOLQJ WR QRWLI\ DGGLWLRQDO
LQIRUPDWLRQ UHTXLUHG IRU WKH QHZ )RUP including information on a “Representative
LQ -DSDQµ GHVLJQDWHG E\ WKH IXQG RSHUDWRU
IDLOXUHRIZKLFKZRXOGUHVXOWLQGLVTXDOLÀFDWLRQ
IURPWKH$UWLFOH([HPSWLRQDQGSRWHQWLDOO\
result in a criminal penalty. The FSA 2016
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Japan” is essentially a contact point of that
fund operator in Japan for the regulator;
DIÀOLDWHV-DSDQHVHEURNHUVODZ\HUVRUSXEOLF
accountants based in Japan can be candidates
for such “Representative”.
Ⱦ
,PPHGLDWHO\ DIWHU WKH VXSSOHPHQW ÀOLQJ
WKH\DUHVXEMHFWWRWKHQHZSXEOLFGLVFORVXUH
requirement.
Ⱦ
%HJLQQLQJ ZLWK WKH ÀVFDO \HDU VWDUWLQJ RQ RU
DIWHU 0DUFK WKH\ DUH VXEMHFW WR WKH QHZ
annual public disclosure requirement.
Ⱦ
%HJLQQLQJ ZLWK WKH ÀVFDO \HDU VWDUWLQJ RQ RU
DIWHU 0DUFK WKH\ PXVW VXEPLW DQ DQQXDO
business report with the regulator within three
months or such other period granted by the
UHJXODWRUDIWHUWKHHQGRIWKHUHVSHFWLYHÀVFDO
year.
,I DQ LQWHUPHGLDU\ LV UHDVRQDEO\ VDWLVÀHG WKDW D
&3,PHHWVDOOWKHVHFULWHULDWKHLQWHUPHGLDU\PD\
treat the CPI as a “professional investor” so long as
WKHLQWHUPHGLDU\KDVSURYLGHGDIXOOH[SODQDWLRQRI
the consequences and the CPI has signed a consent.
AIMA contact: Kher Sheng Lee (kslee@aima.org)
Japan – Amendments to the Article 63
H[HPSWLRQÀQDOLVHG
2Q)HEUXDU\WKH)6$DGRSWHGWKHÀQDOUXOHV (only
in Japanese) to implement the 2015 legislative changes
WRDOLFHQVLQJH[HPSWLRQRQZKLFKPDQ\QRQ-DSDQHVH
(as well as Japanese) fund operators of partnershiptype funds have relied (“2015 Amendment”). As the
UHVXOW WKH $PHQGPHQW EHFDPH HIIHFWLYH RQ 0DUFK7KH)6$DOVRSXEOLVKHGH[WHQVLYHJXLGDQFH
in response to comments it received during the public
consultation in December 2015 (“FSA 2016 Guidance”)
(only in Japanese).
•
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HIIHFWLYHO\ OLPLWV WKH DYDLODELOLW\ RI DQG UHTXLUHV
DGGLWLRQDO UHTXLUHPHQWV WR UHO\ RQ D OLFHQVLQJ
H[HPSWLRQ XQGHU $UWLFOH RI WKH )LQDQFLDO
,QVWUXPHQWV DQG ([FKDQJH $FW ZKLFK H[HPSWV
IXQGRSHUDWRUVRISDUWQHUVKLSW\SHIXQGVW\SLFDOO\
general partners) from licensing requirements to
offer partnership interests to or manage funds
received from Japanese investors on certain
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•
The 2015 Amendment also introduced new
eligibility requirements for investors who are not
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0DUFK WKH )6$ H[SHFWV IXQG RSHUDWRUV WR WDNH
certain reasonable steps to verify the eligibility of
an investor when offering partnership interests to
non-QII investors.
•
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continuedŹ
AIMA Journal Q1 2016
14
AIMA Regulatory Update
DIXQGRQO\KDVQLQHRUIHZHU-DSDQHVHLQYHVWRUV
DOORIZKLFKDUH4,,VDQGWKHLULQYHVWPHQWVFRQVLVW
of less than one-third of the total contribution
WR WKH IXQG KRZHYHU VXFK H[HPSWLRQ GRHV QRW
H[WHQG WR D 7\SH ,, EURNHUGHDOHU OLFHQVH WKDW LV
required to offer partnership interests to Japanese
investors.
delay. As part of this process it is likely that they will
DOVR H[WHQG WKH WUDQVSRVLWLRQ GHDGOLQH IRU 0L),'
giving member states an additional 9 or 12 months for
domestic implementation. A potential change to the
/HYHO WH[W WR SURYLGH WKH PHDQV IRU WKH (XURSHDQ
Securities and Markets Authority (ESMA) to develop
VSHFLÀF WUDQVSDUHQF\ UXOHV IRU SDFNDJHG WUDQVDFWLRQV
is also on the table.
AIMA contact: Kher Sheng Lee (kslee@aima.org)
Markets regulation
Capital Markets Union
AIMA recently responded to the European Commission’s
Call for Evidence on the EU Regulatory Framework;
D NH\ DVSHFW RI WKH &DSLWDO 0DUNHWV 8QLRQ SURMHFW
AIMA’s submission raised a number of areas where
we have seen evidence of barriers preventing nonEDQN ÀQDQFH DQG FDSLWDO PDUNHWV IURP GHYHORSLQJ LQ
the EU including: constraints on asset managers in
participating on the supply side of the securitisation
process; the impacts of bank capital measures on
dealers’ intermediation capacity leading to changes
in secondary market liquidity in a number of asset
classes; the time and cost implications of complying
with regulatory reporting requirements; and the
impact of the public disclosure of short sales on equity
market liquidity. AIMA has put forward a number of
solutions to remedy these and other issues.
The European Commission is continuing to progress its
Action Plan on Building a Capital Markets Union. Key
areas of focus in 2016 will include a consultation on
the main barriers to the cross-border distribution of
investment funds and a report on national barriers to
the free movement of capital.
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
0L),'0L),5
The European Commission has formally adopted a
proposal to push the MiFID2/MiFIR application date
EDFNXQWLO-DQXDU\SURYLGLQJZHOFRPHDGGLWLRQDO
time for industry to implement the new rules. The
Council and European Parliament must now ratify the
,QWKH8.WKH)&$KDVFRQVXOWHGRQDVSHFWVRIWKH8.·V
MiFID2 transposition in a Consultation Paper. While
WKH)&$·VZRUNLVODUJHO\SURFHGXUDOJLYHQLWVJHQHUDO
DSSURDFK RI GLUHFW FRS\RXW RI 0L),' UHTXLUHPHQWV
WKH&3GLGUDLVHDQXPEHURILPSRUWDQWSROLF\SRLQWV
which AIMA and MFA commented RQ ,Q SDUWLFXODU
we signal our strong support for the FCA’s approach
in respect of transaction reporting and its decision
QRW WR H[WHQG WKH REOLJDWLRQ WR DVVHW PDQDJHUV WKDW
DUH QRW 0L),' LQYHVWPHQW ÀUPV :H DOVR H[SUHVV RXU
support for the FCA’s intention to make MiFID2 postWUDGH WUDQVSDUHQF\ ZDLYHUV DYDLODEOH LQ IXOO ZKLOVW
encouraging the FCA to ensure that trading venues
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H[SUHVV VXSSRUW IRU WKH )&$·V GHFLVLRQ QRW WR UHTXLUH
SHULRGLFUHSRUWLQJE\ÀUPVRQWKHLUXVHRIDOJRULWKPV
ESMA has also consulted on guidelines on MiFID2
transaction reporting.
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
EMIR
The European Supervisory Authorities have now
published ÀQDO GUDIW 5HJXODWRU\ 7HFKQLFDO 6WDQGDUGV
(RTS) on EMIR risk mitigation techniques related to
WKH H[FKDQJH RI FROODWHUDO WR FRYHU H[SRVXUHV DULVLQJ
from non-centrally cleared over-the-counter (OTC)
derivatives. The RTS also specify the criteria concerning
LQWUDJURXSH[HPSWLRQVDQGWKHGHÀQLWLRQVRISUDFWLFDO
and legal impediments to the prompt transfer of funds
between counterparties. The draft RTS contain the
following provisions:
•
For OTC derivatives not cleared by a Central
&RXQWHUSDUW\ &&3 WKH GUDIW 576 SUHVFULEH WKDW
FRXQWHUSDUWLHV KDYH WR H[FKDQJH ERWK LQLWLDO DQG
variation margins. This will reduce counterparty
FUHGLW ULVN PLWLJDWH DQ\ SRWHQWLDO V\VWHPLF ULVN
continuedŹ
AIMA Journal Q1 2016
15
AIMA Regulatory Update
and ensure alignment with international standards.
•
The draft RTS outline the list of eligible collateral
IRUWKHH[FKDQJHRIPDUJLQVWKHFULWHULDWRHQVXUH
WKH FROODWHUDO LV VXIÀFLHQWO\ GLYHUVLÀHG DQG QRW
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to determine appropriate collateral haircuts.
•
The draft RTS lay down the operational procedures
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enforceability of the agreements and the timing of
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•
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
The draft RTS cover the procedures for
counterparties and competent authorities related
to the treatment of intragroup derivative contracts.
7KH &RPPLVVLRQ PXVW QRZ DGRSW WKH 576 ZKLFK ZLOO
need to be approved by Parliament and Council. If
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into force on 1 September 2016.
•
from CFTC regulations for discrete aspects of DCO/
CCPs’ non-US clearing activities. The substituted
compliance determination enables DCO/CCPs to comply
with the relevant CFTC rules by complying with the
corresponding requirements under EMIR. The CFTC
has also announced that they are streamlining their
registration process for DCO/CCPs. The Determination
will be effective upon publication in the Federal
Register.
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
Cross-border derivatives issues
,Q )HEUXDU\ WKH (XURSHDQ &RPPLVVLRQ DQG 86
Commodity Futures Trading Commission (CFTC)
announced a common approach regarding requirements
for central clearing counterparties (CCPs). To
LPSOHPHQW WKH DJUHHPHQW WKH (XURSHDQ &RPPLVVLRQ
and CFTC have issued reciprocal determinations to
enable CCPs to provide clearing services in both the
(8 DQG 86 ZKLOH UHPDLQLQJ VXEMHFW SULPDULO\ WR WKHLU
local requirements.
Under the European Commission’s Implementing
Decision 2016/377D86&&3UHIHUUHGWRDVV\VWHPLFDOO\
important and opt-in derivatives clearing organisations
(SIDCOs and DCOs)) will have to apply to ESMA for
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procedures meet a number of conditions related to
the default fund and the calculation and collection of
LQLWLDOPDUJLQVWRDOLJQZLWK(0,5VHH$UWLFOHRIWKH
Implementing Decision).
SEC Regulation of NMS Stock ATSs
)ROORZLQJ FDOOV IURP LQGXVWU\ WKH 6(& LQ ODWH published proposed rules amending Regulation ATS to
enhance the operational transparency and regulatory
oversight of all US Alternative Trading Systems (ATSs)
that offer trading of stocks listed on a national
VHFXULWLHV H[FKDQJH 106 6WRFNV 7KH KHDGOLQH
proposal is for operators of such NMS stock ATSs to
PDNH D QHZ SXEOLFO\ DYDLODEOH ÀOLQJ ¶)RUP $761· ²
that will have to be approved by the SEC for the ATS to
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QDWLRQDOVHFXULWLHVH[FKDQJH
Form-ATS-N will include information about the ATS
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GDWD XVHG RQ HDFK RI LWV $76V DV ZHOO DV HDFK $76·V
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departure from the current regime which requires
QRWLÀFDWLRQ DORQH E\ $76 RSHUDWRUV WR HQMR\ WKH
H[HPSWLRQIURPDXWKRULVDWLRQDVDQDWLRQDOVHFXULWLHV
H[FKDQJH
7KLVTXDUWHU$,0$FRVLJQHGDMRLQWUHVSRQVH with the
0)$H[SUHVVLQJVWURQJVXSSRUWIRUWKH6(&·VSURSRVDOV
WR H[WHQG DGGLWLRQDO WUDQVSDUHQF\ REOLJDWLRQV DQG IRU
¶)RUP$761·7KHUHVSRQVHDOVRVXJJHVWVWKHH[WHQVLRQ
of the obligations beyond NMS Stock ATSs to include
À[HGLQFRPHDQGJRYHUQPHQWVHFXULWLHV
AIMA contacts: Adam Jacobs (DMDFREV#DLPDRUJ
Oliver Robinson (orobinson@aima.org $GHOH 5HQWVFK
(arentsch@aima.org)
The CFTC FRQÀUPHG that its substituted compliance
framework was unanimously accepted. The CFTC is
also issuing a no-action letter to provide limited relief
continuedŹ
AIMA Journal Q1 2016
16
Bloomberg’s streamlined technology gives your
hedge fund the solid foundation it needs today,
and the scalability it demands tomorrow.
Simplify investment operations, reduce
operational risk, minimize upfront infrastructure
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AIMA Regulatory Update
CFTC Regulation AT proposals
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Regulation Automated Trading (Regulation AT)
proposals which were published late last year. As
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5HJXODWLRQ $7 LV D VLJQLÀFDQW UXOHPDNLQJ LQWHQGHG WR
regulate the entire algorithmic trading landscape of
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AIMA’s response builds on our position supporting
proportionate and well-tailored regulation of all
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as utilising robust testing and development processes.
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‘Algorithmic Trading’ which we argue is far too broad
and would capture activities which are demonstrably
not algorithmic trading. Another area of principal
concern for AIMA members are the CFTC’s proposals to
obtain summary access to all AT Persons’ source code
as part of the Regulation AT ‘source code repositories’
framework. AIMA’s response strongly pushes back on
WKLVSURSRVDORQWKHEDVLVRIVHFXULW\ULVNVWRH[WUHPHO\
commercially sensitive information and the lack of any
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source code access. AIMA will continue to engage with
WKH&)7&DVSDUWRILWVRQJRLQJZRUNWRGHYHORSDÀQDO
rulemaking for Regulation AT.
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
Market Abuse Regulation
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published its consultation paper on draft Level 3
guidelines under the EU Market Abuse Regulation
0$5 ZKLFK LV GXH WR HQWHU LQWR HIIHFW RQ -XO\
WKLV \HDU 7KH GUDIW JXLGHOLQHV FRYHU DPRQJ RWKHU
WKLQJV WKH REOLJDWLRQV RQ SHUVRQV UHFHLYLQJ PDUNHW
VRXQGLQJV 065V XQGHU $UWLFOH RI 0$5 VXFK DV
what to do in the event of a discrepancy of opinion
between the MSR and disclosing market participant
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PDUNHW VRXQGLQJ LV LQVLGH LQIRUPDWLRQ DQG SURFHVVHV
for the internal handling of information passed during
the course of a market sounding. The deadline for
comments is 31 March after which ESMA will adopt its
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(60$ RQ WKH FRQVXOWDWLRQ GXULQJ ZKLFK (60$ QRWHG
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in time for 3 July this year. ESMA’s current intention
LVWRÀQDOLVHWKHJXLGHOLQHVGXULQJ4IROORZLQJWKHLU
Board of Supervisors meeting in July.
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Level 2 delegated regulations containing regulatory
technical standards (RTS) have recently been adopted
by the European Commission. These RTS deal with (i)
SUHYHQWLQJGHWHFWLQJDQGUHSRUWLQJDEXVLYHSUDFWLFHV
(suspicious transaction and order reporting); (ii) buyback programmes and stabilisation measures; and (iii)
investment recommendations. Before these can be
SXEOLVKHGLQWKH2IÀFLDO-RXUQDORIWKH(8WKHGHOHJDWHG
regulations must undergo a period of scrutiny by the
European Parliament and Council. The most important
of these from the perspective of AIMA members is
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order reporting by persons ‘professionally arranging
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contained under Article 16(2) of MAR. We still await
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DV ÀQDO 576 RQ WKH REOLJDWLRQV RI GLVFORVLQJ PDUNHW
participants during market soundings.
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
EU rules on benchmarks
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DJUHHPHQW RQ WKH /HYHO WH[W IRU WKH (8 5HJXODWLRQ
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LQ LQ UHVSRQVH WR WKH /,%25 ULJJLQJ VFDQGDOV LV
intended to place particular requirements on the
administrators of any EU benchmark or any thirdcountry benchmark used by a supervised entity in
the EU. The European Parliament is due to vote on
WKH /HYHO WH[W LQ $SULO DQG ZKLOH LW LV H[SHFWHG WR
SDVV ODUJHO\ XQFKDQJHG D QXPEHU RI FKDQJHV KDYH
been under consideration to address inconsistencies
between the treatment of EU and third-country
EHQFKPDUNDGPLQLVWUDWRUV7KH5HJXODWLRQLVH[SHFWHG
WRHQWHULQWRIRUFHLQ-XQHKRZHYHUWKHUHLVVRPH
uncertainty regarding the timeframe for application.
continuedŹ
AIMA Journal Q1 2016
18
AIMA Regulatory Update
$W WKH HDUOLHVW WKH UHTXLUHPHQWV PD\ DSSO\ IURP
around early 2018.
In order to meet the tight timeframes for
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Paper on the Level 2 measures in February for public
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before the Parliament. There are early indications
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WKHLQWHQWRIWKH/HYHOWH[W(60$ZLOOVXEVHTXHQWO\
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of the technical standards or the technical advice.
