CACEIS NEWS 37

First page 1 Next page Last page

THE ASSET SERVICING JOURNAL

The Asset Servicing Journal

MArch 2014 N o. 37

www.caceis.com

CACEIS becomes member of the Chinese Asset Management Association of Hong Kong (CAMAHK) p.7

Interviewwith Lionel Martellini, Professor of Finance, EDHEC and Scientific Director, EDHEC-Risk Institute. p.3

Interviewwith Johann Schwimann, CEO of Seven Capital Management p.5

New frontiers in risk assessment and performance reporting In this new research, EDHEC-Risk Institute is introducing an improved measure to allow institutional investors better assess portfolio diversification and risk-adjusted performance. p.2 OLIS adapts to mobile usage CACEIS has transformed OLIS into an interactive web portal in order to offer its clients a single way of accessing all of their activities, from any location. p.4 CACEIS assists institutional

Establishing the right conditions to favour business development

has been instrumental in strengthening our leadership position as Europe’s largest depo- sitary and premier fund administrator. Our pragmatic business approach has enabled us to address these market and regulatory constraints and complexities and to search out new ways of building long-term and mutually beneficial partnerships with our clients. Our aim has always been to create a business framework where we operate under a highly efficient cost structure. The goal is to give ourselves the financial flexibility to invest into our business by expanding our products and solutions whilst providing competitive rates for our clients. As a result, CACEIS is currently the best capitalised asset servicing provider in Europe. As far as CACEIS’s full service strategy is concerned, we provide a one stop shop ca- pable of servicing all clients’ needs post-in- vestment decision. Clients favour a provider that is capable of offering not just expertise in one area, but rather a full range of services in order to reduce operational complexity, and to concentrate resources on their value- added functions. EMIR and MiFID have certainly generated numerous challenges for asset managers. To help clients overcome these challenges, CACEIS Prime Fund Solutions business line coordinates the group’s electronic execution, clearing and collateral management solu- tions for derivatives, all of which are per- fectly integrated with our fund custody and administration services. The AIFM Directive comes also with a set of challenges and opportunities for fund managers. As a leading European custodian and administrator for alternative funds and an experienced partner in the AIF mar-

ket, holding AIF assets of approximately €300bn, CACEIS helps fund managers com- ply with and take full advantage of the AIFM Directive. We are able to provide support and customised solutions for all types of AIFM, whatever the asset class (hedge funds, Private Equity, Real Estate, and other non- UCITS). In the expert market that is the Private Equity and Real Estate, the right skills, ex- perience and resources are vital to succeed. CACEIS’s experienced teams in Europe and the US assist clients, from boutique opera- tions to some of the world’s largest financial institutions, providing customised solutions for a broad spectrum of structures, strate- gies, sectors and countries of investment, from the initial plan through to daily admi- nistration needs. In addition to our new banking operations in Belgium and the Netherlands, we have recently expanded our banking network by opening our branch in Italy. We are now able to support our existing Italian clients in their home country. In the upcoming years we will continue to enlarge our banking network to other domiciles that will enable us to accom- pany our existing clients in their business expansion and to support CACEIS organic growth strategy. CACEIS’s regional sales teams have step- ped up the pace in recent months, working to keep our existing and prospective clients informed of new servicing opportunities designed to help them meet the challenges that arise with new regulatory measures. The sales teams and I look forward to having the opportunity to meet with you at investment forums and other occasions throughout the year, to discuss the industry and our respec- tive companies’ ongoing business develop- ment plans ■

investors with private equity and real estate investments

A positive outlook for Italy’s asset management community and CACEIS’s Milan office

JOE saliba, Deputy CEO, CACEIS Group

T he financial sector has been going through challenging times. Our clients have been trying to operate in a lacklustre economy creating significant pres- sure to reduce their costs while complying with a new regulatory environment that re- quires large investments in their IT, business processes and organisational structure. For asset servicers, these market conditions have also created a new landscape that is characte- rised by fierce competition between service providers and heavy downward pressure on prices. At the same time, asset servicing pro- viders have to cope with an incessant barrage of new regulations and a growing number of new requests from clients to outsource more administrative functions in order to fully focus on their core business. Asset servicing providers must therefore continue to gene- rate healthy financial results in a constrained environment where fees are dwindling, inte- rest rates are low, risk obligations are high and there is a significant increase in capital investment. At CACEIS, since the 2008 financial crisis, we have put in place a business strategy that

CACEIS has long serviced Italian clients from its European entities. A new office in Milan combined with the Italian market’s renewed appetite for investment funds provides many opportunities for CACEIS to demonstrate its expertise in supporting the country’s investment community. p.6 CACEIS at The BSI Summit 2014 in Frankfurt The BSI Summit took

place from 18 th to 19 th February, 2014, in

the Congress Center in Frankfurt amMain. This is the most important annual event of the German asset management industry for closed-end-funds. p.7

produCts AND services New frontiers in risk assessment and performance reporting In this new research, EDHEC-Risk Institute is introducing an improved measure to allow institutional investors better assess portfolio diversification and risk-adjusted performance.

2 caceis news - No. 37 - March 2014

I n a new publication entitled “Improved Risk Reporting with Factor-Based Diver- sification Measures,” drawn from the ED- HEC-Risk Institute research chair supported by CACEIS on “New Frontiers in Risk As- sessment and Performance Reporting,” ED- HEC-Risk Institute encourages institutional investors to look carefully at the effectiveness of their portfolio diversification. Before the financial crisis, pension funds were insufficiently diversified, with concen- tration in a small number of asset categories. Since the crisis of 2007, there has been a gen- uine trend towards investment in new asset classes and categories in order to diversify, but that does not mean that the diversifica- tion is effective. The study examined the 1,000 largest US pension funds as of 30 September 2002, 30 September 2007 and 30 September 2012. The research introduces new diversification measures based on the concept of risk allo- cation rather than the concept of asset allo- cation. The authors’ aim was to measure the Why is CACEIS sponsoring the EDHEC- Risk Institute’s research chair on “New Frontiers in Risk Assessment and Performance Reporting”? The sponsorship of this new three-year chair, demonstrates CACEIS’s desire to play a central role in the analysis of key developments in the industry. Gaining a fuller understanding of the risk factors to which asset management companies are exposed, enables the Group to enhance its client support by offering optimal servicing solutions. What is the main aim of this three-year chair and what are the key issues it raises? The chair, which is designed to aid institutional investors and asset managers, seeks to explore new concepts in risk assessment and performance reporting as well as new ways of applying those concepts that are currently popular in the investment industry. The chair will focus on two principal issues: ▷ The first is the impact on institutional investors’ and asset managers’ reporting of the increasing shift in ‘conceptual paradigm’ from an asset allocation policy to a risk allocation policy, which is leading to a focus on categories of risk rather than of assets. ▷ The second issue covers advances in extreme risk measurement and reporting for funds and institutional investments, with proposals for new risk indicators that enable improved measurement and management of investment risks.

correspondence between the appearance of diversification (the effective number of class- es or constituents, or ENC) and the reality of diversification (the effective number of bets, or ENB), which measures the actual number of independent risky bets taken by institu- tional investors. Risk-adjusted performance is measured more effectively by using ENB. Increasing the number of asset classes or categories without taking the inter-relations between their risks into account does not provide any real gain in terms, first, of diver- sification, and then of performance. This new research chair should lead to im- proved risk reporting, by shifting from asset allocation to risk factor allocation; enhanced risk measurement for diversified equity port- folios; and better geographic segmentation for equity investing. This work will result in another step forward for CACEIS as its business is at the crossroads of the needs of its clients and the services a major Asset Servicing player should be able to offer the asset management industry ■

The conference includes two major events that will allow professionals to review major industry challenges, explore state- of-the art investment techniques and benchmark practices to research advances. ▷ On the first day, the Indexation and Passive Investment Conference will explore smart beta allocation, new index and benchmark offerings in the equity and fixed income universes and risk management. The conference will also be the occasion to discover new research on portfolio construction and efficient risk diversification. ▷ On the second day, the Global Institutional Investment Conference will present the results of EDHEC-Risk research on themes of great interest to institutional investors. At the plenary session chaired by Joe Saliba , Deputy Chief Executive Officer, CACEIS, Lionel Martellini , Professor of Finance, EDHEC Business School, and Scientific Director, EDHEC-Risk Institute will comment the results of the research drawn from the chair supported by CACEIS “New Frontiers in Risk Assessment and Performance Reporting.” Monetary Authority of Singapore (MAS); the City of London in the United Kingdom; Nice and Paris in France; and New York in the United States. The philosophy of the institute is to validate its work by publication in prestigious academic journals, but also to make it available to professionals and to participate in industry debate through its Position Papers, published studies and conferences. Each year, EDHEC-Risk organises three conferences for professionals in order to present the results of its research, one in London (EDHEC-Risk Days Europe), one in Singapore (EDHEC-Risk Days Asia), and one in New York (EDHEC-Risk Days North America) attracting more than 2,500 professional delegates. About EDHEC-Risk Institute EDHEC-Risk Institute is located at campuses in Singapore, which was established at the invitation of the

A copy of “Improved Risk Reporting with Factor-Based Diversification Measures” is available on www.caceis.com

Interview with Philippe Bourgues, Head of Operational Line – Front Office Solutions, CACEIS