AIMA will continue to monitor and report on potential
LPSDFWVRQPHPEHUVLQFOXGLQJWKHXVHRIWKLUGFRXQWU\
benchmarks.
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
$OO FRXQWHUSDUWLHV H[HUFLVLQJ UHXVH RYHU UHFHLYHG
FROODWHUDOKDYHVL[PRQWKVWRFRPSO\ZLWKWKHUHOHYDQW
SFTR reuse obligations.
An important outstanding question for AIMA hedge
fund manager members is the scope of the SFT
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with non-EU counterparties only caught if they use an
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WKDWWKHH[SOLFLWZRUGLQJRI6)75WKHUHIRUHH[FOXGHV
non-EU AIFs from scope of Article 4 SFT reporting
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authorisation of its AIFM. We have discussed the
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their agreement with our interpretation. We now await
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‘FAQs’ on the interpretation of SFTR.
•
AIMA contacts: Adam Jacobs (DMDFREV#DLPD
org 2OLYHU 5RELQVRQ orobinson@aima.org $GHOH
Rentsch (arentsch@aima.org)
Securities Financing Transactions
The European Regulation on transparency of securities
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effect back in January of this year. The key obligations
contained within the SFTR include: (i) SFT reporting
and recordkeeping - two-sided reporting of the details
of all SFTs to trade repositories by all EU established
FRXQWHUSDUWLHVDQGEUDQFKHVLLLQYHVWRUGLVFORVXUHV²
pre-contractual and periodic disclosures by authorised
AIFMs and UCITS managers to investors as to their
funds authorisation and use of SFTs and total return
VZDSV DQG LLL UHXVH ULVN GLVFORVXUH DQG FRQVHQW ²
obligations on persons receiving collateral further to
DQ\ FRQWUDFW QRW MXVW 6)7V WR PDNH ULVN GLVFORVXUHV
and obtain consent from their counterparty in order
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7KHVHPDLQREOLJDWLRQVDUHVXEMHFWWRYDU\LQJSKDVHLQ
SHULRGVZLWKWKH6)7UHSRUWLQJSKDVHLQRQO\VWDUWLQJ
once Level 2 measures further specifying the details
of reports have been developed and published by
ESMA and the European Commission. Pre-contractual
disclosures will apply to any new funds constituted
after the entry into force of SFTR and 18 months later
IRU H[LVWLQJ IXQGV 3HULRGLF LQYHVWRU GLVFORVXUHV ZLOO
start in January 2017. ESMA are empowered to adopt
RTS further specifying the details of such investor
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intend to use this power for the time being; it’s focus
will be on developing Level 2 measures for SFT reports.
Hong Kong - SFC publishes consultation
conclusions on expansion of the scope of
short position reporting
The Securities and Futures Commission (SFC) released
its Conclusions on a consultation regarding new rules
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proposals were as follows:
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cover all securities that are determined by The
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“Designated Securities”;
•
The reporting threshold trigger for Designated
Securities that are stocks remains the same
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capitalisation of the listed issuer concerned or
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•
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to be set at HK$30 million.
The SFC has concluded that short position reporting
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VKRUW VROG XQGHU WKH UXOHV RI 7KH 6WRFN ([FKDQJH RI
continuedŹ
AIMA Journal Q1 2016
19
AIMA Regulatory Update
Hong Kong Limited. The reporting threshold for stocks
will remain unchanged (being the lower of 0.02% of the
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the threshold for collective investment schemes will
be set at HK$30 million.
The proposed amendments to the rules will be submitted
to the Legislative Council for negative vetting. To give
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SFC plans for the amended rules to come into effect
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The SFC will make further announcements regarding
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regime in due course.
AIMA contact: Kher Sheng Lee (kslee@aima.org)
Singapore - AIMA responds to the MAS's
Consultation on OTC Derivative Trade
Reporting
AIMA has submitted a response to the Monetary
Authority of Singapore (MAS)’s recent consultations
on proposals to implement reporting of commodity
derivative contracts and equity derivatives contracts
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FRQWUDFWV DV ZHOO DV UHYLVLRQV WR ÀQHWXQH WKH
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institutions.
AIMA contact: Kher Sheng Lee (kslee@aima.org)
Tax
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Directive (ATA DirectiveOD\LQJGRZQUXOHVDJDLQVWWD[
avoidance practices including: (1) a limitation on relief
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controlled foreign company rules; and (5) a framework
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the Commission proposes to amend the Directive on
administrative cooperation (to be DAC4) to include the
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(and so enacting the OECD’s country-by-country
reporting rules). Both measures will be submitted to
the European Parliament for consultation and to the EU
Council for approval.
The Commission is also endorsing (i) a recommendation
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permanent establishment; and (ii) an H[WHUQDOVWUDWHJ\
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the EU will develop a process for assessing and listing
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of respects.
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proposal for a Council Directive to amend the DAC
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IRUP FDQ EH H[SODLQHG DV WKH (8 KDV GRQH here) as
follows: (1) the original DAC(2011) set out to enhance
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DAC was amended to incorporate the OECD’s Common
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(DAC2 DQG WKH ODWHVW WH[W DJUHHG LV DAC3 which
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advance cross-border rulings and advance pricing
arrangements (applying from 2018). To this will be
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would apply country-by-country reporting to certain
MNEs from 2017.
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consultation to help identify the key measures for
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as part of the implementation of the Commission's
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which was presented in June 2015. AIMA responded to
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collective investment schemes needed to be taken into
account when designing the proposed framework and
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be evaluated.
•
AIMA contact: Paul Hale (phale@aima.org) or
Enrique Clemente (eclemente@aima.org)
continuedŹ
AIMA Journal Q1 2016
20
AIMA Regulatory Update
Financial Transaction Tax (FTT)
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not met their self-imposed deadline for application of
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meeting a January 2017 deadline seems to be unlikely.
The ECP Member States disagree on core aspects of the
FTT and differences remain in satisfying the different
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There must be progress at a technical level before any
negotiations are taken forward to the representatives
of the Member States. The Council Legal Services has
produced a paper which sets out the voluntary and
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State may withdraw prior to a directive being agreed.
•
AIMA contact: Paul Hale (phale@aima.org) or
Enrique Clemente (eclemente@aima.org)
WRDFNQRZOHGJHWKHJHQHUDOSULQFLSOHRIWD[QHXWUDOLW\
the treatment of non-CIVs is to be developed further
by the OECD. AIMA intends to continue to put the case
of non-CIVs to the OECD and to respond to concerns
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investors that are not themselves entitled to treaty
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income through non-CIVs. AIMA has been in contact
with the UK Treasury to inform the commentaries of
a Principle Purpose Test (PPT) should it be included
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OECD consultation published on 24 March.
In a development that may be relevant to the ability of
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UDWKHUWKDQWKHPRUHJHQHUDO337WKH&RPPLVVLRQKDV
declared that the proposed LOB would in its nature be
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%DVH(URVLRQDQG3URÀW6KLIWLQJ%(36
The OECD released the 2015 Base Erosion and
3URÀW 6KLIWLQJ %(36 deliverables which form a
comprehensive set of changes to the international
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and includes these areas: (i) the interaction between
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FRPSDQ\ UHJLPHV K\EULG PLVPDWFK DUUDQJHPHQWV
LL WKH VXEVWDQFH RI LQWHUQDWLRQDO WD[ SURYLVLRQV DQG
PRGHO WD[ FRQYHQWLRQV DQWLDYRLGDQFH SURYLVLRQV WR
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DQG LLL WUDQVSDUHQF\ DQG FHUWDLQW\ RI 01( WD[
liabilities (country-by-country reporting).
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in inappropriate circumstances (treaty abuse)
Additional work remains to be done in 2016 in various
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$FWLRQ ² ÀQDO UHSRUW) where the ability to access
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for regulated collective investment vehicles (CIVs)
and does not offer a carve out for non-CIVs such as
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HM Treasury published last year FRQVXOWDWLRQ RQ WD[
GHGXFWLELOLW\ RI LQWHUHVW H[SHQVH IRU FRPSDQLHV. The
FRQVXOWDWLRQ IROORZHG WKH 2(&' UHSRUW RQ $FWLRQ which provides recommendations for a best practice
approach to the design of rules to prevent base erosion
through the use of interest deductions. The OECD
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rule (under which a company may deduct net interest
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a group ratio rule as general principles together with
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banking and insurance sectors). AIMA’s response to that
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Secretariat stressed the need for developing further
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as well as technical considerations on grandfathering
SHULRGde minimis thresholds or FX gains and losses.
•
AIMA contact: Paul Hale (phale@aima.org) or
Enrique Clemente (eclemente@aima.org)
Automatic Exchange of Information (AEOI)
The OECD’s Common Reporting Standard (CRS) went
live on 1 January 2016. Financial institutions (FIs)
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to implement due diligence procedures when new
continuedŹ
AIMA Journal Q1 2016
21
AIMA Regulatory Update
DFFRXQWVDUHRSHQHGDQGWRUHYLHZH[LVWLQJDFFRXQWV
Reporting will commence in 2017. The evolution
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LQIRUPDWLRQ XQGHU &56 ZLOO EH FKDOOHQJLQJ DQG $,0$
will continue to take up members’ concerns with the
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encouraging sound practices in the industry.
•
salaried members and therefore employees. This WG
has been refreshed with the mandate to engage with
HMRC on some of the practical implications that the
legislation has produced.
AIMA contact: Paul Hale (phale@aima.org) or Enrique
Clemente (eclemente@aima.org)
AIMA contact: Paul Hale (phale@aima.org) or
Enrique Clemente (eclemente@aima.org)
US tax
Carried interest (UK)
The Autumn Statement delivered on 25 November 2015
LQFOXGHG IHZ WD[ PHDVXUHV DORQJVLGH WKH VSHQGLQJ
UHYLHZ IRU WKH QH[W ÀQDQFLDO \HDU 'UDIW )LQDQFH
Bill legislation (released on 9 December) contained
measures restricting the opportunities for full
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receipts of carried interest to funds with an average
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QRZ UHGXFHG WR PRQWKV DW WKH %XGJHW *HQHUDOO\
hedge fund management businesses in the UK receive
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will not be affected by the measure. AIMA has been
involved in discussions on the proposals with HMRC and
submitted a response RQ EHKDOI RI PHPEHUV IRUPLQJ
WKH $OWHUQDWLYH &UHGLW &RXQFLO ZKLFK IRFXVHV RQ WKH
impact that these income-based carried interest
rules could have on funds that are alternative credit
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direct lending funds. AIMA also submitted a more
general response. It is hoped that the Finance Bill to
be published after the Budget delivered on 16 March
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submission and by other parties.
•
AIMA contact: Paul Hale (phale@aima.org) or
Enrique Clemente (eclemente@aima.org)
Partnership Working Group
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subsequently enacted in Finance Act 2014. It is apparent
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agreeing with HMRC the interpretation of the rules
relating to the treatment of some members of LLPs as
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in 2015 which may affect hedge funds holding US
investments or managers operating in the US. These
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withholding under section 871(m) of the Internal
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may arise on the change of terms of a convertible
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contracts. The House of Representatives and the Senate
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which will be relevant to alternative investment funds
and management entities which are partnerships which
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managers with investors in states such as California
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even when the fund and fund manager have no physical
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California seems to have reduced the risk.
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what US bodies see as unreasonable scrutiny of US
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in Washington. Following a full committee hearing on
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growing number of corporate inversions moving US
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include country-by-country reporting and an interest
deductibility limit among other BEPS-based provisions.
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ownership and an amendment to the limitation on
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business organisations are arguing that the US should
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AIMA Journal Q1 2016
22
AIMA Regulatory Update
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•
AIMA contact: Paul Hale (phale@aima.org) or
Enrique Clemente (eclemente@aima.org)
Hong Kong - Introduction of a HK OpenEnded Fund Company (OFC)
The Hong Kong government on 27 January 2016
commenced the legislative process to implement the
OFC regime. It introduced the relevant bill into the
Legislative Council (LegCo) with a view to securing the
passage of the bill before the summer of 2016.
AIMA has been working for some years to promote the
introduction of open-ended fund company legislation
to establish Hong Kong as a successful domicile for
private funds. AIMA responded to the Consultation
Paper published in March 2014 by the Financial
Services and the Treasury Bureau (FSTB). AIMA was
also invited by the FSTB to provide comments on the
draft legislative proposals in November 2015. A copy
of AIMA’s comments on the draft legislative proposals
can be found here.
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(FSTB) issued a concept paper to gauge views on the
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the Legco’s House Committee agreed to form a Bills
Committee to study the legislative bill for the OFC
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23 February 2016 with members of the administration
in attendance.
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UK referendum on membership of the
European Union
The UK is rapidly approaching an in-out referendum
to determine its future relationship with the EU. On
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the UK should (i) stay in the EU (in light of the UK
government securing a limited EU reform package (‘HM
Government settlement’LLRUH[LWWKH(8+RZHYHU
what the UK’s relationship with the EU would look like
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could be one of a number of scenarios that will affect
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Although the withdrawal mechanism is included in
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to predict as there is no precedent in the international
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period or a mutual recognition process to avoid
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Markets Union (CMU) would be discontinued.
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AIMA contact: Enrique Clemente (eclemente@
aima.org)
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working group which AIMA has formed are assessing
potential impact on members and considering a
response to the concept paper.
AIMA contact: Kher Sheng Lee (kslee@aima.org)
AIMA Journal Q1 2016
23
SHAPING
OUR FUTURE
AIMA Global Policy &
Regulatory Forum 2016
18
MAY
2016
VENUE
TIME
Lancaster Hotel
Lancaster Terrace
London, W22TY
09:00 - 17:00
Please join us for AIMA’s 2016 Global Policy and Regulatory Forum, which will take place in
London. Providing you with a greater understanding of the key policy themes that will impact
the evolution of the industry in coming years, the event will feature senior regulators sharing
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networking opportunities.
AIMA members /
Regulators
Non-members
‘early bird’ rate
Non-members
standard rate
Free
£500 + VAT
£750 + VAT
(until 24th March)
(after 24th March)
The Alternative Investment Management Association Limited (AIMA)
2nd Floor, 167 Fleet Street, London, EC4A 2EA. United Kingdom.
Tel: +44 (0)20 7822 8380 | www.aima.org
AIMA events
Forthcoming AIMA events
Canada - AIMA/PRMIA/CAIA Montréal Career Panel
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Canada - 12th Annual AIMA Canada Charity Golf
Tournament
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AIMA Canada Hedge Fund Conference 2016
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For information on these and our other forthcoming
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FEATURED EVENT IN Q2
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AIMA Journal Q1 2016
25
Get Ready,
Investment
Strategies Are
Evolving
Traditional investment strategies
are strained. With shifting
demographics, volatile markets
and low interest rates, the financial
industry is transforming. As diverse
asset classes gain mainstream
appeal,* alternative investment
managers have a powerful
opportunity to deliver innovative
solutions to the market. The
question is: are you ready?
*
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AIMA news
AIMA launches Bermuda
member network
AIMA is to establish a new volunteer network in Bermuda.
AIMA members on the island will be represented by
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supporting committees will seek to boost membership
and support the continued development of Bermuda’s
alternative investment community.
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initiatives locally and globally at a launch event at
the Bermuda National Gallery attended by around 85
professionals on 3 March.
Other speakers at the event included Dr the Hon
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and Enforcement at the Bermuda Monetary Authority;
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the Bermuda Business Development Agency.
Mr Bridgewater said: “We look forward to AIMA
Bermuda becoming the focal point and voice for the
industry in Bermuda. We are keen to increase AIMA’s
activities in Bermuda and will be organising events and
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creating working groups and committees to encourage
participation and collaboration among local AIMA
members and other industry partners.”
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and I very much look forward to collaborating with the
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every region of the globe.”
News in brief
New set of hedge fund director DDQs released
AIMA published a set of Due Diligence Questionnaires (DDQs) for hedge fund directors in March. They were produced
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versions of the new DDQ - an Illustrative Questionnaire for the Due Diligence of Individual Hedge Fund Directors
(Investor Version); an Illustrative Questionnaire for the Due Diligence of Individual Hedge Fund Directors (Manager
Version); and an Illustrative Questionnaire for the Due Diligence of Hedge Fund Boards of Directors. The new DDQs
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the DDQs (members only). A summary is here.
Guide to operational risk management published in Q1
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to Sound Practices for Operational Risk Management focuses on a wide variety of risks that could result in loss from
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VXPPDU\ZKLFKLVDOVRDYDLODEOHWRQRQPHPEHUVFDQEHGRZQORDGHGhere.
AIMA Journal Q1 2016
27
AIMA news
Basel III fundamentally changes
how asset managers are
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V\VWHPVD\V$,0$6SDSHU
Basel III reforms have fundamentally changed how asset
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MRLQWVXUYH\DQGUHSRUW by AIMA and S3 Partners.
The survey of fund managers worldwide found that:
•
•
•
•
•
•
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even split between those who quantify the level of
cost increase as being greater than 10% and below
10%.
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The impact is consistent regardless of a fund
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75% have been asked to change how they do
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67% have had to cut the amount of cash they keep
on their brokers’ balance sheets.
Most alternative asset managers over the last
two years have either maintained or increased
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be four.