How could EDHEC-Risk Institute’s proposed indicators, which enable improved portfolio risk measurement and diversification, be included in risk and performance reports generated by CACEIS, and which clients stand to benefit? According to the EDHEC-Risk Institute’s paper, the two formal measures of portfolio diversification - the Effective Number of Constituents and the Effective Number of Bets - afford asset managers a ‘predictive view’. In addition to the Value-at-Risk and tracking error, the EDHEC-Risk Institute identifies other forward-looking (ex-ante) indicators which allow asset managers to understand potential risks to which their portfolios may be exposed. For example, an assessment can be made as to whether there is a correlation between a portfolio’s degree of risk diversification (using a suitable measurement), and its performance through various market conditions. This can be done by analysing correlated constituents to understand how well or poorly diversified a portfolio is. CACEIS’s massive investment data repository, when combined with the EDHEC-Risk Institute’s powerful statistical analysis techniques, offers new insights into risk and performance that could lead to major improvements in investment reporting going forward. These indicators could well assist asset managers and institutional investors in selecting funds for any asset class. The process would of course be tailored to suit each specific asset management profile ■

“ The two formal measures of portfolio diversification - the Effective Number of Constituents and the Effective Number of Bets - afford asset managers a predictive view. ”

No. 37 - March 2014 - caceis news 3 products and services

Interview of Lionel Martellini, Professor of Finance, EDHEC Business School, and Scientific Director, of the EDHEC-Risk Institute regarding the first study carried out within the framework of the new research chair, sponsored by CACEIS

Why have you chosen to study asset allo- cation by means of risk factors rather than asset classes? Analysis of diversification in terms of risk factors has become a new paradigm. Its emergence has been supported by the high- lighting of the limitations of the convention- al approach, based on the supposed advan- tages of diversification between asset classes. First of all, it is worth recognising that a breakdown by asset classes is often arbitrary. For example, convertible bond yields are ex- posed not only to interest rate and credit risk, but also - due to the conversion option - to equity and volatility risk. As a result, treating these securities as if they belong to the bond class is debatable as a classification choice. Another limitation relates to the correlation of asset classes. An investor practising conven- tional diversification and allocating the same amount to different correlated assets may be under the illusion of managing a well-diversi- fied portfolio. In practice, however, their port- folio may be subject to high concentration of a small number of risk factors. For example, an investor holding 25% equi- ties, 25% corporate bonds, 25% speculative funds and 25% private equity would be very likely to be exposed to a dominant risk fac- tor. This reasoning applies to short-term and long-term investments. Are the advantages of diversifying invest- ments illusory? Although it is well known that diversifica- tion consists intuitively of not putting all of your eggs in one basket, it should be recog- nised that this is still a rather ambiguous for- mulation. As stated above, the conventional approach consists of saying that each basket is repre- sented by an asset class and that being well diversified consists of the investor spreading their eggs (money) across the largest pos- sible number of baskets (asset classes). This poses at least two problems. Firstly, reasoning in terms of correlated as- set classes is not satisfactory. It is hard to see what the advantage would be of putting your eggs in different baskets if these baskets are related to each other, which means that they could all collapse together. Furthermore, it seems important to take ac- count of the risk associated with each of these baskets. If we have two baskets, but the sec- ond is much more fragile than the first, equal allocation of the eggs between both baskets would not be appropriate. The desire for di- versification would inevitably result in trying to allocate different assets so that each has an equal contribution in terms of risk, rather than in purely monetary terms. It is only within a fictional context with decorrelated assets of the same risk that equally weighted allocation would result in all assets making an equal con- tribution to portfolio risk.

Are there any indicators that allow for cor- relations to be identified between asset classes in order to give a coherent overview of the risks? It should be noted that counting the number of baskets - whether represented by correlat- ed asset classes or decorrelated risk factors - is not as easy as it seems. For example, if an investor allocates 99% of their wealth to a particular asset class or risk factor, while the remaining 1% is allocated to 9 other as- set classes or risk factors, it would clearly be of little relevance to say that the number of constituents represented in the investor’s portfolio is equal to 10. The effective number in terms of risk assessment would be much lower, in this case just above 1. In order to give a more relevant measure- ment of the number of constituents in a portfolio, an indicator can be introduced, called effective number of constituents” or ENC, formally defined as the entropy of the weight distribution of the portfolio. This quantity tends towards 1 when the portfolio tends to be concentrated as a single asset, and takes on a value equal to the nominal number of constituents if the portfolio is equally weighted. Therefore, in the same way as duration is a more relevant measurement of the effective maturity of a bond than facial maturity, the effective number of constituents is a more relevant measurement of the number of bas- kets than the nominal number. The “effective number of bets” (ENB) is defined as the en- tropy of the distribution of contributions of a series of non-correlated risk factors repre- senting total portfolio risk. This means that a portfolio invested with equal weighting in very closely correlated assets - such as bonds from the same sover- eign issuer - will have a high ENC but a low ENB (well diversified in terms of allocation to portfolio constituents but highly concen- trated in terms of exposure to risk factors). ENB allows for more in-depth risk analysis than ENC. You have studied the performances over 55 years of 14 major international equity indi- ces (United States, Europe, Asia). How well diversified are they? Building up a stock market index on the ba- sis of weighting proportional to market capi- talisation poses a problem, as this system of weighting tends to create portfolios with a high concentration of investments in a rela- tively small number of stocks, precisely those with the largest capitalisations. Within a universe like the CAC 40, the FTSE 100 or the S&P 500, there are considerable differences in terms of size of capitalisation. These very marked differences imply that the smallest stocks in each universe receive just a very small allocation within the index. This concentration leads to a high opportunity cost in terms of diversification. By definition, poorly diversified portfolios contain excess

risk without remuneration, and in this re- spect do not represent effective benchmarks for investors looking for the best risk-reward profile. You dedicate another part of your study to analysis of the 10 largest pension fund portfolios in the world and the 1,000 larg- est US pension fund portfolios. What is the main conclusion of this? The main conclusion obtained from our study of the diversification of US pension funds is that there is a positive relationship between the effective number of bets and performance in downward markets. The most well diversified funds, within the sense of a higher effective number of bets, have tended to be more resilient to extreme mar- ket situations, such as that of autumn 2008. Although statistically significant, however, this is not a linear relationship. As can be expected, the pension funds performed best in 2008 are those that adopted an extremely concentrated portfolio, investing exclusively in risk-free assets. Furthermore, this relationship is much weaker when diversification is measured by the effective number of constituents, which confirms the idea that reasoning in terms of independent risk factors allows for a better assessment of the level of diversification of a portfolio. In your opinion, how could this study con- tribute to changes in measurement, perfor- mance attribution and risk reporting com- ponents? The study demonstrates the possibility of in- troducing new indicators to help to improve portfolios’ ex-ante risk analysis. Within this context, it seems that indicators such as the effective number of independent bets in a given portfolio allow asset manag- ers to make a better assessment of the degree of portfolio diversification and therefore the performance potential of their portfolios un- der different market conditions. The introduction of these indicators could be useful both within the context of inter-class allocation and within the context of an intra- class portfolio, such as an equity portfolio ■

“ The study demonstrates the possibility of introducing new

indicators to help to improve portfolios’

ex-ante risk analysis. ”

4 caceis news - No. 37 - March 2014 products and services OLIS adapts to mobile usage

CACEIS has transformed OLIS into an interactive web portal in order to offer its clients a single way of accessing all of their activities, from any location. C lients benefit from a new architecture and graphical interface tailored to demands of mobile usage. They have an overview of all of their transactions and reports in order to enable them to manage their assets quickly in a flexible and secure environment. A new user-friendly approach OLIS opens on a screen suited for use on both desktop PCs and touch-screen tablets. The welcome screen is the true nerve cen- tre of activities, with a list of reports and dy- namic mosaic blocks that provide the latest information about CACEIS. This screen can

be customised according to clients’ needs. Users can directly access the functions and reports they wish, thereby improving their personal productivity. They can also add several slides to the screen to go from one feature to another without losing previous screen displays and without having to go through the main menu. A single entry point From the business line welcome screen, cli- ents obtain improved visibility and more di- rect access to all information relating to their relationship with CACEIS, including cus- tody services, cash management, treasury, fund administration, depositary services, monitoring of the fund distribution net- work, performance measurement and risk analysis. Currently available features remain inchanged. Clients can continue to use the tool in the same way. OLIS is integrated directly into all of CACEIS’ IT systems, thereby ensuring its re- liability. The site also allows for instructions to be passed on and files to be downloaded.

Customisable reporting CACEIS offers additional services, from re- al-time reporting, covering all types of assets and instructions, which can be downloaded in a variety of formats, to online validation of net asset values. Using the most reliable internet technology, the tool is available 24 hours a day in a fully secure environment. Clients can create re- quests with criteria that suit their activities. Files can be exported on request and can also be programmed in order to generate reports sent to recipients by e-mail with the sched- ule, format (xls, csv, txt) and frequency of their choice.

With OLIS, clients benefit from tools to analyse their assets, ongoing accurate infor- mation, intuitive features and customisable reporting, with in-depth data to help with decision-making. Users can consolidate their information of choice quickly, make checks, understand performances and thereby dem- onstrate the advantages of their investment strategy ■ CACEIS assists

arnaud Misset, Group Product & Solutions Deputy Director, CACEIS

institutional investors with private equity and real estate investments

gilles de foucault, Product Manager, CACEIS

Institutional investors are taking an keen interest in new asset classes that are independent from the volatility of listed markets. CACEIS provides them with services to make it easier to diversify their investments. L ow returns and the volatility of the finan- cial markets over the last few years have led to growing interest among institu- tional investors in unlisted assets. Real estate, private equity and private debt now play a sig- nificant role in the medium to long-term asset management allocation strategies of insurance companies, pension funds and sovereign funds. Controlling financial flows Investments via a selection of private equity funds increasingly take the form of a regular

succession of cash flow dependent on the life cycle of the investments. To manage their li- quidity risk, investors build cash flow projec- tions for each of the funds in their portfolio. Consolidated at the level of an institutional in- vestor and updated as calls for funds and pay- outs occur, these projections help to maintain the actual level of investments (cash at work). Control of financial flows and their recognition is one of the key functions helping to safeguard the creation of institutional investors’ portfolios over the medium to long term. Valuation of unlisted assets Other functions are just as essential, such as valuation of unlisted assets. This meets two aims: obtaining precise information for in- vestors’ accounting purposes and analysing portfolio performance and risks. At the level of an institutional investor, valuation usu- ally requires automated exchanges with asset managers. The implementation of a single tool providing a link between an investor’s assets and commitments also allows for automated adjustment of valuations as calls for funds and payouts are made.