Only 20% of fund managers have a clear
understanding of how their prime brokers calculate
their worth in terms of the revenue they provide
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on assets” or RoA. Fewer still have the data
necessary to calculate this themselves.
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and “collateral optimisation”. AIMA and S3 say this
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key terms.
Recommendations
Hedge fund managers can put themselves in a stronger
position to deal with the changing nature of the prime
brokerage relationships. To maintain access to the
AIMA Journal Q1 2016
´JULGµRIÀQDQFLQJPDQDJHWKHLURYHUDOOFRVWRIGRLQJ
EXVLQHVVDQGRSWLPLVHWKHPXWXDOYDOXHRIWKHLUSULPH
brokerage and counterparty relationships within the
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investment managers must increasingly:
•
•
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unbiased data sources.
Use a different set of analytic tools and calculation.
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counterparties are speaking a common language
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effective collateral management activities.
The survey is comprised of 78 alternative asset
managers with combined assets under management
(AUM) of more than $400bn. Respondents ranged
from small single-strategy managers (under $100m of
AUM) to large global multi-strategy managers (over $10
billion of AUM).
To download ‘Accessing the Financial Power Grid:
+HGJH IXQG ÀQDQFLQJ FKDOOHQJHV XQGHU %DVHO ,,, DQG
EH\RQG· FOLFN KHUH www.aima.org/en/documentVXPPDU \LQGH[FIPGRFLG&)%'%'
BB11BB6E401CF7C6
28
MARKET LEADERSHIP
Our Investment Management practice is one of the largest and
most sophisticated global investment management practices,
operating on four continents across Asia, Australia, Europe,
and North America.
Perhaps the best measure of our practice stems from client
perceptions of working with our investment management
team members:
“UNPARALLELED DEPTH AND
BREADTH OF EXPERTISE.”
- The Legal 500 “THEY DO WORK OF TREMENDOUS QUALITY.”
- Chambers USA
“I SIMPLY CANNOT IMAGINE A BETTER
LEGAL TEAM SERVING OUR FUNDS.”
- U.S. News & Best Lawyers
K&L Gates LLP. Global legal counsel across five continents. To learn how we partner with
clients in the investment management and brokerage industries, please visit klgates.com.
From our members
Opportunities in a volatile market
AIMA SPONSORING PARTNER
%\1HLO0DVRQ6HQLRU0DQDJLQJ'LUHFWRU
0DQ*/*
Introduction
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to the year. Equities had been in retreat until midFebruary but have recently rebounded. Despite this
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of the cycle is possible. While we do not view another
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has already dropped 11% and risen 9% this year) and
stock dispersion may continue.
Warren Buffet has been right so many times that his
pronouncements have become platitudes. But with
palpable oscillations between fear and greed on the
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in which investment opportunities may begin to
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conviction ideas for potentially taking advantage of
this volatility.
1)
Merger Arbitrage
M&A (mergers and acquisitions) arbitrage is a strategy
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discrepancies in the stocks of acquirers and targets
undergoing corporate takeovers. 2015 was the best
year for merger and acquisition volumes since the
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are going to be more likely to put their often ample
war chests to work in order to combat volatility with
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price and that which the acquirer has said they will
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continuedŹ
AIMA Journal Q1 2016
30
From our members
20152. Wider spreads can be considered as an indicator
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completed. We see this scepticism as having two causes.
First deals appear to be getting bigger and more legally
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making investors nervy that many proposed mergers
will collapse.
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really engross yourself in the minutiae of the regulatory
landscape associated with these deals then attractive
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Despite staging something of a comeback in recent
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movements that recall the sovereign debt turmoil of
2011 and the credit crisis 2008/9. We believe that price
drops in the recent volatility may have represented
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differences between this panic and previous ones. In
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have raised large amounts of high quality capital whilst
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backed lines of credit that have been put in place since
the Global Financial Crisis (GFC) aim to avert any shortWHUPOLTXLGLW\FULVLV7KHUHDUHRIFRXUVHH[FHSWLRQV²ZH
are hesitant about whether Italian banks have actually
UHFRYHUHG IURP WKH IDOORXW RI DQG ² EXW
why a stable UK lender such as Lloyds should have had
such a white-knuckle ride this year is mysterious to us.
We think there could well be further volatility to come
and future troughs may provide more opportunities.
A space that warrants particular mention is AT1
DGGLWLRQDO WLHU FRQWLQJHQW FRQYHUWLEOH ERQGV
commonly known as CoCos. These instruments sit
between equity and subordinated debt in a bank's
capital structure. They are issued as a source of
additional capital in case the bank hits trouble. At
the February nadir these bonds fell into the 80s on
2
a cash price basis. We believe this was partly due
to technical pressure as daily liquidity income funds
SDQLFVROGRQDQLQGLVFULPLQDWHEDVLV²DWXUQRIHYHQWV
which we believe may be repeated in the near future.
Under such circumstances we feel the asset class could
be considered for selective investment.
&/2V
Two years of low volatility and high prices in the
levered loan market came to a dramatic end at the
start of 2016. Much of the pain has been felt by
FRPSDQLHVDVVRFLDWHGZLWKHQHUJ\PLQLQJDQGXWLOLWLHV
In the chaos we believe there are often instances of
overreaction. Identifying them involves detailed work
around the fundamentals of credit investing: poring
RYHU WKH QXPEHUV UXQQLQJ VWUHVV WHVWV WDONLQJ WR
VWDNHKROGHUVDQGXQGHUWDNLQJLQGHSWKFROODWHUDODQG
documentation reviews.
One potential way of participating in loan market
GLVORFDWLRQVLVWRLQYHVWLQWUDQFKHVRI&/2V²VHFXULWLHV
which reference a pool of underlying levered loans.
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D PDQDJHU ZLWK WKH H[SHUWLVH WR ORRN WKURXJK WR WKH
underlying loans and employ rigorous credit selection
in the construction of their portfolios.
Success in this analysis offers the opportunity of
FDSLWDOLVLQJ RQ D GRXEOH GLVORFDWLRQ ZLWK VWUHVVHG
technically-driven pricing in both the underlying loans
and in the CLO tranches which reference them. There
LV GLVWUHVV LQ WKH PDUNHWSODFH FHUWDLQO\ EXW SULFLQJ
levels have dropped across an entire universe of
VHFXULWLHVLQH[FHVVRIZKDWZHVHHDVEHLQJMXVWLÀHG
by underlying fundamentals. That splashing sound you
can hear? In our opinion it's babies being thrown out
with the bathwater.
'LVWUHVVHG6HFXULWLHV
&RQVLVWHQW ZLWK RWKHU YLHZV H[SUHVVHG LQ WKLV DUWLFOH
we believe that a new distressed cycle has started.
Energy has already been hit hard and could offer
VLJQLÀFDQW SRWHQWLDO LQ RXU YLHZ 7KH VHFWRU DSSHDUV
WREHULFKZLWKDVVHWVWKDWDUHH[SHQVLYHWRUHSOLFDWH
Energy businesses are also often highly operationally
JHDUHG DQG VR LI ERXJKW LQWR DW WKH ULJKW WLPH
attractive returns may potentially be generated in a
normalisation scenario. We think that price stabilisation
over recent weeks may be further supported by supplyVLGH FRQWUDFWLRQV QRWLQJ WKH FDSDFLW\ UHGXFWLRQV LQ
the dry bulk market as evidence of this.
Bloomberg
continuedŹ
AIMA Journal Q1 2016
31
From our members
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will be bolstered by an increasing lack of access to
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which are over-levered and have been limping along in
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that banks would be ever-more capital-constrained
and we believe there may be a reversal of the loose
FUHGLW HQYLURQPHQW HQMR\HG E\ ÀUPV LQ UHFHQW \HDUV
We would not be surprised to reach a position where
only the most credit-worthy companies will be able to
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RWKHUVFRXOGZHOOEHIRUFHGWRUHVWUXFWXUHDQGIXUWKHU
opportunities may arise.
Conclusion
The general theme as we see it is this: the markets
appear to be entering a new phase of the cycle and
the more swiftly investors acknowledge and react
WR WKLV WKH EHWWHU :KLOVW UHFHQW ZHHNV KDYH VHHQ
D SRVLWLYH UHYHUVDO LQ FUHGLW DQG HTXLW\ PDUNHWV ZH
believe volatility is more likely to persist and continue
to produce potential opportunities for investors with
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technical pressures on many in the markets. A clear
head in response to these moments could help
investors to identify situations where fundamental
value is being ignored.
Important Information
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DQGDQ\LQFRPHGHULYHGIURPLWFDQJRGRZQDVZHOODVXSDQG
investors may not get back their original amount invested.
$OWHUQDWLYH LQYHVWPHQWV FDQ LQYROYH VLJQLÀFDQW DGGLWLRQDO
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investors who are willing to bear the higher economic risks
associated.
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investment advisory or any other services. The content is
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nor an investment recommendation or opinion regarding the
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to any individual recipient to whom this material has been
sent.
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are based on current indicators and expectations at the date
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risks and uncertainties that may cause actual results to
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)LQDQFLDO LQGLFHV DUH VKRZQ IRU LOOXVWUDWLYH SXUSRVHV
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PDUNHW GDWD DYDLODEOH DV D SRLQW RI UHIHUHQFH $Q LQGH[
is a statistical measure that shows changes in the economy
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DQG LWV SHUIRUPDQFH GRHV QRW UHÁHFW WKH H[SHQVHV
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cannot be guaranteed.
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AIMA Journal Q1 2016
32
ENTREPRENEURIAL
ASSET MANAGEMENT
INSTITUTIONAL
FRAMEWORK.
Man Group is one of the largest independent alternative investment managers in liquid, alpha investment strategies. With our clients’ needs at
our core, we offer a comprehensive suite of absolute return and long-only funds through our performance-driven investment engines. We believe
that the key to alpha generation from capital markets is to provide an institutional framework for our entrepreneurial asset managers to operate in,
allowing them to focus solely on alpha generation and research.
www.man.com
Opinions expressed are those of the author and may not be shared by all personnel of Man Group plc (‘Man’). These opinions are subject to change without notice, are for information
purposes only and do not constitute an offer or invitation to make an investment in any financial instrument or in any product to which any member of Man’s group of companies provides
investment advisory or any other services. Any forward-looking statements speak only as of the date on which they are made and are subject to risks and uncertainties that may cause
actual results to differ materially from those contained in the statements. Unless stated otherwise this information is communicated by Man Investments AG which is regulated by the
Swiss Financial Market Authority FINMA. In Australia, communicated by Man Investments Australia Limited ABN 47 002 747 480 AFSL 240581, which is regulated by the Australian
Securities & Investments Commission (ASIC). This information has been prepared without taking into account anyone’s objectives, financial situation or needs. In the United States this
material is presented by Man Investments Inc. (‘Man Investments’). Man Investments is registered as a broker-dealer with the US Securities and Exchange Commission (‘SEC’) and is
a member of the Financial Industry Regulatory Authority (‘FINRA’). Man Investments is also a member of Securities Investor Protection Corporation (‘SIPC’). Man Investments is a wholly
owned subsidiary of Man Group plc. (‘Man Group’). The registrations and memberships in no way imply that the SEC, FINRA or SIPC have endorsed Man Investments. In the US,
Man Investments can be contacted at 452 Fifth Avenue, 27th floor, New York, NY 10018, Telephone: (212) 649-6600. P/16/0466/GL/DIR/AO
From our members
1RWGLJLWDOQRWHPRWLRQDOQRWDOLJQHG²ZK\ORQJRQO\IXQGVDUH
eating your lunch
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The hedge fund sector has done well to recover its
UHSXWDWLRQDOLWWOHLQUHFHQW\HDUVEHQHÀWWLQJLQSDUW
from managers that have re-invented themselves as
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KRZHYHU SDUWLFXODUO\ DV WKH ORQJRQO\ FRPSHWLWLRQ
have been in that market longer.
The good news is that institutional investors are
positively disposed towards alternative strategies at
SUHVHQWDWOHDVWDFFRUGLQJWRUHVHDUFKIURP'HXWVFKH
Bank that says that investors are likely to increase
DOORFDWLRQV %XW LQ WKLV LQWHUPHGLDWHG FRQVXOWDQW
GULYHQ HQYLURQPHQW WKLV ZLOO EHQHÀW D IHZ PDQDJHUV
UXQQLQJ D VSHFLÀF VHW RI VWUDWHJLHV PRUH WKDQ WKH
industry overall. There are a few other challenges
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RPLQRXV UXPEOLQJV IURP WKH 86 DQG WKH VLWXDWLRQ LQ
WKH8.DQG(8DOVRVWDQGVWREHQHÀWWKRVHSROLWLFLDQV
ZLWK VLPLODUO\ H[WUHPH YLHZV +RZ SRVLWLYH LQYHVWRU
sentiment stands up to any crisis in bond fund liquidity
is hopefully a problem we won’t have to face.
Investor sentiment is not a perfect gauge of reputation
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VNLWWLVK3DUWRIWKHLVVXHLV,WKLQNWKDWZKLOHPDQDJHUV
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roads into the institutional markets (and many have
taken the logical corollary of launching long-only funds
DVZHOOUHODWLRQVKLSVDUHVWLOO\RXQJDQGVNLQGHHS
The descriptive transition from ‘hedge fund’ to
‘institutional asset manager’ is never clearer than in
how these managers describe themselves online. We
VXUYH\HG WKH ODUJHVW KHGJH IXQG ÀUPV1 and found
that virtually none use the term ‘hedge fund’ in how
they describe themselves online and those few who
GR DUH RIWHQ EXVLQHVVHV RZQHG E\ EDQNV SUHVXPDEO\
for whom the association with alternative strategies
is weakest. Institutional investors may like ‘alternative
strategies’ but it seems they don’t want to invest in
‘hedge funds’.
1
As ranked by Institutional Investor’s Alpha
$V WKH PDUNHW IRU DOWHUQDWLYH VWUDWHJLHV HYROYHV
particularly through the use of liquid alternative
YHKLFOHV VR LW EHFRPHV PRUH LPSRUWDQW WR EH DEOH
WR HQJDJH ZLWK VWDNHKROGHUV RQ WKHLU WHUPV ² WR
GHPRQVWUDWH WKDW H[WUD OD\HU RI XQGHUVWDQGLQJ 7KH
research highlighted above shows that whilst hedge
IXQG ÀUPV KDYH PRGHUDWHG WKHLU GHVFULSWRUV WKH\
DUHVWLOOHQJDJLQJRQDPRQROLWKLFEDVLVZKHUHDVWKHLU
competitors from the long-only world are much better
at describing themselves in a way which is aligned to
their client interests. Being client-centric does not
make you more of an asset gatherer than an asset
PDQDJHU EXW LW PLJKW PDNH \RX PRUH RI DQ DVVHW
retainer.
,VWKHUHUHDOO\DFRUUHODWLRQEHWZHHQWKHZRUGVÀUPVXVH
to describe themselves and their attitude to clients? Of
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DZHEVLWHWKDWGHVSLWHFRQWDLQLQJDORWRIGHSWKUHDOO\
GLGQ·WVHHPFOLHQWFHQWULFDWDOO²WKHPHVVDJHLWJDYH
FRXOGEHEHVWVXPPHGXS¶WKLVLVZKRZHDUHWDNHLW
RU OHDYH LW· )XQQLO\ HQRXJK D IHZ ZHHNV ODWHU WKH\
announced their decision to withdraw from managing
H[WHUQDOPRQH\«
7KH GLJLWDO HTXDWLRQ LV LPSRUWDQW 0RVW RI WKH PDMRU
institutional asset managers formerly known as hedge
funds have moved beyond simple landing pages for all
but clients to provide a healthy level of detail about
their business. The one or two that haven’t done so
do at least have LinkedIn pages or similar which give
DVXIÀFLHQWRYHUYLHZRIWKHFRPSDQ\SDUWLFXODUO\IRU
potential recruits.
This latter point is not to be underestimated. The rise of
employer review sites such as Glassdoor.com does more
than provide disgruntled former employees the chance
to vent their spleen online; it’s also a useful source of
information for manager selectors. A bad review on
such a site isn’t likely to be a deal breaker (no-one
VKRXOGHYHUWDNHWKHPDWIDFHYDOXHEXWLWFDQEHD
XVHIXOVRXUFHRIGLIÀFXOWTXHVWLRQVWRDVN6RFLDOPHGLD
DQGWKHGLJLWDOZRUOGSURYLGHDQH[FHOOHQWFKDQQHOWR
engage and reassure clients once you navigate the
UHJXODWRU\ LVVXHV EXW DUH ODUJHO\ XQGHUXWLOLVHG 7KLV
continuedŹ
AIMA Journal Q1 2016
34
From our members
LVPXFKOHVVWKHFDVHIRUWKRVHORQJRQO\ÀUPVZKR·YH
EHHQZRUNLQJWKHLQVWLWXWLRQDOPDUNHWIRUORQJHUDQG
it’s time that the gap was closed.