CACEIS enjoys specialist Private Equity & Real Estate Servicing teams and dedicated systems enabling it to support institutional investors investing in unlisted assets across all middle and back office functions ■ “ Control of financial flows and their recognition is one

Performance analysis Full mastery of portfolio data helps to create bespoke periodical reports. Benchmarking funds in the portfolio with their peers, com- paring the performance of investment strat- egies or periods, identifying the strongest performing investment regions or under- standing the maturity of portfolios are all useful areas of analysis for asset managers. Depending on the depth of data, analysis can be carried out on the basis of transparency up to the level of assets held by funds in the portfolio. Risk management Integrating financial flows into internal risk models also allows for models to be created of the composition of the portfolio and meas- urement of the correlation between assets. Furthermore, by creating a model of past rates of return for their portfolio, investors can design scenarios allowing them to simu- late future asset performance and quantify the level of liquidity risk relating to their ini- tial cash flow projections.

of the key functions, helping to safeguard the creation of institutional investors’ portfolios over the medium to long term. ”

No. 37 - March 2014 - caceis news 5 PRODUCTS AND SERVICES

Seven Capital Management has received an AIFMD marketing passport

Interview of Johann Schwimann, CEO of Seven Capital Management.

as well as the issues raised by the AIFM direc- tive to support the launch of our BlackSnake SICAV SIF fund. As Europe’s leading deposi- tary and fund administrator of alternative in- of outsourcing services for middle and back- received AIFM accreditation. Seven Capital Management has developed a fund management process based on risk analysis that has been awarded “Jeune Entreprise Innovante” (JEI) status by the French Ministry of Research. How would you characterise your fund management models? Our fund management models are 100% quantitative and systematic, and innovative on building up portfolios with a long-bias strat- is fully integrated into the fund management process; and thirdly, a general signals matrix with the use of highly innovative risk signals. - sponsiveness during erratic market phases

asset management companies in France to have received AIFM accreditation in August 2013 and also to have received a marketing “passport”. Do you see this new regulatory framework as an opportunity to develop your international activities? help the marketing of our products in other countries. Obtaining AIFM accreditation ena- bles us to highlight the quality of Seven Capital Management’s structure and controlling bod- ies, and to reach a new kind of client for whom AIFM accreditation is a prerequisite. Furthermore, with changes to regulatory re- quirements and the ban on using swaps and will present a solid alternative to alternative - sure to the initial strategy. Under the AIFM directive, asset manage- ment companies are subject to new require- ments. Which services provided by CACEIS help Seven Capital Management to meet reg- ulators’ demands? We needed a service provider with full knowl- edge of the French and Luxembourg markets,

CACEIS provides custodian and fund administrator services to Seven Capital Management Seven Capital Management has selected CACEIS in Luxembourg as custodian and administrator for its Seven Lux SICAV-SIF fund, whose BlackSnake sub-fund is the rst to be granted a European passport for direct alternative investment fund management. Founded in 2006, Paris-based Seven Capital Management is an independent and innovative management company specialising in absolute performance management. Last August it became the rst alternative investment management from the AMF, the French nancial markets supervisory authority. is authorisation permits it to manage its alternative investment funds (AIFs) within the European Union, and using the cross-border marketing passport, market them throughout EU Member States. Seven Capital Management has also obtained the rst European cross-border management passport enabling it to manage the BlackSnake sub-fund directly from France. Joe Saliba , Deputy Chief Executive O cer at CACEIS group, said: “With a strong presence in Europe, and particularly in France and Luxembourg, CACEIS has developed an overall service o ering for AIFs, no matter what asset classes are involved. We are delighted to work alongside Seven Capital Management as it capitalises on this rst European cross-border passport for direct alternative investment fund management.” company in France to receive AIFM (Alternative Investment Fund Managers) authorisation

CACEIS‘s dedicated solutions for alternative investment products

Fund administration and NAV calculation

Depositary/Trustee and Custody services

Fund structuring & Domiciliary agent

Substance services for alternative UCITS

. A comprehensive depositary bank/ trustee function performed by our risk and compliance experts . Reliable custody services providing settlement and safekeeping of assets worldwide in over 80 markets

. Flexible models for UCITS substance

. Independent valuation of alternative asset portfolios and provision of a global and consolidated view of assets . Accurate and exible performance fee & equalisation calculation service

. Assistance to establish the structure that best meets your investment and distribution needs

. Comprehensive risk management reporting

. Assistance in fund re-domiciliation

. Full domiciliary agent and corporate secretarial services in certain key jurisdictions

Know-How in alternative investments and established track-record

A wide variety of alternative products serviced

Middle-O ce & Risk Analytics

Highly-experienced people to service you

Alternative products accounting for more than 20% of the total assets under custody and/or administration of CACEIS in Ireland and Luxembourg, and for 100% of CACEIS in North America

. Hedge funds; Funds of hedge funds; Futures & options funds; Managed accounts and structured products; Alternative UCITS . Alternative product coverage continuously enhanced to support our clients’ needs

. Exceptional technical expertise to service investment strategies involving leverage, OTC instruments and multiple market counterparts . Active market & regulatory watch, plus participation in main industry committees in all countries where CACEIS is established

. Trade management and portfolio recordkeeping . Performance and risk analytics reporting

Timeline 2014

UCITS V On February 25 th , the trialogue

CENTRAL SECURITIES DEPOSITORIES REGULATION On February 26 th , the European Council’s

discussions between the European Council, the parliament and the European Commission on Ucits V reached a consensus. Vote in Plenary expected before the European elections of May 2014.

AIFM EU alternative

EUROPEAN LONG TERM INVESTMENT FUNDS S European Parliament: Vote in Plenary expected before the European elections of May 2014.

managers have up until July 22 nd 2014 to apply for their licence, while non-EU firms managing EU alternative funds need to apply by July 22 nd 2015.

MiFID AND MiFIR European Parliament: Vote in Plenary

committee of permanent representatives, known as Coreper, confirmed the trialogue agreement. European Parliament: Vote in Plenary expected before the European elections of May 2014.

FOREIGN ACCOUNT TAX AND COMPLIANCE ACT will come into force on July 1 st , 2014.

MAY 2014 European Parliament elections.

expected before the European elections of May 2014.

2014

products and services

6 caceis news - No. 37 - March 2014

new business

Tikehau IM Asset manager Tikehau IM and its service provider CACEIS have set up the FCT Novo 2 French mutual securitisation fund. Working with Tikehau IM, which manages the fund, CACEIS provides depositary and accounting services, maintains the shareholder register and also acts as the settlement bank for the fund. As a fund set up to lend to the French economy, the aim of FCT Novo 2 is to grant loans to small and medium-sized enterprises (SMEs) to finance growth businesses. Its investment universe is focused on the financing of medium-sized French businesses. partnership: “We put forward the name of CACEIS to fund’s initiators, (the investors, the CDC and the FFSA), to act as depositary for the fund’s cash and receivables. CACEIS performs this role for all our mutual securitisation funds and we value the group’s responsiveness, its fast handling of processes and the consistent quality of its services; the choice was clear.” Joe Saliba , Deputy CEO of CACEIS, said: “We are proud Tikehau IM selected us to co- found this French SME loan fund and have supported the group since they set up their first mutual securitisation fund. The CACEIS group has developed recognised expertise in the innovative financing arena and aims to play an increasingly important role in the securitisation market.” ■ ABN AMRO Investment Management B.V. ABN AMRO Investment Management B.V. has launched the first two ABN AMRO Basic UCITS ETFs which have been listed on Euronext Amsterdam since 6th February. Following a long RFP process, ABN AMRO awarded the fund administration mandate to CACEIS, which is responsible for providing accounting and related services to the funds. The two ABN AMRO Basic UCITS ETFs respond to the strong demand for passive investment fund solutions in the market. The Dutch domiciled funds invest in a physical basket of shares which replicates the complete composition of the tracked index. The funds do not make use of securities borrowing and lending, and therefore there is no counterparty risk with the ETFs. They can be bought in the orderbook or on the closing NAV of the day. According to Bart Mantje , Director at ABN AMRO Investment Management, “We are delighted to be able to offer these high quality investment solutions to the market. We believe that ABN AMRO Investment Management, combined with the advanced ETF fund administration services of a leading provider like CACEIS demonstrates our willingness to respond to the market’s demands for simple and transparent investment opportunities”. Joe Saliba , Deputy CEO of CACEIS said, “We have been working closely with ABN AMRO Investment Management to ensure that our market-leading ETF servicing capabilities are precisely tailored to our client’s requirements. The CACEIS group is also strengthening its commitment to the entire Dutch market, as our new banking license enables us to greatly extend the range of services available to clients through our Amsterdam office.” ■ Bruno de Pampelonne , Chairman of Tikehau IM, commented on the