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marketing approach from the asset management
LQGXVWU\ DSSHDUV UHVROXWHO\ VWXFN LQ WKH V ²
PDUNHWLQJDQGSURPRWLRQLVVHHQDVMXVWDVDOHVDLG7KH
ZRUOGKDVPRYHGRQDQGWKHLPSRUWDQFHRIDQHPRWLRQDO
FRQQHFWLRQZLWKDXGLHQFHVUHPDLQVLPSRUWDQW²DQGD
vital counter-balance to the ever increasing emphasis
RQGLJLWDO$JDLQWKH¶HPRWLRQDO·DSSURDFKFDQVHHP
counter-intuitive to the investment world as it moves
DZD\IURPWKHWUDGLWLRQDOSHUIRUPDQFHPHVVDJH²EXW
given that few managers achieve really consistent
RXWSHUIRUPDQFH IRU DQ\ SHULRG RI WLPH VXUHO\ WKDW·V
a good thing.
davidm@lansons.com
www.lansons.com
AIMA Journal Q1 2016
35
Global Fund Services
A global partner in administration and operations
outsourcing services
Fund View: One platform, three powerful views
Fund View is our enhanced operational management system built exclusively for managing hedge fund
and private equity fund middle and back office operations, fund accounting, and investor and regulatory
activities.
Composed of three modules: Operations View, Accounting View, and Investor View, Fund View provides
COOs, CFOs, CCOs, investor relations professionals and other designated users with a comprehensive webbased platform to monitor and analyze operational activities, measure and mitigate operational risk, and
maintain and access fund and investor information on a real-time intraday basis. Fund View also provides
critical information that can be leveraged by fund directors, operational due diligence analysts, auditors,
and other authorized third parties.
Fund View provides full lifecycle transparency and reporting across all functions and activities outsourced
to Wells Fargo Global Fund Services:
· Operations View: middle and back office activities such as trade capture, confirmation, settlement, cash
and collateral management, asset servicing and P&L calculations
· Accounting View: activities related to NAV calculation and financial statement processing
· Investor View: subscription/redemption and capital call/distribution, KYC/AML, and investor accounting
and servicing activities
Wells Fargo Global Fund Services offers comprehensive fund administration and operations outsourcing
services for investment managers, family offices, endowments P]S foundations, and pension funds worldwide.
For more information contact
claire.e.murphy@wellsfargo.com or 917-260-1532
or visit wellsfargo.com/fundservices
Wells Fargo Global Fund Services (“WFGFS”) refers to the fund administration, middle-office and operations services to hedge funds and other alternative investment firms provided by Wells Fargo & Co. and its affiliates. WFGFS (UK) Limited is regulated by
the Financial Conduct Authority, and WFGFS (Ireland) Limited is regulated by the Central Bank of Ireland.
Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of NYSE, FINRA, NFA and SIPC, Wells Fargo
Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts.
© 2015 Wells Fargo Securities, LLC. All rights reserved. WCS-1368101
From our members
Implementation considerations
within discretionary global
macro
AIMA SPONSORING PARTNER
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discretionary global macro (“macro”) managers cannot
be easily categorised into homogeneous groups. Macro
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investment horizon and structuring sophistication.
The focus for a particular manager will of course
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portfolio managers and their team.
The result is that the portfolio manager will approach
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other hedge fund strategies and market betas. As a
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term strategic allocation within investors’ portfolios.
,Q ZKDW IROORZV ZH GLVFXVV WKH LPSOHPHQWDWLRQ
options available within macro to investors. We start
with DM macro and analyse how this sub-strategy has
been impacted by the market environment in the
past few years. We then argue why the outlook for
DM macro appears to be improving and outline how
the opportunity set may evolve. Later we discuss
emerging market (EM) macro and the evolution of the
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FRQVLGHULQJ KRZ IRU KLJKHU JRYHUQDQFH LQYHVWRUV DQ
allocation to EM macro could supplement that of DM
global macro.
The case for DM macro
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managers warrant a long-term strategic allocation
within investors’ portfolios. The strategy provides
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RWKHU VWUDWHJLHV DQG DVVHW FODVVHV LW WHQGV WR SURÀW
in times of rising uncertainty and volatility (due to a
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of managers with a DM focus possessing strong and long
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in DM markets create an attractive opportunity set by
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drivers change in real-time and macro-economic
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of investor appetite for such strategies historically
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DM managers were well established and large and
presented much less business risk than EM managers
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+RZHYHU '0 PDFUR KDV QRW IDUHG WRR ZHOO LQ
recent years. Part of the reason for the strategy’s
underwhelming returns has been the protracted
period of quantitative easing and coordinated central
bank policy setting across the developed world. This
has vastly reduced the opportunity set by anchoring
current interest rates close to zero and subsequently
reducing uncertainty in the interest-rate-futures
market. This has weighed on performance through the
UHGXFWLRQLQGLUHFWLRQDODQGDUELWUDJHRSSRUWXQLWLHVDV
well as the payoff to trades due to supressed volatility.
,W ZDV GLIÀFXOW WR SUHGLFW WKH H[WHQGHG GXUDWLRQ RI
FHQWUDOEDQNFRRUGLQDWLRQ+RZHYHUZHDUHQRZVHHLQJ
DVLJQLÀFDQWLPSURYHPHQWLQWKHRSSRUWXQLW\VHWLQWKH
IRUPRIVRFDOOHGSROLF\GLYHUJHQFH,QGHHGWKH)HGHUDO
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European Central Bank (ECB) defy the lower bound for
interest rates. These opposing monetary policies have
created an attractive divergence trade for DM macro
PDQDJHUVWRFDSWXUHDVLWGHYHORSV)XUWKHUPRUHWKLV
GLYHUJHQFHRIPRQHWDU\SROLF\LVXQOLNHO\WREHVPRRWK
continuedŹ
AIMA Journal Q1 2016
37
From our members
despite attempts to provide forward guidance- which
currently many market participants feel resembles
IRUZDUG GHFHSWLRQ. This will further enhance the
opportunities for DM macro managers who should be
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broad tool kit across asset classes.
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be improving as the opportunity set evolves. With the
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not have been the best decision over the last three
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The case for EM macro
An allocation to EM macro could also be considered
by high governance investors as a supplement to their
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markets are becoming increasingly institutionalised
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PDFUR VWUDWHJ\ VLQFH WKLV DOORZV IRU WKH ÁH[LELOLW\ WR
react quickly as market drivers change in real time
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broadening and deepening of capital markets allows
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that both will suffer from the same headwinds such
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capital chasing the opportunities.
who is immersed in these economies and possesses
the requisite skill set.
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macro
implementation considerations
manager
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their team. So simply having one DM focused manager
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to all emerging markets.
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macro could supplement an allocation to DM global
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macro managers possess very different skill sets and
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on their respective opportunity sets. In times of
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the EM macro funds can provide alternative return
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US combined with the ECB and BOJ’s ongoing battle
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MRVKXDSDOPHU#ZLOOLVWRZHUVZDWVRQFRP
www.willistowerswatson.com
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regulations. Therefore we feel it is clear that having
a specialist immersed in these economies is critical in
order to capitalise on the alpha opportunities and to
obtain an edge.
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generally desynchronised business cycles and policy
frameworks. However investing in this opportunity
set comes with many issues that need to be
understood so as to mitigate risk and capitalise on
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AIMA Journal Q1 2016
38
The HedgeFund Intelligence
European Summit 2016
25-27 April 2016
Palais de la Bourse, Paris
10%
discount available for
AIMA members
Visit our website
for more
information
Europe’s leading alternative investment
event that brings together the global hedge
fund business for high-level discussions,
insights and networking
For more information contact Simon Miley
T: +44 (0) 20 7556 6033 E: events@hedgefundintelligence.com
We are delighted to invite institutional investors to attend free of charge
www.hfieuropeansummit.com
From our members
MiFID II and paying for research:
To bundle or unbundle? That is no
longer the question
AIMA SPONSORING PARTNER
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Bloomberg Tradebook
The European Commission’s (EC) draft of MiFID II
GHOHJDWHG DFWV ZKLFK ZDV OHDNHG LQ 'HFHPEHU caused a stir regarding the use of commission sharing
arrangements (CSAs) in paying for research going
IRUZDUG :KLOH WKH ÀQDO GUDIWV DUH QRW H[SHFWHG WR
be released until later this year and each individual
national regulator will still need to make its own
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VSHFXODWLRQWKDW&6$VPD\EHDOORZHGWRFRH[LVWZLWK
research payment accounts (RPAs) in a post MiFID II
environment.
Regulators are seeking greater transparency throughout
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the costs of trading activity from research spend. The
concept of unbundling is now very much on the table.
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EHWZHHQ&6$V53$VDQGKRZEXQGOLQJYVXQEXQGOLQJ
works in practice.
A CSA breaks down the commission a buy-side
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component and a distinct research (CSA) component.
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with its brokers to pay for research from a provider
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3ULRU WR &6$V DQ\ SDUWLFXODU SLHFH RI UHVHDUFK GLG
QRWQHFHVVDULO\KDYHDQDEVROXWHSULFH)RUH[DPSOH
LI FRPPLVVLRQ UDWHV UHPDLQHG XQFKDQJHG EXW D ÀUP
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they would pay 50% more for the same research
service.
MiFID II has proposed the creation of RPAs ZKLFK
ZRXOG DOORZ ÀUPV WR VHW DQ DEVROXWH PRQHWDU\
budget to pay for their research to help divorce the
relationship between trading activity and research
spend. Reviewing the language that ESMA and the EC
KDYHXVHGWRGHVFULEHDQ53$LWLVSRVVLEOHWRFRQFOXGH
that an RPA is merely an enhanced CSA. RPAs could
also be interpreted as separate accounts.
&XUUHQWO\ EX\VLGH ÀUPV KDYH VHYHUDO ZD\V WR SD\
for research—depending on their approach to the
“unbundling” of the relationship with their broker.
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commission to its broker and essentially receives its
research as an add-on. Regulators are looking to bring
PRUH WUDQVSDUHQF\ WR WKLV SURFHVV VLQFH EXQGOHG
commission and research spend do not provide clarity
on the actual cost of the research.
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LWV H[HFXWLRQ FRPPLVVLRQV IURP LWV UHVHDUFK VSHQG ,W
will generally use CSAs or other mechanisms to manage
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build up a research “pot” during the early part of a
\HDUDQGWKHQVZLWFKWR´H[HFXWLRQRQO\µFRPPLVVLRQ
rates once an acceptable research budget has been
HVWDEOLVKHG2WKHUEX\VLGHÀUPVVHWXS&6$DFFRXQWV
ZLWKDVPDQ\RIWKHLUH[HFXWLQJEURNHUVDVSRVVLEOHLQ
RUGHUWRVDWLVI\WKHLURZQOLTXLGLW\RU´EHVWH[HFXWLRQµ
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the various options available.
We recently conducted a survey of over 100 European
buy-side clients to gauge market sentiment around
some of these issues. Of those respondents whose
ÀUPVSD\IRUUHVHDUFKDUHSUHVHQWO\SD\LQJZLWK
bundled commissions VRPHWKLQJ WKDW ZLOO QRW OLNHO\
be possible once MiFID II is implemented. It will be
LQWHUHVWLQJ WR VHH KRZ WKHVH ÀUPV DGDSW WKH\ FRXOG
LQVWLWXWH &6$V RU 53$V SD\ GLUHFWO\ IURP WKHLU RZQ
UHVRXUFHV RU SRVVLEO\ VWRS SD\LQJ IRU UHVHDUFK DOO
together. DUH SD\LQJ IRU UHVHDUFK XVLQJ PDLQO\
CSAsDQGKDYHWKHUHIRUHDOUHDG\PDGHVWULGHVWRZDUG
continuedŹ
AIMA Journal Q1 2016
40
From our members
XQEXQGOLQJ²D VWHS FORVHU WR ZKDW WKH UHJXODWRUV DUH
looking for.
When asked if their interpretation of the MiFID II drafts
mean that research payment accounts will allow for
&6$V D PDMRULW\ RI UHVSRQGHQWV ³ ³ GLGQ·W
know. This underscores the level of uncertainty in the
market and also the reluctance to make decisions until
PRUH FODULW\ LV RIIHUHG RQ WKH ÀQDO UHOHDVH KDYH
not considered how they will pay for research once the
new regulation is implemented.
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EDVHG ÀUPV ZKHUH &6$V KDYH EHHQ LQ SODFH VLQFH
7KURXJKRXW PXFK RI FRQWLQHQWDO (XURSH ORFDO
UHJXODWRUV VWLOO GR QRW HQGRUVH &6$V VR EXQGOHG
commissions are much more common. Despite the
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EHQHÀWV RI WKRURXJKO\ EXGJHWLQJ DQG DFFRXQWLQJ IRU
their research spend before the regulations come into
force. Irrespective of whether CSAs do eventually gain
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DFFRXQWDELOLW\DQGDWWULEXWLRQLQVRPHZD\$GGLWLRQDOO\
there are savings to be made. With the microscope on
buy-side research spend and a movement away from
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on research to decrease. 80% of our survey respondents
DJUHHGH[SHFWLQJWKHLUWRWDODPRXQWSDLGIRUUHVHDUFK
to either stay the same or decrease.
:LWK DOO WKH DERYH IDFWRUV LQ PLQG LQYHVWPHQW
managers will need to start evaluating budgeting tools
that can help them meet their research transparency
requirements. Firms will also need clear audit trails and
the ability to provide full disclosure to their end-clients
in order to demonstrate how they are staying MiFID IIcompliant. Further attribution and accountability are
the underlying themes of the new regulation. Tools
that help investment managers in that process will be
necessary moving forward.
ssteinmetz1@bloomberg.net
aezekiel2@bloomberg.net
AIMA Journal Q1 2016
41
The Pulse
of Fintech,
2015 in
Review
Global Analysis of Fintech
Venture Funding
March 9, 2016
kpmg.com/fintech
© 2016 KPMG International Cooperative (“KPMG International”). KPMG International
provides no client services and is a Swiss entity with which the independent member
firms of the KPMG network are affiliated.
From our members
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required for hedge fund managers?
AIMA SPONSORING PARTNER
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A new European regulation has come into force which
will be important for EU and third country hedge funds
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involve the reuse of collateral.
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6)75DVLWLVNQRZQFDPHLQWRIRUFHLQ-DQXDU\
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This article focuses on the key requirements for hedge
fund managers and highlights some of the issues that
need to be addressed by the market as it moves
towards implementation.
SFTR requirements
The SFTR imposes requirements in three keys areas:
•
•
•
In relation to the re-use of collateral received
through a security or title transfer collateral
arrangement;
Disclosure to investor requirements for managers
of UCITS and AIFs;
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following the model in EMIR.
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LV QRW UHVWULFWHG WR VHFXULWLHV ÀQDQFLQJ WUDQVDFWLRQV
as it also applies in some instances to commodities
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any transaction where collateral is received under
securities or title transfer collateral arrangements.
This is because the scope of the three key
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different parties.
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give the scope requirements of the SFTR careful
consideration.
SFTR highlights
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on the reuse of securities collateral
Disclosure requirements on the use of SFTs
and total return swaps by fund managers
to fund investors
New requirements to report SFTs to a
trade repository by T+1
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counterparties and fund managers
Applies to a broad range of transactions in
DGGLWLRQ WR 6)7V ² GHULYDWLYHV FROODWHUDO
total return swaps and some commodities
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Phased
implementation
of
most
requirements
Some requirements (e.g. record-keeping
and pre-contractual disclosure for new
funds) apply from 12 January 2016
Disclosure to investor requirements (Article
13 and 14)
The SFTR requires EU authorised managers of UCITS
and AIFs to make disclosures with respect to SFTs
and total return swaps. Managers must make detailed
disclosure through:
• Periodic reports: including disclosure of certain
SUHVFULEHG LQIRUPDWLRQ LQ WKH VL[ PRQWKO\ DQG
annual reports required under the UCITS Directive
or the annual report required under the AIFMD;
• Pre-contract disclosure: including disclosure of
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as required under the UCITS Directive or relevant
pre-contractual/offering documentation required
under the AIFMD.
continuedŹ
AIMA Journal Q1 2016
43
From our members
Managers already have to comply with the precontractual requirements in respect of funds
FRQVWLWXWHGDIWHU-DQXDU\ZKLFKZDVWKHGD\
WKH6)75FDPHLQWRIRUFH)XQGVDOUHDG\LQH[LVWHQFH
do not have to comply until 13 July 2017 because of
the transitional provisions. For the periodic disclosure
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QHZDQGH[LVWLQJIXQGVVRPDQDJHUVZLOOKDYHXQWLO
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start thinking about those requirements now to ensure
that they are capturing the required information for
the coming year.
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FRQFHUQ WKH SUHFRQWUDFWXDO GLVFORVXUH UHTXLUHPHQWV
as they already apply for 'new' funds. Questions have
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LQ SDUWLFXODU ZKHWKHU QHZ VXEIXQGV LQ DQ H[LVWLQJ
umbrella structure would be able to take advantage of
the grandfathering provisions.
It appears that national regulators have different views
on this. It is reported that the current view of the UK
FCA is that the pre-contractual disclosure (prospectus)
requirements in article 14 apply to all new sub-funds
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ZKHUHDV RWKHU UHJXODWRUV IRU H[DPSOH WKH &66) LQ
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before the SFTR came into force will be grandfathered.
Managers have also been considering the level of
detail that has to be included in pre-contractual
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no indication of the level of detail required. ESMA
may develop RTS in respect of periodical reports and
pre-contractual disclosure by managers of UCITS and
$,)V EXW QR WLPHOLQH LV VSHFLÀHG IRU WKHVH DV WKH\
are optional. These means that managers will need to
reach a view on an appropriate level of detail and it
ZRXOGEHEHQHÀFLDOIRUWKHPDUNHWWRFRPHXSZLWKD
consistent approach to this.