CACEIS Piazza Cavour, 2 I-20121 Milano

CACEIS has long serviced Italian clients from its European entities. A new office in Milan combined with the Italian market’s renewed appetite for investment funds provides many opportunities for CACEIS to demonstrate its expertise in supporting the country’s investment community. A positive outlook for Italy’s asset management community and CACEIS’s Milan office

giorgio solcia, Managing Director, CACEIS, Italy

I taly is one of the largest economies in Europe and in recent years its investment fund in- dustry has seen steadily rising asset inflows that have now exceeded pre-crisis levels. Indeed, the latest figures from Assogestioni - the Italian asset management association – show that assets under management on behalf of third parties, including foreign funds, amount to €1.3 trillion, of which discretionary mandates account for €730 billion as at end January 2014. This grow- ing market creates a wealth of opportunities for the asset management industry, and CACEIS is ready to support the development of Italian clients’ business, leveraging both its Milan of- fice’s deep-rooted market knowledge and the CACEIS Group’s broad asset servicing expertise and global network coverage. Carrying forward real estate momentum CACEIS in Italy already services a number of real estate clients which together rank us as

the fourth largest player servicing real estate vehicles in the market. These clients are in a strong position to benefit from working with a large international group like CACEIS with extensive expertise in servicing Real Estate, Private Equity and other alternative structures. Through their dedicated local contact in Italy, our Italian Real Estate clients have access to the group’s knowledge base and to our centres of excellence in Europe. Our experts can assist in selecting the optimum operational struc- ture and vehicle to take advantage in interna- tional opportunities to develop new business. A comprehensive offer to market participants But CACEIS’s service offer to the Italian market covers a far broader range of support than just the alternative investment sector. Our business development strategy has always been to pro- vide the full range of asset servicing capabilities, and CACEIS in Italy offers depositary banking, fund administration and custody services to- gether with Prime Funds Solutions designed to achieve EMIR compliance. The comprehensive service offer is designed to enable asset managers, pension funds, insur- ance companies and banks to focus resources on their core business, while relying on the robust, efficient and transparent services of an experi- enced global asset servicing company. Leveraging local market insight A further advantage of our presence in Italy is that, as of now, clients throughout the CACEIS group’s worldwide network can benefit from the Italian office’s local market knowledge. Those looking to expand their existing operations into Italy will be able to rely on the support of an ex- perienced team with a clear understanding of cultural differences, regulatory issues, admin- istrative procedures, and distribution opportu- nities in the Italian market. This level of local

market support, in conjunction with the strong signs of continued growth in asset inflows, pre- sents itself as an attractive opportunity for in- vestment management companies to broaden the geographic scope of their operations and market their products in Italy. As one of the major global asset servicing pro- viders operating in the Italian market, CACEIS will be exhibiting at Il Salone del Risparmio, the most important Italian forum exclusively fo- cused on the asset management industry. This event, held from 26 th to 28 th March, is an excel- lent opportunity for our sales teams and other members of CACEIS to network and to discuss the state of industry with both delegates and other exhibitors from across the investment in- dustry. At the forum, please feel free to come by to meet your new team for the Italian market, and find out how partnering with a large global company like CACEIS can help you achieve your business development objectives ■

roberto colapinto, Head of Regional Coverage, clients from South America and South Europe, CACEIS

We look forward to welcoming you to our stand C73

No. 37 - March 2014 - caceis news 7 events

CACEIS at The BSI Summit 2014 in Frankfurt The BSI Summit took place from 18 th to 19 th February, 2014, in the Congress Center in Frankfurt amMain. It is the most important annual event of the German asset management industry for closed-end-funds.

CACEIS becomes member of the Chinese Asset Management Association of Hong Kong (CAMAHK)

perspective, displaying the process from the selection considerations to the established relationship. First speaker of the CACEIS panel was Holger Sepp , Co-Head of CACEIS in Germany, giving an overview of CACEIS’s depositary services. Christian Hogrebe , Head of Business Development, CACEIS in Germany, ex- plained how client relationship functions as a key factor in success as a depositary and talked about the requirements for successful long-term partnerships. Heike Findeisen , Business Development Director, CACEIS in Luxembourg, talked about how the comprehensive AIFMD service- range of CACEIS builds on its long-standing “alternative Investments”- experience ■

T he CAMAHK currently has 48 members. The association’s man- agement board encompasses repre- sentatives from seven top Mainland fund managers: China AMC, CSOP, E Fund, HuaAn, Fullgoal, Bosera, and HFT. The association exists to facilitate the offshore RMB business and further the overseas businesses of Chinese fund managers. This strategy is highlighted by the re-

C ACEIS´s second participation as a sponsor at the fair involved branding, a booth and a 90 minute panel featur- ing three CACEIS presentations: As a guest speaker at the panel Franz Unterbichler, Managing Director of LHI capital manage- ment GmbH, spoke about LHI`s experience with CACEIS. His first-hand field-report showed the depositary-service from a client´s

cently unveiled mutual fund recognition platform between Hong Kong and China. CACEIS Hong Kong recently became the very first non-Mainland background member and also the only service pro- vider in this association. This gives a great first starter advantage and opportunity to meet top Mainland fund managers ■ For more information: www.hkcama.com

conferences Q2 2014

in the press Q1 2014

1-3 April 2014 Fund ForumAsia - Hong Kong “Uncovering the operational mechanics of your Fund Distribution Strategy in Asia” Laurent Majchrzak, Head of Operational Line – FDS, CACEIS 3 April 2014 – Paris AGEFI Conference Post-marché 2014 - Paris “EMIR” Laurent Durdilly, Group Product & Solutions Director, CACEIS 10 April 2014 AGEFI Conférence Gestion Alternative - Paris “AIFMD” Jean-Philippe Ballin, Director of the Trustee Services, CACEIS