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as collateral under a security or title transfer collateral
arrangement only if the disclosure and consent
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FRQGLWLRQV DUH VDWLVÀHG VR WKDW D SDUW\ KDV WKH ULJKW
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SFTR also stipulates additional conditions which apply
WR WKH H[HUFLVH RI DQ\ ULJKW RI UHXVH QDPHO\ WKDW
the reuse must be undertaken in accordance with the
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instruments received under a collateral arrangement
must be transferred from the account of the providing
counterparty.
The requirements on reuse of collateral in Article 15
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any 'undertaking' established in the EU or in a third
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The requirements apply to counterparties established
in the EU even if they are acting through a branch
outside the EU.
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FRXQWHUSDUWLHVEXWRQO\LIWKH\DUHUHFHLYLQJFROODWHUDO
from counterparties established in the EU or if the
non-EU counterparty is acting through a branch in the
EU. Also notable the scope of the reuse provisions
LV ZLGHU WKDQ MXVW 6)7V DV WKH\ DSSO\ WR WKH UHXVH
RIVHFXULWLHVDQGRWKHUÀQDQFLDOLQVWUXPHQWVSURYLGHG
as collateral under all security and title transfer
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requirements will not apply to members of the
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not apply to both sides of the trade as counterparties
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comply with the reuse requirements.
,QRUGHUWRJLYHWKHPDUNHWWLPHWRSUHSDUHWKHUHXVH
UHTXLUHPHQWV ZLOO WDNH HIIHFW VL[ PRQWKV DIWHU WKH
6)75FRPHVLQWRIRUFHRQ-XO\+RZHYHUWKH
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DOVR DSSO\ WR FROODWHUDO DUUDQJHPHQWV H[LVWLQJ RQ WKH
date the reuse requirements take effect.
The SFTR reuse requirements will impact hedge funds
e.g. through their repo activity or prime brokerage
arrangements. The main focus for the market now is on
ensuring that there is adequate disclosure to providing
FRXQWHUSDUWLHVDVWKHUHTXLUHPHQWVVHHPOLNHO\WRJR
EH\RQGH[LVWLQJGLVFORVXUHV,QGXVWU\DVVRFLDWLRQVKDYH
collaborated to prepare market standard disclosures
ZKLFKZRXOGEHVHQWWRH[LVWLQJFRXQWHUSDUWLHVEHIRUH
the new rules come into effect and incorporated into
new arrangements going forward. Aside from the
ZRUGLQJ RI WKH GLVFORVXUHV WKH PDUNHW LV WKLQNLQJ
continuedŹ
AIMA Journal Q1 2016
44
From our members
DERXWWKHORJLVWLFDOH[HUFLVHRIPDNLQJWKHGLVFORVXUHV
DFKDOOHQJHLQLWVHOIDQGLVDLPLQJIRUDVDFRQVLVWHQW
approach as possible across the market.
Reporting to trade repositories (Article 4)
The SFTR reporting regime generally follows the model
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ERWK SDUWLHV WR D WUDGH ZKHWKHU WKH\ DUH ÀQDQFLDO
RU QRQÀQDQFLDO FRXQWHUSDUWLHV ZLOO KDYH WR UHSRUW
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recognised trade repository by T+1 and must maintain
UHFRUGV RI 6)7V IRU DW OHDVW ÀYH \HDUV IROORZLQJ WKH
termination of the transaction. UCITS managers and
AIFMs will have to report on behalf of their funds.
The reporting requirements apply to counterparties
HVWDEOLVKHG LQ WKH (8 LQFOXGLQJ WKHLU EUDQFKHV
RXWVLGHWKH(8DQGWR(8EUDQFKHVRIWKLUGFRXQWU\
FRXQWHUSDUWLHV7KHUHLVKRZHYHUVRPHXQFHUWDLQW\
as to the application of the reporting requirements
WR$,)VLQSDUWLFXODUZKHUHDQRQ(8$,)LVPDQDJHG
by an EU AIFM. It seems likely that these queries
will be resolved by FAQs in the two to three years
before the reporting obligation would apply to these
HQWLWLHV(60$LVH[SHFWHGWRFRQVXOWRQWKHUHSRUWLQJ
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more information on the reporting requirements may
be forthcoming shortly.
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period of between 12 and 21 months after the detailed
rules (known as Regulatory Technical Standards or
RTS) for trade reporting come into force and thus
the full requirements are known. The length of the
transitional period will vary depending on the type of
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PRQWKV1RQÀQDQFLDOFRXQWHUSDUWLHVZLOOQRWQHHGWR
begin reporting their trades until 21 months after the
relevant RTS comes into force.
reported to the trade repository and further detail will
be provided in the RTS and ITS to be adopted under the
SFTR. These will need to ensure consistency with the
reporting regime under EMIR and internationally agreed
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for Global Securities Financing Data Collection and
Aggregation published by the FSB (November 2015).
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such as the ECB are introducing SFT reporting regimes
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a degree. This is challenging from an implementation
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the industry is working with regulators to develop
a consistent approach to the interpretation of the
requirements and the collection of data in order to
comply with as little duplication of effort as possible.
Implementation
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UHIRUPV PRVW QRWDEO\ 0L),' WKH 6)75 QRQHWKHOHVV
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which may require systems build and establishing
internal processes e.g. to capture all new in-scope
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such as those for the collateral re-use disclosures and
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PDUNHW VR HIIRUWV E\ WKH WUDGH DVVRFLDWLRQV WR ZRUN
collaboratively on this are to be welcomed. In some
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guidance will be required before the issues can be
fully resolved. It is hoped that further clarity will be
provided as the Level 2 process unfolds.
owen.lysak@cliffordchance.com
MDFTXHOLQHMRQHV#FOLIIRUGFKDQFHFRP
www.cliffordchance.com
,Q FRQWUDVW WR WKH UHSRUWLQJ UHTXLUHPHQW WKHUH ZLOO
be no grace period for record-keeping. Counterparties
must comply with the record-keeping obligation from
12 January 2016.This may be onerous for entities that
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though the SFTR does not specify a particular form or
content requirements for these records.
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are a number of issues around SFT reporting. Much of
these relate to overlapping reporting requirements.
The SFTR sets out the information that must be
AIMA Journal Q1 2016
45
More Tier 1 rankings than any other firm
“They are excellent to work with; the senior people are very
hands-on. I appreciate their willingness to thrash out ideas and
come up with solutions that work.”
Chambers Global 2015: Investment Funds
We also advise funds on direct lending, acquisitions and disposals across the M&A, private equity, real estate and
infrastructure sectors, accessing financing, derivatives and structured products transactions, as well as regulatory, tax,
employment and litigation advice.
We have dedicated funds and investment management resource across key jurisdictions, including Amsterdam, Beijing,
Frankfurt, Hong Kong, London, Luxembourg, Madrid, New York, Paris, Shanghai, Singapore, Sydney and Tokyo.
Key Contacts
Mark Shipman
Global Head of Funds &
Investment Management
T: +852 2825 8992
E: mark.shipman@
cliffordchance.com
Cliff Cone
Partner, New York
T: +1 212 878 3180
E: clifford.cone@
cliffordchance.com
Simon Crown
Partner, London
T: +44 20 7006 2944
E: simon.crown@
cliffordchance.com
Paul Van den Abeele
Partner, Luxembourg
T: +352 485050 478
E: paul.vandenabeele@
cliffordchance.com
Clifford Chance shares a global commitment to dignity, diversity and inclusiveness.
www.cliffordchance.com
Clifford Chance LLP
Our funds and investment management group is recognised as an industry leader with unequalled experience in all
aspects of fund establishment and operation, including structuring and formation, advising on marketing and investor
negotiations, advisor remuneration, tax structuring (including carried interest arrangements), regulatory advisory, custody
and back-office services and listing of fund vehicles. We maintain involvement with fund managers throughout the lifecycle
of their funds, advising on operational issues, restructurings and exits and working closely with our leading private equity
transactional and acquisition finance teams. We are experienced in dealing with large global investors and are adept at
negotiating with these investors on behalf of our clients.
From our members
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The rules across Europe requiring disclosure by
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undergoing the most comprehensive set of revisions
since the Transparency Directive came into force in
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are likely to need to increase their focus on this area
while member states switch over to the new disclosure
requirements and on an on-going basis as a result of
the greater reach of the rules and heightened sanctions
when things go wrong.
Background
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together with implementing Commission Directive
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shareholding disclosures across Europe since it
came into force in member states in 2007. The TD
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are traded on an EU regulated market and establishing
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It became increasingly apparent that these twin
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variations in member states’ rules from the outset
resulting from the way member states transposed the
provisions of the TD into national law and elected to
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to the creation of new instruments that gave investors
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was never contemplated by the TD. A number of highSURÀOHFDVHVKLJKOLJKWHGWKDWFDVKVHWWOHGLQVWUXPHQWV
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resulting in market abuse and a false and misleading
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implemented piecemeal changes to their national
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shares. It also introduces other important changes
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disclosure rules across Europe [VHH ER[ RQ IROORZLQJ
page].
Financial instruments with similar economic
effect
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positions in (1) voting shares of issuers which are
admitted to trading on an EU regulated market (“inVFRSH VKDUHVµ DQG ÀQDQFLDO LQVWUXPHQWV ZKLFK
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whether cash-settled or physically-settled1. Both the
TDA and ESMA provide lists of instruments that may
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with similar economic effect. Although these lists
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is not on the lists may nevertheless be disclosable if its
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included on the lists might not be disclosable. In
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instrument into which a particular instrument may
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by instrument type across the three categories of
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acquire and instruments with similar economic effect
- as well as distinguishing between cash-settled and
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To determine whether an instrument is a disclosable
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Closing the loophole
The Amending Transparency Directive (2013/50/EU)
(TDA) seeks to close off this loophole across all member
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1
Article 13(1)(b) of the amended TD
2
Articles 13(1) and 13a of the amended TD
continuedŹ
AIMA Journal Q1 2016
47
From our members
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change
Day
Position of
direct/indirect
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should start by considering whether the instrument
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gives an entitlement to acquire3. If the answer is
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conditions the satisfaction of which are outside the
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the holder should then go on to consider whether
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economic effect4.
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member states currently require aggregation of shares
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assess their holdings post-TDA to see if their positions
trip an aggregated threshold. ESMA has produced a
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page]. The number of voting rights attributable to
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using the full notional amount of shares underlying the
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continuedŹ
AIMA Journal Q1 2016
48
From our members
Other Key Changes
•
•
•
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Mandatory availability of trading book
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(previously trading book was not available
in all member states ). ESMA’s Final Report
on draft Regulatory Technical Standards
contains very helpful commentary on
horizontal and vertical aggregation rules
for both the trading book and market
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ESMA did not consider itself mandated by
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double function - the initial purpose it was
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in Germany and the UK have been removed
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disaggregation rules for parents of
management companies and investment
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effect.
Heightened sanctions: Sanctions for breach
of the shareholding disclosure rules have
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up to EUR 10 million or 5% of total annual
turnover; or up to twice the amounts of
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rights in the most serious cases.
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instruments it may have in respect of the same
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triggered if either the 1% or 20% threshold is met. There
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referenced to a series of baskets/indices which are
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thresholds if aggregated.
Securities lending transactions
A lender who transfers securities to a borrower with
the right to reacquire on maturity the loaned securities
has a disclosable entitlement to acquire shares under
Article 13(1)(a) of the amended TD. This is not new.
The original TD position captured rights of recall as
entitlements to acquire but their treatment was
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disclosure position across Europe. ESMA acknowledged
the resulting uncertainty regarding regulatory practices
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Technical Standards6 and the TDA includes the right
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Although the deadline for transposition of the TDA
by member states into national law has passed7
implementation of the new disclosure rules by member
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ESMA’s Final Report on draft Regulatory Technical Standards
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(whether actively or passively managed) are now
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Commission Delegated Regulation (EU) 2015/761 despite the nontransposition of the TDA into national law)
10
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continuedŹ
AIMA Journal Q1 2016
49
From our members
in force in national law and 13 member states11 have
yet to transpose the TDA and are continuing to require
compliance with their pre-TDA disclosure rules.
Even amongst member states that have switched over
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a number of key areas such as the initial disclosure
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the UK continuing to retain initial thresholds which are
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than the T+4 TDA standard) and additional disclosures
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pre-TDA requirements to disclose shares in addition
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others lack any certainty or even an indication of their
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With a variety of disclosure regimes currently operating
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the rule book even amongst member states that have
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instruments with a similar economic effect and
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monitor closely.
www.allenovery.com/online-services
claire.farley@allenovery.com
Disclaimer:
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2016. Nothing in this article is intended to provide legal or
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contained in this article.
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AIMA Journal Q1 2016
50
From our members
3HRSOH
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information: Dealing with key
employment risks
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proprietary information. This article looks at some
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available to restrict key people moving to competitors.
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of mobile devices and wearables in recent times poses
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regulatory reasons. But what other steps can and
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algorithms or employee data?
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means of enforcing that policy; and have enforceable
restrictions to operate during notice periods and posttermination.
Policies
The common law gives an employer relatively little
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generally only restricting the disclosure or use of
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information an employer will need clear contractual
provisions coupled with a clear policy. These ought
to describe in granular detail the types of information
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should give employees clear guidance on what they
may and may not do.
Monitoring and enforcement
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the modern age the real challenge lies in the policing.
Employees are seldom foolish or naïve enough to use
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need to address all the myriad ways in which data
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smartphones and social media platforms all offer
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arrangements. This is an increasingly popular means
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loaded onto an employee’s own device (tablet or laptop
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As emails and messages continue to be routed through
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should continue to be able to monitor usage as if the
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decision largely mirrors what is established best
practice in the UK.
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ECHR 61 was widely reported in the press as giving
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the position is rather more nuanced and the case was
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purposes and was very clearly told that no private
usage was permitted. He used the account for private
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when challenged that he had never used it for personal
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should not have monitored the account to prove he had
in fact done so.
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Romanian law permitting the monitoring to be
compliant with the over-arching human right to respect
continuedŹ
AIMA Journal Q1 2016
51
From our members
for private life and correspondence. But that is not the
same as ruling in favour of unrestricted monitoring. In
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Commissioner’s Employment Practices Code make
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embarking on monitoring
Employees are informed in advance (usually via
the employer’s policies) that monitoring may be
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what will be done with the results
The employer acts in a reasonable and proportionate
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results will be retained and who will have access
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feel safe in taking a robust line.
Notice periods, garden leave and posttermination restrictions
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takes place when an employee is contemplating a
move and there are additional methods of protecting
business-critical information at that stage.
Well-drafted employment agreements will typically
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leave provisions will usually restrict the employee’s
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and contractual restrictions on the use of social media
are now increasingly common.
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notice provision. Even though employees continue to
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UHOXFWDQWWRVSHQGOHQJWK\SHULRGVRXWRIWKHPDUNHW
and the courts will generally only force an employee to
sit on their hands for a limited period.
and try to evade garden leave-type arrangements.
For that reason it’s important to have in place
restrictions that operate post-termination. Restrictive
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for a competitor or soliciting clients or investors can
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interests. Those interests can include the protection
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relationships. Post-termination restrictions are often
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be a mistake to disregard them when developing a suite
of strategies to protect key information or employees.
Firms may be able to achieve a higher degree of
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by making use of the court’s traditional willingness to
permit longer restrictions against partners and other
business owners. Some fund documentation also seeks
to prolong a partner/member’s period of restraint by
using the (largely untested) tactic of indirect restraints
often linked to a period of passive membership where
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continues to have an economic interest in one or more
funds.
Firms cannot operate without good people and good
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unattainable. The challenges posed by technological
development and social media means that the law is
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positions.
hayley.robinson@macfarlanes.com
matthew.ramsey@macfarlanes.com
www.macfarlanes.com
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be effective ways of blocking an employee from going
elsewhere. But inevitably some employees will leave
AIMA Journal Q1 2016
52
UCITS
We are leading advisers on the UCITS regime.
We regularly advise managers on how to bring a UCITS to market,
whether by establishing their own fund or by joining a hosted platform,
and on service provider and distribution arrangements.
Macfarlanes is a leading legal adviser to financial services firms, asset managers
and investment funds and is an active adviser in the hedge fund space.
We represent clients ranging from small start-ups and boutique operations to some of the largest institutions.
Our advice is not limited to designing and building the funds.
Our Macfarlanes hedge funds and derivatives teams, working together with the other practice areas in the firm,
have extensive experience advising hedge fund managers on all aspects, and at all stages, of the business cycle.
LORA FROUD
PARTNER
DD +44 (0)20 7849 2409
lora.froud@macfarlanes.com
TIM CORNICK
PARTNER
DD +44 (0)20 7849 2510
tim.cornick@macfarlanes.com
Macfarlanes LLP 20 Cursitor Street London EC4A 1LT
T +44 (0)20 7831 9222 F +44 (0)20 7831 9607 DX 138 Chancery Lane
www.macfarlanes.com
From our members
ESMA Q&A on the application of the UCITS V Directive: Some
breathing space to address compliance with the new rules?
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7KH ÀIWK LWHUDWLRQ RI WKH 8QGHUWDNLQJV IRU &ROOHFWLYH
Investment in Transferable Securities Directive (UCITS
V) is scheduled to be implemented throughout the
European Economic Area (EEA) by 18 March 2016
(Implementation Date). Although the scope of the UCITS
V Directive is relatively modest and largely in line with
equivalent provisions of the Alternative Investment
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with the new rules ahead of the Implementation Date
may prove challenging given the limited transitional
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Level 2 Regulation implementing the UCITS V Directive
(Level 2 Regulation) and the ESMA guidelines on
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will provide an overview of the additional guidance
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application of UCITS V.
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and management companies face in updating their
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the European Securities and Markets Authority (ESMA)
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application of the UCITS V Directive. The Q&A provides
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timeframe for implementation of various aspects of
UCITS V. This is particularly welcome given the lack of
formal general guidance on implementation by national
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Authority (FCA) was one of the few regulators formally
voicing its position in favour of a transitional period
to address compliance with the new requirements. In
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guidance on UCITS V have been consolidated in the FCA
3ROLF\ 6WDWHPHQW SXEOLVKHG RQ )HEUXDU\ which will come into force on the Implementation Date.
Depending on how compliance with UCITS V is
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FDPSV L WKRVH ZKR ZLOO RSW WR EHQHÀW IURP WKH
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and will not rush into updating their documentation
and (re)negotiating their depositary agreement by the
Implementation Date; and (ii) those who have already
started revising their documentation in light of UCITS
V and will continue to make necessary arrangements
with a view to becoming fully compliant by the
Implementation Date. The 11th-hour implementation
reprieve brought by the ESMA Q&A is arguably redundant
to this second group. UCITS stakeholders should now
keep an eye on any local UCITS V transposition guidance
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Prospectus and KIIDs update
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(i) details of the remuneration policy and procedures;
(ii) description of any safe-keeping functions delegated
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of interest that may arise from the delegation of
safe-keeping duties by the depositary as well as any
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RU LWV LQYHVWRUV WKH PDQDJHPHQW FRPSDQ\ DQG WKH
depositary. Each KIID must also specify that details of
the up-to-date remuneration policy are available on
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prospectus disclosure requirements will be either the
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the Implementation Date on which the KIID is revised
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available at that point in time.
Depositary arrangements
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UCITS must ensure each depositary agreement
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following requirements introduced by UCITS V: (i) an
updated description of the services to be provided by
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new “strict liability” standard; (iii) new delegation
requirements and restrictions; and (iv) references to
the reuse of assets held in custody by the depositary
(and its delegates) in line with the new Restrictions.
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contain liability clauses that are inconsistent with the
continuedŹ
AIMA Journal Q1 2016
54
From our members
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KDV FODULÀHG WKDW VXFK SURYLVLRQV ZLOO EH YRLG ZLWK
effect from the Implementation Date. The stricter
UCITS V liability provisions will therefore automatically
apply as of such date and depositary agreements will
not be required to be updated by the Implementation
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VDLG (60$ VWURQJO\ HQFRXUDJHV 8&,76 WR ´SURPSWO\µ
revise their depositary agreements in accordance with
any transitional arrangements outlined in the Level 2
Regulation. The Level 2 Regulation is currently being
approved by the European Parliament and will become
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Annual report disclosures
Similar in scope to the disclosure requirements under
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disclose: (i) the aggregate amount of remuneration
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fees paid by the UCITS; (ii) the aggregate amount of
remuneration broken down by category of employees
or other staff members; (iii) a description of how the
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(iv) the outcome of the periodic reviews of the
remuneration policy; and (v) a description of any
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Given the potential impact of the remuneration rules
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also likely to be caught within the above disclosure
requirements.
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RQO\QHHGWREHUHÁHFWHGLQDQQXDOUHSRUWVUHODWLQJWR
periods that end on or after the Implementation Date
DOWKRXJKLQDQ\HYHQWEHIRUHWKH8&,76PDQDJHPHQW
FRPSDQ\ KDV FRPSOHWHG LWV ÀUVW DQQXDO SHUIRUPDQFH
period in which it has to comply with the relevant UCITS
9 UHPXQHUDWLRQ UHTXLUHPHQWV ,Q VXFK FDVHV 8&,76
management companies are required to include the
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Establishment of remuneration policies and procedures
Remuneration is another key area where UCITS
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(60$ 8&,76 PDQDJHPHQW FRPSDQLHV DQG LQYHVWPHQW
managers that fall within the scope of the remuneration
rules will most likely not be required to apply the UCITS
remuneration principles until they commence their
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,PSOHPHQWDWLRQ'DWHHJLIWKHDFFRXQWLQJSHULRGRI
a UCITS management company ends on December 31
AIMA Journal Q1 2016
RI HDFK \HDU WKH UHPXQHUDWLRQ SULQFLSOHV ZLOO DSSO\
IRUWKHÀUVWWLPHLQUHODWLRQWRWKHDFFRXQWLQJSHULRG
ending on 31 December 2017).
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to its consultation concerning guidelines on sound
remuneration policies under the UCITS V Directive and
the AIFMD (Consultation). ESMA is yet to publish its
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KDVUHFHLYHGRQWKH&RQVXOWDWLRQDQGZKLOHWKHVHDUH
H[SHFWHGWREHSXEOLVKHGE\WKHÀUVWTXDUWHURI
SULRUWRWKH8&,769GLUHFWLYHWUDQVSRVLWLRQGHDGOLQH
UHFHQWUHSRUWVKDYHLQGLFDWHGWKDWWKHÀQDOWH[WPD\
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ESMA encourages management companies to publish
on a website relevant details of the management
company’s remuneration arrangements in light of the
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SDUW\ VXELQYHVWPHQW PDQDJHUV PD\ FRQVLGHU HYHQ
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(or self-managed UCITS funds) as regards the
implementation of remuneration policy requirements.
Conclusion
Although the implementation of UCITS V has not been
KHOSHGE\WKHYDULRXVGHOD\VDQGFRQIXVLRQRYHUÀQDO
UXOHVDQGJXLGDQFHLWVHHPVWKDWWKLQJVDUHQRZFOHDUHU
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most of the requirements without having to rush into
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UCITS' home Member State. With UCITS V by and large
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been dormant since the publication of a consultation
paper by the European Commission back in 2012.
The consultation covers a number of sensitive topics
including the application of sophisticated investment
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eligible assets through derivative instruments.
Although a formal UCITS VI proposal is yet to be
issued and the consultation should not prompt UCITS
funds and managers to recast their business model
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should begin to brace itself for future changes to the
8&,76 IUDPHZRUN ZKLFK SRWHQWLDOO\ PD\ EH IDU PRUH
disruptive to UCITS managers than the requirements
introduced under UCITS V.
nsuignard@sidley.com
www.sidley.com
55
21 S T ANNUAL
Sohn Investment
Conference
Wednesday, May 4, 2016 | David Geffen Hall | Lincoln Center | NYC
In Partnership with
The world-renowned Sohn Investment Conference is the
original and premier investment conference. Since 1995,
the Conference has brought together fresh insights and
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sohnconference.org
For sponsorship opportunities contact paula@ sohnconference.org
From our members
Section 871(m) - New US
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Equivalent Payments
AIMA SPONSORING PARTNER
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871(m) (“the regulations”) affecting non-US persons
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linked instruments (ELIs) with payments that reference
(or are deemed to reference) dividends on US equity
securities. Parties to such contracts may become
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such dividend equivalent payments that are made to a
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that trade instruments that are within the scope of
the rules will need to consider the application of the
rules to each type of affected trade to determine
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responsibilities.
Background
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on notional principal contracts (NPCs) were generally
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equivalent payments made on a narrow class of
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Section 871(m) that would have broadened the scope
of instruments on which withholding was required
to include payments on derivative instruments over
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below) of 0.7 or greater at the time the instrument
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measurement was changed to 0.8 or greater and a
new test for contracts with indeterminate deltas
was introduced. The regulations will be effective to
payments made on transactions issued on or after 1
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on such contracts that were to be made on or after 1
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Internal Revenue Service released corrections to the
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calendar year 2016 from the scope of the regulations.
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871(m) and its regulations if they are issued on or after
1 January 2017.
The delta and substantial equivalence tests
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relationship between changes in value of the
instrument and changes in value of the underlying
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the value of the instrument should mirror changes in
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any NPC or ELI that has a delta of 0.8 or greater at
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change from prior proposed regulations which required
continuous testing of the delta at each payment date
and a more inclusive delta of 0.7. The delta test is
used for simple contracts. The delta of certain types
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introduced a new "substantial equivalence test" to
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substantial equivalence test uses an in-scope contract
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using the level at which the short party would need to
vary the number of shares of stock in its hedge as the
price of the underlying security changes.
Combined transactions
Long parties (and agents thereof) must treat two or
more transactions as combined for purposes of testing
and application of the rules if they reference the same
underlying security and the combined transactions
continuedŹ
AIMA Journal Q1 2016
57
From our members
replicate the economics of a transaction that would
be a Section 871(m) in-scope transaction. Funds could
be trading the same or similar products across brokers
which will need to be tracked in case such multiple
transactions may need to be treated as a single
transaction for Section 871(m) purposes.
This is particularly important where the payments on
such products are not withheld on by the short party
due to certain favourable presumptive rules that allow
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contracts that are in different accounts or that are
separated by at least two business days. Note that
such presumptive rules are not applicable to the long
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source.
What payments are affected?
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1. Any substitute dividend that references a US source
dividend made pursuant to a securities lending or
sale-repurchase transaction
2. Any payment that references a US source dividend
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3. Any payment that references a US source dividend
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4. Any other substantially similar payment
The amount of the dividend equivalent is calculated
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equivalent amount is calculated by multiplying the pershare dividend amount with respect to the underlying
security times by the number of notional shares of the
underlying by the delta of the 871(m) transaction.
Withholding under Section 871(m)
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withhold on a dividend equivalent until the later of
when a payment is made with respect to a Section
871(m) transaction or when the amount of a dividend
equivalent is determined. A payment with respect to a
Section 871(m) transaction must generally occur when
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when the long party sells or otherwise disposes of the
Section 871(m) transaction.
AIMA Journal Q1 2016
Exceptions to the Section 871(m) rules
Certain transactions and payments may be treated
as out of scope for Section 871(m) purposes such as
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Industry insight
Brokers serving the asset management industry in
the US have begun preparing for the implementation
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readiness are beginning to ramp up this quarter.
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impact on their business and understand the level of
assistance that their service providers may be able
to provide as well as the level of effort that will be
required in-house.
Next steps
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changes to legal and service level agreements and
make any necessary systems changes prior to the 1
January 2017 effective date. This would include:
•
•
•
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Identifying in-scope transactions
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system and data challenges
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communications and agreements
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advice where their strategies may be impacted.
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to any person relying on this article.
dfarrell@uk.ey.com
amanda.murphy@ie.ey.com
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58
From our members
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market in 2015
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Introduction
,QWKHVHFRQGTXDUWHURI$,0$SXEOLVKHGDresearch
paper highlighting the growing and important role of
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research underlined that one of the most enduring
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2015 saw a continued shift away from banks
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a variety of alternative credit providers. This shift
in funding sources for European corporates is now a
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GLIIHUHQWDVVHWFODVVHVLQFOXGLQJFRUSRUDWHUHDOHVWDWH
and infrastructure debt.
The principal reasons for this structural shift in the
(XURSHDQÀQDQFLQJPDUNHWVDUHQRZZHOOGRFXPHQWHG
and focus on a combination of bank retrenchment
in a number of lending markets (as the panoply of
national and international regulatory frameworks
LQWURGXFHGVLQFHWKHÀQDQFLDOFULVLVKDYHIRUFHGEDQNV
to strengthen their balance sheets) coupled with the
unprecedented low interest environment which has
forced institutional money to hunt for yield in less
liquid corporate and other debt instruments. Given
this background this article summarises a number of
the key themes emerging in the private debt markets
last year and looks at some of the challenges that may
lie ahead for the industry.
Wall of money
Whilst there is some evidence that the pace of
fundraising for alternative debt slowed in the last
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of capital are being raised to invest in this asset class.
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160% bigger than its maiden direct lending fund. This
theme has been repeated for a number of the larger
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ICG’s latest direct lending fund almost double the size
of its June 2013 fund.
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focused private debt funds currently attempting to
raise a combined amount of circa EUR 48 billion.
‘Convergence’
(and
documentary terms
weakening)
of
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whilst there were a number of macro concerns in the
world economy during 2015 (and these have become
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ZDVLQWKHPDLQDJRRGWLPHWREHDERUURZHU
At the top end of the market the competition between
the high yield market (when it was open for business)
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WKH PLGPDUNHW WKH FRPSHWLWLRQ EHWZHHQ EDQNV DQG
alternative credit providers has meant that borrowers
(and their lawyers) have been able to “cherry pick”
terms from a variety of different products leading to
what has been labelled as a “convergence” of terms
as covenant-lite structures and terms from the US high
\LHOGDQG7HUP/RDQ%PDUNHWVÀQGWKHLUZD\LQWRPRUH
and more European deals.
Whilst there is a view that private debt managers
have “held the line” in the European mid-market and
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FRYHQDQWV WKHUH LV HYLGHQFH WKDW WKLV GLVFLSOLQH KDV
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published research looking at sub EUR 250 million
debt transactions to determine whether the more
aggressive features of larger transactions had impacted
mid-market deals (where private debt tends to feature
PRUH VLJQLÀFDQWO\ 7KH UHVHDUFK IRXQG WKDW ZKLOVW
in 2013 over 90% of sub EUR 250 million transactions
IHDWXUHG WKH WUDGLWLRQDO IRXU ÀQDQFLDO PDLQWHQDQFH
continuedŹ
AIMA Journal Q1 2016
59
From our members
FRYHQDQWSDFNDJHOHYHUDJHLQWHUHVWFRYHUFDVKÁRZ
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transactions in 2015.
Whilst a leverage covenant remains sacrosanct for
PRVW SULYDWH GHEW SURYLGHUV LQ WKH PLGPDUNHW
ERUURZHUVVSRQVRUVDQGWKHLUODZ\HUVKDYHFRQWLQXDOO\
been able to make incremental improvements to
documentary terms and this is a theme which is likely
to continue into 2016 and until the current credit cycle
GHÀQLWLYHO\WXUQV
Governments are playing their part
Many European states have traditionally given banks
a preferred status in lending transactions e.g. the
requirement for bank licences in France and Italy in order
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,Q DGGLWLRQ LQ VRPH FRXQWULHV RQO\ EDQNV KDYH EHHQ
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the credit crisis has led to the harmonisation of a
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to bank licensing requirements.
European governments have recognised however
that in order for there to be a sustained economic
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overall resilience of funding sources to corporates
and have therefore taken action to encourage this
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traditionally been reserved to banks and certain
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DUH VXEMHFW WR UHJXODWRU\ DQG SUXGHQWLDO SURYLVLRQV
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the lending market so that securitisation vehicles as
well as Italian insurance companies are now allowed to
lend directly to Italian companies provided they retain
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The changes also enable collective investment schemes
to invest in loan receivables effectively enabling them
to also lend directly.
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VRWKDWDZLWKKROGLQJWD[H[HPSWLRQWKHZLWKKROGLQJ
rate being 26%) will apply to payments of interest
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institutions established in an EU Member State and
insurance companies established and authorised under
the law of an EU Member State.
Banks versus alternative credit providers
It is important to recognise that whilst there is clearly
a competitive threat to commercial banks from the
variety of alternative credit providers now operating
in the market and more generally by the deployment
of more institutional capital in banks’ traditional
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private debt managers are working together to
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clients. This structuring takes account of the fact that
banks and private debt mangers may have different
risk appetites and can therefore structure (through
a unitranche arrangement) a “one loan” solution for
borrowers whilst at the same time apportioning the
risk on that loan between themselves by virtue of an
agreement between lenders or other intercreditor
arrangement.
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FRQWLQXH WR EH D NH\ SURYLGHU RI KHGJLQJ ZRUNLQJ
capital and other ancillary banking arrangements
(often necessitating the use of bespoke super senior
intercreditor arrangements). Whilst the co-operation
between banks and private debt managers has in
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DUUDQJHPHQWPRVWEDQNVDQGSULYDWHGHEWIXQGVVHHP
to prefer a less formal series of alliances with a set
of interceditor documentation pre-agreed to take to
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minimising legal cost.
What happens when the cycle turns?
The three-year bull run in private debt has yet to be
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DQGVRPHKDYHH[SUHVVHGFRQFHUQVDERXWKRZSULYDWH
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European corporate debt increase (and there is some
evidence that this is now beginning to happen).
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debt managers have tended to operate bilaterally or in
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FKHTXHVZKHQFRPSDUHGWRVD\DPD[LPXPKROGIRU
a bank of EUR 20-25 million) and have not sold on their
positions. This inevitably means that they will be very
active participants in any debt restructurings as any
losses they sustain will have a material impact on their
fund’s performance.
Whilst it is a truism that each turn in the cycle begets
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inevitable that some of the intercreditor structuring on
which private debt deals have been predicated in the
continuedŹ
AIMA Journal Q1 2016
60
From our members
last two to three years will make it harder and more
complicated to restructure debt. This is particularly
the case in unitranche transactions which have been
structured using an agreement between lenders to
which borrowers are not party. Based on recent court
MXGJPHQWV LQ (QJODQG WKHVH VWUXFWXUHV FRXOG DOVR
provide an unpleasant surprise for “last out” creditors
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agreement between lenders is structured without a
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position won’t necessarily guarantee them their own
separate class should a scheme of arrangement be
XVHGWRFUDPGRZQGLVVHQWLQJMXQLRUFUHGLWRUV
alistair.hill@simmons-simmons.com
www.simmons-simmons.com
AIMA Journal Q1 2016
61
Solutions for a
changing world
“A dominant
presence in the
hedge funds
market”
Chambers & Partners 2015
Our leading hedge funds practice has been finding new solutions for the
changing world faced by our clients for more than 20 years.
We are committed to finding innovative ways of providing a world class, user-friendly service to address
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simmons-simmons.com
elexica.com
@SimmonsLLP
Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated practices. Simmons & Simmons LLP is a limited liability partnership registered in England & Wales with number OC352713 and with its registered office at
CityPoint, One Ropemaker Street, London EC2Y 9SS. It is regulated by the Solicitors Regulation Authority.
From our members
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may serve as an island escape
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such hedge fund managers may be able to reduce their
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advisory operations to or initiating their advisory
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an ownership interest in a Puerto Rican investment
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income items attributable to such advisory services to
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receipt of dividends from such corporation.
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but conducts his or her operations through an Act 20
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items attributable to his or her advisory activities to
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interest” allocations of long-term capital gains.
Overview of relevant US tax considerations
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worldwide income regardless of where such resident
individual is domiciled.3$86LQGLYLGXDOWD[SD\HUPD\
be able to renounce his or her citizenship or otherwise
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3
Section 7701(a)(30) and Regulation Section 1.1-1(b).
continuedŹ
AIMA Journal Q1 2016
63
From our members
LQFRPH WD[ RQO\ ZLWK UHVSHFW WR KLV RU KHU 86 VRXUFH
LQFRPH $Q ´H[LW WD[µ PD\ DSSO\4 KRZHYHU ZKLFK
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moves to Puerto Rico without renouncing his or her US
citizenship or terminating his or her status as a lawful
permanent US resident.6
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applicable to US resident individuals on ordinary
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rate currently applicable to US resident individuals
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individual’s “net investment income”.7 ´4XDOLÀHG
dividend income” received by a US resident individual
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rates applicable to long-term capital gains.8 Dividends
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organised in Puerto Rico generally are considered
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Section 877A.
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to passive income and gross income derived in a trade or business
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Section 1(h)(11).
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such individual’s Puerto Rican source income.10 The
Regulations provide a detailed set of rules regarding
whether income will be considered to be derived from
Puerto Rican sources.11
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performed in Puerto Rico is considered Puerto
Rican source income12; (ii) dividends received by a
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Puerto Rican corporation are considered to be Puerto
Rican source income; (iii) dividends received by any
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total voting stock of a Puerto Rican corporation are
considered to be Puerto Rican source income if (a) 80%
or more of the gross income of the corporation during
the prior three years (or the period during which such
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50% or more of the gross income during the prior three
years (or the period in which such corporation was in
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the active conduct of a trade or business within Puerto
Rico13; and (iv) dividends received by a US individual
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stock of a Puerto Rican corporation not described in
(iii) will be considered Puerto Rican source income
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10
A U.S. resident individual generally will be considered
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connection to the United States or a foreign country other than Puerto
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11
6HHJHQHUDOO\Regulation Section 1.937-2.
12
Section 937(b)(1) generally provides that rules similar to
determining whether income is from sources within the United States
or is effectively connected with the conduct of a trade or business
within the United States shall apply for purposes of determining
whether income is from Puerto Rican sources.
13
Regulation Section 1.937-2(g)(1)(ii).
continuedŹ
AIMA Journal Q1 2016
64
From our members
source income.14 While the source of capital gains
generally is determined by reference to the residence
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at the time of his or her move to Puerto Rico may
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within 10 years of emigration to Puerto Rico.15
Overview and relevant Puerto Rican tax
considerations
Act 20 and the complementary Puerto Rico Individual
Investors Act (“Act 22”) were enacted in January 2012
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businesses and individuals to Puerto Rico.
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services performed by the company in Puerto Rico.
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for service recipients located outside of and with
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services performed by an Act 20 Company are
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An Act 20 Company may be a start-up company or an
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generally must be established).16 Transfer pricing
issues must be considered if an Act 20 Company is
part of a group business that operates both in and
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IRU D GLYLGHQG WD[ H[HPSWLRQ ZLWKKROGLQJ RU
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14
Regulation Section 1.937-2(g)(1)(i).
15
5HJXODWLRQ 6HFWLRQ ILL 1RWLFH C.B. 681.
16
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RXWERXQG WUDQVIHU UXOHV PXVW EH FRQVLGHUHG LQFOXGLQJ 6HFWLRQ and the anti-inversion rules under Section 7874.
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contract between the government of Puerto Rico
and the Act 20 Company providing that the Act 20
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,Q JHQHUDO $FW SURYLGHV DQ H[HPSWLRQ IRU SDVVLYH
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residents. Built-in gains accrued while residing outside
of Puerto Rico and realised within 10 years of becoming
a Puerto Rican resident17 DUH VXEMHFW WR 3XHUWR 5LFDQ
LQFRPH WD[ DW D UDWH RI DQG VXFK EXLOWLQ JDLQV
realised after 10 years of becoming a Puerto Rican
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rate of 5%.
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3XHUWR5LFDQUHVLGHQWVKRXOGQRWEHVXEMHFWWR86RU
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VRXUFHGLYLGHQGVLQWHUHVWDQGSRVWPLJUDWLRQFDSLWDO
JDLQV 1RWDEO\ KRZHYHU QRW DOO SDVVLYH LQFRPH
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emigration to Puerto Rico is free from both US and
3XHUWR5LFDQWD[HV$VVXFKLQGLYLGXDOVZKRTXDOLI\
under Act 22 are incentivised to invest in Puerto Rican
businesses and real estate after emigration to Puerto
Rico because passive income from these sources
JHQHUDOO\ PD\ EH H[HPSW IURP ERWK 86 DQG 3XHUWR
5LFDQIHGHUDOLQFRPHWD[HV
&RPSHQVDWLRQ LQFRPH UHFHLYHG E\ D ERQD ÀGH $FW
3XHUWR 5LFDQ UHVLGHQW LV VXEMHFW WR LQFRPH WD[ LQ
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the United States and Puerto Rico should not result
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WR86IHGHUDOLQFRPHWD[HVXQGHU6HFWLRQ
An individual who owns an Act 20 Company may choose
17
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IHGHUDO LQFRPH WD[ ZKHQ UHFRJQL]HG EXW D 86 IRUHLJQ WD[ FUHGLW
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continuedŹ
AIMA Journal Q1 2016
65
From our members
to limit the amount of compensation he or she receives
from the Act 20 Company and instead receive dividend
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Puerto Rico may treat a dividend as compensation
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individual to have received less than reasonable
compensation for his or her services.
Whether compensation is reasonable is based on the
facts and circumstances in each case. Puerto Rico
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will not challenge an arrangement as providing for
disguised compensation where an individual receives
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20 Company.
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management business is operational prior to the
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still possible.
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A US-based individual investment manager that
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be able to organise an Act 20 Company to conduct
his or her investment management operations and
TXDOLI\IRUWKH3XHUWR5LFDQWD[EHQHÀWVDIIRUGHG
under Act 22. In that case (i) the Act 20 Company’s
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WD[ RI LL WKH LQGLYLGXDO ZRXOG EH VXEMHFW WR
3XHUWR5LFDQEXWQRW86LQFRPHWD[ZLWKUHVSHFW
to Puerto Rican source compensation received from
the Act 20 Company; (iii) the individual generally
ZRXOGQRWEHVXEMHFWWR3XHUWR5LFDQRU86LQFRPH
WD[ZLWKUHVSHFWWRGLYLGHQGGLVWULEXWLRQVIURPWKH
Act 20 Company; (iv) the individual generally would
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with respect to gains realised upon the sale of the
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organised following the individual’s emigration
to Puerto Rico; and (v) the individual generally
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WD[HVZLWKUHVSHFWWR3XHUWR5LFDQVRXUFHFDSLWDO
gains recognised on capital assets acquired after
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•
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considered if a group of companies under common
control conducts investment management activities
both in and outside of Puerto Rico. The relevant
transfer pricing rules may require that a portion
of the group’s income be allocated to the United
6WDWHVDQGVXEMHFWWR86IHGHUDOLQFRPHWD[
7RTXDOLI\XQGHU$FWDQLQGLYLGXDOPXVWLQRWKDYH
been a resident of Puerto Rico at any time during the
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-DQXDU\LLDSSO\WRDQGJDLQDSSURYDORIWKH
2IÀFHRI,QGXVWULDO7D[([HPSWLRQRI3XHUWR5LFRDQG
(iii) change his or her domicile to Puerto Rico.18
The island vacation – putting it all together
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these provisions may be summarised as follows:
•
A US-based individual investment manager who
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Rico may be able to organize an Act 20 Company
to conduct his or her investment management
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WKH WD[ RQ QHW LQYHVWPHQW LQFRPH WKH 3XHUWR 5LFDQ WD[ WKDW ZRXOG EH LPSRVHG RQ WKH
$FW &RPSDQ\ DQG DVVXPLQJ WKDW WKH KLJKHVW
86 IHGHUDO LQFRPH WD[ UDWHV ZLOO DSSO\ GLYLGHQG
LQFRPH UHDOLVHG E\ D 86 LQGLYLGXDO WD[SD\HU IURP
DQ$FW&RPSDQ\ZLOOEHVXEMHFWWRDQHIIHFWLYH
FRPELQHG86IHGHUDODQG3XHUWR5LFDQLQFRPHWD[
18
Domicile refers to the intention of the individual to
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VXEMHFWLYH WKDQ WKH 86 ´ERQDÀGH UHVLGHQWµ WHVW GHVFULEHG LQ
footnote 9 above.
19
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LQFRPH RI DQG GLVWULEXWHG LWV DIWHUWD[ LQFRPH WR LWV VROH
VKDUHKROGHUD86LQGLYLGXDO7KH$FW&RPSDQ\ZRXOGEHVXEMHFW
WRRIWD[LQ3XHUWR5LFROHDYLQJDYDLODEOHIRUGLVWULEXWLRQ
to its shareholder. Assuming the application of the highest U.S.
IHGHUDOLQFRPHWD[UDWHRQ´TXDOLÀHGGLYLGHQGLQFRPHµDQGWKH
DSSOLFDWLRQ RI WKH WD[ RQ ´QHW LQYHVWPHQW LQFRPHµ WKH GLYLGHQG ZRXOG EH VXEMHFW WR 86 IHGHUDO WD[HV RI ZLWKDQDJJUHJDWH86IHGHUDODQG3XHUWR5LFDQLQFRPHWD[
OLDELOLW\RIRUDQHIIHFWLYHWD[UDWHRIDSSUR[LPDWHO\
continuedŹ
AIMA Journal Q1 2016
66
From our members
Conclusion
A US individual hedge fund manager who is not
compensated with carried interest allocations of longWHUP FDSLWDO JDLQ JHQHUDOO\ LV VXEMHFW WR 86 IHGHUDO
LQFRPHWD[RQVXFKFRPSHQVDWLRQDWRUGLQDU\LQFRPH
WD[UDWHV,QDGGLWLRQDKLJKQHWZRUWK86LQGLYLGXDO
JHQHUDOO\ FDQQRW H[SDWULDWH ZLWKRXW SRWHQWLDOO\ EHLQJ
VXEMHFW WR D 86 H[LW WD[ 8QGHU FXUUHQW ODZ D 86
individual hedge fund manager may be able to take
DGYDQWDJHRI$FW$FWDQGFHUWDLQ86WD[EHQHÀWV
related to ownership of a Puerto Rican corporation
DQGRU 3XHUWR 5LFDQ UHVLGHQF\ ZLWK WKH UHVXOW WKDW
WKH LQGLYLGXDO PD\ EH DEOH WR VLJQLÀFDQWO\ UHGXFH KLV
RUKHUDJJUHJDWHLQFRPHWD[EXUGHQDQGRUUHGRPLFLOH
ZLWKRXWEHLQJVXEMHFWWRDQH[LWWD[:KLOHRUJDQL]LQJ
or reorganizing investment management operations to
Puerto Rico may not be suitable for all US individual
KHGJH IXQG PDQDJHUV JLYHQ WKHVH PHDQLQJIXO WD[
EHQHÀWVDSHUPDQHQWYDFDWLRQWRWKHWURSLFDOLVODQGRI
3XHUWR5LFRLVFHUWDLQO\ZRUWKH[SORULQJ
frank.dworak@klgates.com
DGDPWHMHGD#NOJDWHVFRP
www.klgates.com
continuedŹ
AIMA Journal Q1 2016
67
CONTEXT SUMMITS
TEXAS 2016
JUNE 5 - 7, 2016
THE PREEMINENT TEXAS INVESTOR SUMMIT FOR THE ALTERNATIVE ASSET
MANAGEMENT INDUSTRY, JUNE 5-7, 2016 - AT&T STADIUM, ARLINGTON, TX
.
.
.
.
Most proven, efficient, and productive event format in the
alternative asset management industry.
Investors perform substantive due diligence through focused,
pre-scheduled, one-on-one meetings with hundreds of portfolio
managers over a two-day period.
Elevated conference experience through a superior, innovative
format where targeted relationship building leads to unmatched
results with a maximized return on time and investment.
Single-site social events provide unmatched opportunities to
network and develop long-term meaningful relationships to drive
success and grow assets.
WEBSITE: contextsummits.com/texas
PHONE: 908-379-3900
10% DISCOUNT FOR FUNDS
CODE: ASSN-AIMA
AIMA's sponsoring partners
Sponsoring Partners of AIMA
Sponsoring Partners of AIMA
AIMA Journal Q1 2016
69
New members
7KH IROORZLQJ FRUSRUDWH PHPEHU ÀUPV MRLQHG $,0$
GXULQJWKHIRXUWKTXDUWHURI
0HPEHUVKLS RI $,0$ LV FRUSRUDWH )RU IXUWKHU
GHWDLOV SOHDVH FRQWDFW )LRQD 7UHEOH DW
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$,0$PHPEHUVKLSFOLFNhere$OOLQIRUPDWLRQVXSSOLHG
LQ WKH IROORZLQJ PHPEHU SURÀOHV KDV EHHQ SURYLGHG
by the member company and its accuracy is not
guaranteed by AIMA.
ABBEY CAPITAL (US) LLC
Country: USA
Contact: Helen Doody
Telephone: +1 646 495 5546
Business activity: Hedge Fund Manager / Adviser
Website: www.abbeycapital.com
ADAPTIVE REASONING LTD
Country: UK
Contact: John Berry
Business activity: IT/Systems/Software Services
Website: www.adaptivereasoning.com
%XVLQHVVDFWLYLW\)XQG$GPLQLVWUDWLRQ$FFRXQWLQJ
Custody Services
Website: www.bnpparibas.com.hk
BOVILL ASIA PTE LIMITED
Country: Singapore
&RQWDFW%LOOLH-R'L[RQ
Telephone: +65 3157 2156
Business activity: Consultant (Other)
Website: www.bovill.com
BULKARA CAPITAL LIMITED
Country: UK
Contact: Adam O'Neil
Telephone: +44 (0)20 8144 8233
Business activity: Hedge Fund Manager / Adviser
Website: www.bulkara.com/
CACEIS IRELAND LIMITED
Country: Ireland
Contact: Oscar Garcia
Telephone: +353 1 672 16 00
%XVLQHVVDFWLYLW\%DQNLQJ6HUYLFHVH[FOSULPH
brokerage)
Website: www.caceis.com
AITKEN INVESTMENT MANAGEMENT PTY
LTD
CIBC ASSET MANAGEMENT INC
Country: Australia
Contact: Les Andrews
Telephone: +61 2 9236 7250
Business activity: Hedge Fund Manager / Adviser
Website: www.aimfunds.com.au
Country: Canada
Contact: Ela Karahasanoglu
Telephone: +1 416 364 5620
Business activity: Hedge Fund Manager / Adviser
Website: www.cibcam.com
ARKK SOLUTIONS
CLARITY CAPITAL PTY LTD
Country: UK
Contact: Richard Metcalfe
Telephone: +44 (0)20 7036 2758
Business activity: Consultant (Other)
Website: www.arkksolutions.com/
Country: Australia
Contact: Ryan Donaldson
Telephone: +61 2 9231 0600
Business activity: Hedge Fund Manager / Adviser
Website: www.lessnoisemoreclarity.com
BNP PARIBAS SECURITIES SERVICES
COPPER STREET CAPITAL
Country: Ireland
Contact: Pete Townsend
Telephone: +353 1 612 6400
%XVLQHVVDFWLYLW\)XQG$GPLQLVWUDWLRQ$FFRXQWLQJ
Custody Services
Website: www.securities.bnpparibas.com
BNP PARIBAS SECURITIES SERVICES
Country: Hong Kong
Contact: Aisling Keane
Telephone: +852 2909 8888
Country: UK
Contact: Vishal Shete
Telephone: +44 (0)20 3824 1500
Business activity: Hedge Fund Manager / Adviser
CROWN STERLING LLC
Country: USA
Contact: Whitney Holmes
Business activity: Hedge Fund Manager / Adviser
Website: www.crownsterlingllc.com
continuedŹ
AIMA Journal Q1 2016
70
New members
CUBE CAPITAL INVESTMENT MANAGEMENT
LIMITED
Country: UK
Contact: Mike Williams
Telephone: +44 (0)20 7291 8180
Business activity: Hedge Fund Manager / Adviser
Website: www.cubecap.com
DEVET CAPITAL INVESTMENTS
Country: UK
Contact: Leonardo Marroni
Business activity: Hedge Fund Manager / Adviser
Website: www.devetcapital.com
DYAL CAPITAL PARTNERS
Country: USA
Contact: Jeffry Brown
Telephone: +1 212 476 8525
Business activity: Consultant (Investment)
EAGLEWOOD CAPITAL MANAGEMENT LLC
Country: USA
Contact: Nancy Lynch
Telephone: +1 212 729 4688
Business activity: Hedge Fund Manager / Adviser
Website: www.mweaglewood.com/
EAGLEWOOD EUROPE LLP
Country: UK
Contact: Dipali Sahni
Telephone: +44 (0)20 7925 4865
Business activity: Hedge Fund Manager / Adviser
Website: www.mweaglewood.com/
FREETHINK CAPITAL INC
Country: Canada
Contact: Rebecca Mullin
Telephone: +1 780 443 6980
Business activity: Hedge Fund Manager / Adviser
GLOBAL CREDIT INVESTMENTS PTY LTD
Country: Australia
Contact: Adam Schwartz
Telephone: +61 2 8247 3120
Business activity: Hedge Fund Manager / Adviser
Website: www.globalcreditinvestments.com
GRANITE ALPHEN CAPITAL FUND LIMITED
Country: Gibraltar
&RQWDFW0D[ZHOO0DQQLQJ
Telephone: +350 200 748 54
Business activity: Fund of Hedge Funds Manager
Website: gacfund.com
GREYLOCK CAPITAL MANAGEMENT LLC
Country: USA
Contact: John C. Maguire
Telephone: +1 212 808 1800
Business activity: Hedge Fund Manager / Adviser
Website: www.greylockcapital.com
GRUSS CAPITAL MANAGEMENT LP
Country: USA
Contact: Michael Cassidy
Business activity: Hedge Fund Manager / Adviser
Website: www.grusscap.com
GSO CAPITAL PARTNERS INTERNATIONAL
LLP
Country: UK
Contact: Sara Cunningham
Telephone: +44 (0)20 7758 9000
Business activity: Hedge Fund Manager / Adviser
Website: www.blackstone.com
HARNEY WESTWOOD & RIEGELS SINGAPORE
LLP
Country: Singapore
Contact: Lisa Pearce
Telephone: +65 3152 1930
Business activity: Legal Services
HARNEYS CORPORATE SERVICES (ASIA)
LIMITED SHANGHAI REPRESENTATIVE
OFFICE
Country: China
Contact: Kristy Calvert
Telephone: +86 13 9185 98782
Business activity: Legal Services
HARNEYS SERVICES JAPAN KK
Country: Japan
&RQWDFW<XML$VDQR
Telephone: +81 3 5219 1233
Business activity: Legal Services
HGC INVESTMENT MANAGEMENT INC
Country: Canada
Contact: Brett Lindros
Telephone: +1 647 776 2200
Business activity: Hedge Fund Manager / Adviser
Website: www.hgcinvest.com
continuedŹ
AIMA Journal Q1 2016
71
New members
IBV CAPITAL LTD
Country: Canada
Contact: Ryan Perillo
Telephone: +1 416 603 4282
Business activity: Hedge Fund Manager / Adviser
Website: www.ibvcapital.com
INDEPENDENT VIEW
Country: The Netherlands
&RQWDFW5RELQYDQ%R[VHO
Telephone: +31 1 20 737 2783
Business activity: Hedge Fund Manager / Adviser
Website: www.independentview.com
INVEREWE CAPITAL LONDON LIMITED
Country: UK
Contact: Michael Murphy
Telephone: +44 (0)20 7493 4316
Business activity: Hedge Fund Manager / Adviser
Website: www.inverewecapital.com
INVICO CAPITAL CORPORATION
Country: Canada
Contact: Shivek Ratnaswamy
Telephone: +1 403 538 4771
Business activity: Hedge Fund Manager / Adviser
Website: www.invicocapital.com
ITG
Country: France
Contact: Jonathan Touboul
Telephone: +33 1 8283 7010
Business activity: Other Service Providers
ITG INC
Country: USA
Contact: Scott Kurland
Telephone: +1 212 588 4000
Business activity: Other Service Providers
Website: ww.itg.com
ITI ASSET MANAGEMENT LTD
Country: UK
Contact: Shaun Blake
Telephone: +44 (0)20 3287 3038
Business activity: Hedge Fund Manager / Adviser
Website: www.itiassetmanagement.com
JAMES RIVER CAPITAL CORP
Country: USA
Contact: Lisa Blankenship
Telephone: +1 804 784 4500
Business activity: Hedge Fund Manager / Adviser
:HEVLWHZZZMUFFQHW
JP MORGAN SECURITIES LLC
Country: USA
Contact: Eric Klein
Telephone: +1 212 648 1563
Business activity: Hedge Fund Manager / Adviser
:HEVLWHZZZMSPRUJDQVHFXULWLHVFRPSDJHVDP
securities/home
KIMURA CAPITAL LLP
Country: UK
Contact: Kristofer Tremaine
Telephone: +44 (0)20 7887 2231
Business activity: Hedge Fund Manager / Adviser
Website: www.kimuractf.com
KIMURA CAPITAL LLP
Country: USA
Contact: Morgan Metters
Telephone: +1 212 601 9356
Business activity: Hedge Fund Manager / Adviser
Website: kimuractf.com
KOHLBERG KRAVIS ROBERTS & CO LTD
Country: UK
Contact: Ludo Bammens
Telephone: +44 (0)20 7839 9800
Business activity: Debt Manager
Website: www.kkr.com
MACKENZIE FINANCIAL CORPORATION
Country: Canada
Contact: Simon Bedard
Telephone: +1 416 967 2000
Business activity: Hedge Fund Manager / Adviser
Website: www.mackenzieinvestments.com
MACROMONEY INVESTMENTS
Country: Cayman Islands
Contact: Simone Dalle Nogare
Telephone: +48 22 300 26 48
Business activity: Hedge Fund Manager / Adviser
Website: www.macromoney.com
MACX ASSET AG
Country: Switzerland
Contact: Jose Eduardo Homes de Montes
Telephone: +41 41 729 49 65
Business activity: Hedge Fund Manager / Adviser
continuedŹ
AIMA Journal Q1 2016
72
New members
MARTIN CURRIE INC
Country: USA
Contact: Alastair Barrie
Telephone: + 1212 258 1900
Business activity: Hedge Fund Manager / Adviser
MAVEN INVESTMENT MANAGEMENT LIMITED
Country: UK
&RQWDFW$OH[DQGHU'RQQHOO\
Telephone: +44 (0)20 3668 0767
Business activity: Hedge Fund Manager / Adviser
Website: mavensecurities.com
MILL HILL CAPITAL
Country: USA
Contact: David Meneret
Telephone: +1 212 520 2953
Business activity: Hedge Fund Manager / Adviser
NEWGEN ASSET MANAGEMENT
Country: Canada
Contact: Robert Duncan
Telephone: +1 416 941 9111
Business activity: Hedge Fund Manager / Adviser
NUOXIN CAPITAL (HONG KONG) LIMITED
Country: Hong Kong
Contact: Antony Wood
Telephone: +852 3580 2766
Business activity: Hedge Fund Manager / Adviser
:HEVLWHZZZFKLQDQ[KN
OESA LIMITED
Country: UK
Contact: Kate Wormald
Telephone: +44 (0)20 7907 9850
Business activity: Consultant (Investment)
Website: www.oesa.co.uk
PALMERSTON CAPITAL MANAGEMENT LLP
Country: UK
Contact: Jesse McCormick
Telephone: +44 (0)20 3701 7730
Business activity: Hedge Fund Manager / Adviser
Website: www.palmerstonllp.com
PAVILION ADVISORY GROUP LTD
Country: Canada
&RQWDFW$OH['D&RVWD
Telephone: +1 514 932 1548
Business activity: Consultant (Other)
Website: www.pavilioncorp.com
PERISCOPE CAPITAL INC
Country: Canada
Contact: Steve Elgee
Telephone: +1 416 365 2785
Business activity: Hedge Fund Manager / Adviser
Website: www.periscopecap.com
PICTET & CIE (EUROPE) SA
&RXQWU\/X[HPERXUJ
Contact: Bettina Graeber
Telephone: +352 467 171-1
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Custody Services
Website: www.pictet.com
PIXL8 INTERACTIVE LTD
Country: UK
Contact: Neil Rosewarn
Telephone: +44 (0)845 260 0726
Business activity: IT/Systems/Software Services
:HEVLWHZZZSL[OFRXN
PRYTANIA INVESTMENT ADVISORS LLP
Country: UK
Contact: Gideon Fackrell
Telephone: +44 (0)20 7002 1555
Business activity: Hedge Fund Manager / Adviser
Website: www.prytaniagroup.com
QQM FUND MANAGEMENT AB
Country: Sweden
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Telephone: +46 8 407 5050
Business activity: Hedge Fund Manager / Adviser
QUANTIUS INC
Country: Canada
Contact: Svetlana Koretskaia
Telephone: +1 123 123 1234
Business activity: Hedge Fund Manager / Adviser
Website: www.quantius.ca
R&F CAPITAL ADVISORS LP
Country: USA
Contact: Daniel Naccarella
Telephone: +1 646 213 7000
Business activity: Hedge Fund Manager / Adviser
RUBY CAPITAL LLP
Country: UK
Contact: Mark George
Telephone: +44 (0)20 7290 3700
continuedŹ
AIMA Journal Q1 2016
73
New members
Business activity: Hedge Fund Manager / Adviser
Website: www.rubycap.com
RVX ASSET MANAGEMENT, LLC
Country: Canada
Contact: Charles Lemay
Telephone: +1 514 600 1520
Business activity: Hedge Fund Manager / Adviser
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SABRE MANAGEMENT SERVICES LTD
Country: Isle of Man
Contact: Andrew Rouse
Telephone: +44 (0)20 3180 1550
Business activity: Hedge Fund Manager / Adviser
Website: www.sabre-iom.com
SAXO BANK FX SECURITIES KK
Country: Japan
Contact: Yuti Shimada
Telephone: +81 3 5545 6351
Business activity: Prime Brokerage Services
SAXO CAPITAL MARKETS PTE LTD
Country: Singapore
Contact: Matthew Cartwright
Telephone: +65 6303 7800
Business activity: Prime Brokerage Services
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SAXO CAPITAL MARKETS PTY LTD
Country: Australia
Contact: Andrew Wood
Telephone: +61 2 8267 9000
Business activity: Prime Brokerage Services
SCHRODER INVESTMENT MANAGEMENT
(LUXEMBOURG) SA
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Contact: Noel Fessey
Telephone: +352 34 13 42 212
Business activity: Fund of Hedge Funds Manager
Website: www.schroders.co.uk/global/aboutVFKURGHUVZRUOGZLGHORFDWLRQVHXURSHOX[HPERXUJ
SCHRODER INVESTMENT MANAGEMENT
(SINGAPORE) LTD
Country: Singapore
Contact: Rupert Rucker
Telephone: +65 6535 3411
Business activity: Fund of Hedge Funds Manager
Website: www.schroder.com
SCHRODER INVESTMENT MANAGEMENT
LIMITED
Country: UK
Contact: Charles Hopkinson-Woolley
Telephone: +44 (0)20 7658 6000
Business activity: Hedge Fund Manager / Adviser
Website: www.schroders.com
SCHRODER INVESTMENT MANAGEMENT
NORTH AMERICA INC
Country: USA
Contact: Eric Nelson
Telephone: +1 212 641 3830
Business activity: Hedge Fund Manager / Adviser
Website: www.schroders.com
SCOTIA GLOBAL BANKING AND MARKETS
Country: Singapore
Contact: Ramsay Carter
Telephone: +65 6305 8333
Business activity: Prime Brokerage Services
Website: www.scotiaprimebrokerage.com
SCOTIABANK
Country: UK
Contact: Michael Brian
Telephone: +44 (0)20 7638 5644
Business activity: Prime Brokerage Services
Website: www.scotiabank.com
SCOTIABANK
Country: USA
Contact: Lauren Malafronte
Telephone: +1 212 250 6623
Business activity: Prime Brokerage Services
Website: www.gbm.scotiabank.com/
SKYSCAPE CAPITAL INC
Country: Canada
Contact: Michael Wellwood
Telephone: +1 587 333 2830
Business activity: Hedge Fund Manager / Adviser
STATE STREET ALTERNATIVE INVESTMENT
SOLUTIONS
Country: USA
Contact: Finnian McCaul
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Custody Services
continuedŹ
AIMA Journal Q1 2016
74
New members
THREE STONES CAPITAL LIMITED
Country: Hong Kong
Contact: Nicholas Bloom
Telephone: +852 3955 2784
Business activity: Hedge Fund Manager / Adviser
Website: www.three-stones.com
UNAVISTA, LSEG
Country: USA
Contact: Robert Grant
Telephone: +1 212 314 1240
Business activity: Consultant (Other)
Website: www.lseg.com/unavista
VALGREEN ADVISORS LTD
Country: Cayman Islands
Contact: Mary Allyn
Telephone: +456 166 7183
Business activity: Hedge Fund Manager / Adviser
VARDE PARTNERS ASIA
Country: Singapore
Contact: Carrie Seele
Telephone: +65 6579 0800
Business activity: Hedge Fund Manager / Adviser
Website: www.varde.com
VISTA FUND SERVICES LIMITED
Country: Gibraltar
Contact: Carol Ruffell
Telephone: +350 200 764 58
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Custody Services
Website: www.vistafundservices.com
WHITECOVE CAPITAL
Country: Australia
Contact: Stefan Chytra
Telephone: +61 2 9251 6669
Business activity: Hedge Fund Manager / Adviser
YARLUN CAPITAL PTE LIMITED
Country: Singapore
Contact: Geoff Main
Telephone: +65 6303 0730
Business activity: Hedge Fund Manager / Adviser
Website: www.yarlun.com
AIMA Journal Q1 2016
75
20–22 June, 2016
Hotel Okura, Amsterdam
Where Managers and Investors in Alternatives Collaborate to Drive Capital, Implement
New Industry Standards and Source Cutting Edge Information on Future Returns.
500 global participants. Hundreds of Investor/ Manager meetings. The world of alternatives in one place.
CO-LOCATED
20–21 June, 2016
Hotel Okura, Amsterdam
Where C-level Hedge Funds and Private Equity Operations, Due Diligence and Compliance
Experts Meet to Achieve Operation Excellence and Mitigate Regulatory Impact.
Exclusive peer-to-peer boardrooms. International regulators. All global jurisdictions represented.
AIMA — Representing the interests of the global hedge fund industry
AIMA has more than 1,700 corporate members
in over 50 countries and is present in all of the
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Track record
AIMA was founded in 1990 and over 25 years has
grown into the only truly global hedge fund industry
association, with more than 1,700 corporate members
in over 50 countries.
Representing the industry
We represent the world’s hedge fund industry to
regulators, policymakers, investors, the press and other
stakeholders.
Speaking for the whole industry
AIMA’s members come from all parts of the global
industry — including managers, service providers,
allocator managers (including FoHFs), advisers and
investors. AIMA’s manager members manage a combined
$1.5 trillion in assets.
Regulatory updates
AIMA members receive comprehensive regulatory
updates and tools.
Sound Practices and DDQs
AIMA members receive access to our full range of sound
practices material, covering hedge fund management,
valuation and asset pricing, administration, governance,
business continuity, as well as DDQs for managers and
service providers, offshore alternative fund directors
and fund of hedge funds managers.
Loyal members
We consistently have a high membership renewal rate.
Insight
Our members get access to our online library of
industry knowledge and expertise. Additionally, they
receive our weekly newsletter, covering all the latest
key industry and regulatory developments, and our
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Positive start
Due to the amount of information available from AIMA
and assistance we can provide through sound practices
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are based.
Get involved
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outcomes by either joining one of our many committees
and regulatory working groups or by taking part in one
of our many events around the world.
Regular events
Our Annual Conference and Global Policy and
Regulatory Forum, open to all AIMA members, attract
leading speakers from the industry and among
policymakers, and hundreds of delegates, from around
the world. We also hold regular events globally, which
provide intelligence and networking opportunities.
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The Alternative Investment Management Association Ltd
2nd Floor, 167 Fleet Street, London, EC4A 2EA
Tel: +44 (0) 20 7822 8380
Email: info@aima.org
Registered in England & Wales at the above address Company No. 4437037 — VAT No. 577 5913 90
www.aima.org
Contact us
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+44 20 7822 8380
info@aima.org
AIMA in the USA
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+1 646 397 8411
mnoyes@aima.org
AIMA Hong Kong
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+852 2526 0211
hongkong@aima.org
AIMA Singapore
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+65 6535 5494
singapore@aima.org
AIMA Australia
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+61 412 224 400
mgallagher@aima-australia.org
AIMA Canada
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+1 416 453 0111
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AIMA Cayman
cayman@aima.org
AIMA Japan
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www.aima.org