March 2014 HFM-Luxembourg Report “Supporting Luxembourg’s growing real estate market and managing risk in the alternative space” Pascal Hernalsteen , Head of Private Equity and Real Estate Servicing, CACEIS March 2014 Funds Europe “Asset Servicing Roundtable - AIFMD implementation” Barry McGloin , Business Development Manager, CACEIS February 2014 MENA Fund Manager “AIFMD” Vincent Marc , Head of Regional Coverage, Middle-East and Asian clients, CACEIS February 2014 Les Echos “ EMIR: Depositaries are in the front line” Laurent Durdilly , Group Product & Solutions Director, CACEIS ■

13-14 May 2014 BAI Alternative Investment Conference 2014 - Frankfurt

13-16 May 2014 Skybridge Alternative - Las Vegas

A global player in asset servicing... Offering leading value in investor services demands constant evolution. At CACEIS, our strategy of sustained growth is helping customers meet competitive challenges on a global scale. Find out how our highly adapted investor

17-19 June 2014 ISLA’s 23 rd Annual International Securities Lending Conference - Berlin

services can keep you a leap ahead. CACEIS, your comprehensive asset servicing partner.

23-26 June 2014 Fund Forum International - Monaco François Marion, Chief Executive Officer, CACEIS ■

... and climbing. Custody-Depositary / Trustee Fund Administration Issuer Services www.caceis.com

Publishing Director: Eric Dérobert - Editor: Philippe Naudé +33 1 57 78 10 68 philippe.naude@caceis.com - Design: Sylvie Revest Photos credit: Yves Maisonneuve, Yves Collinet, CACEIS; Dominique Amphonesinh; Fotolia - Printer: GRAPH’IMPRIM certified Imprim’vert®. This document is printed on Cyclus paper, 100% recycled fiber, certified Blaue Engel, Nordic Ecolabel and Ecolabel européen - Number ISSN: 1952-6695 For further information on our products and services, please contact your Business Development Manager. This newsletter has been produced by CACEIS. CACEIS cannot be held responsible for any inaccuracies or errors of interpretation, which this document may contain. www.caceis.com

8 caceis news - No. 37 - March 2014

Worldwide

Europe

Country Focus - France

Luxembourg Focus in the next Caceis news

Source: EFAMA - January 2014

Source: EFAMA - March 2014

Total assets under management (AUM) in France (€ billion)

Net assets of the European Fund industry Q4 2013 (€ billion) The combined assets of the investment fund market in Europe, i.e. the market for UCITS and non-UCITS, increased by 3.2% during the last quarter of 2013 and reach a rise of 8.9% in 2013 to stand at €9,788 billion.

Worldwide Investment Fund Assets Q3 2013 (€ trillion) Investment fund assets worldwide increased 3.5% during the third quarter to stand at EUR 23.37 trillion at end September 2013.

Funds and discretionary mandates posted asset growth of 3.1% last year. Assets under management across the industry rose to some €3 trillion at the end of 2013 including assets held in discretionary mandates and foreign-domiciled funds. French-law funds increased by 1.2%, while foreign-law funds that are managed in France reported strong growth, seeing their asset pool jump by 5.2%.

French funds Mandates (inc. foreign funds)

1,523 3,023 +3.1%

1,506 2,932 +5.9%

1,514 2,917 +4.2% 2,768 -5.1%

2,800 +11.6%

1,594 2,779 +4.6% 2,509 -9.7%

1,544 2,658 +13%

23.78 22.94 23.37

1,523

1,329 2,354 +13%

19.97 20.85 21.42 21.95 22.17

1,387

1,164 2,087 +16%

1,384

Country Austria Belgium Bulgaria

€bn 150

1,798 +7%

1,016 1,686 +15%

1.5% 1.0%

1,473 +4%

1,050

1,500

888

1,426

1,403

1,381

0 5

- -

1,277

1,185

1,125

1,114

1,025

Czech Republic

2011

2012

2013

923

748

670

Denmark

186

1.9% 0.8%

585

Total net assets Type Split - Q3 2013

Finland France

1,525 1,405

15.6% 14.3%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Equity

39%

Germany

Source: AMF and AFG estimates for end 2011 for mandates and foreign funds, FCPEs, FCPRs and OPCIs.

Money Market

15%

Greece

0.1% 0.2%

Hungary

Bond

23%

AUM by French fund category

Ireland

1,344

13.7%

Balanced

11%

Italy

209

2.1% 0.3%

Net assets (€billion)

Variation 2013

Liechtenstein Luxembourg

Other

12%

2,615

26.7%

€bn

31/12/12 31/12/13

Malta

0.1% 0.9% 0.8% 0.5% 0.3%

Equity

234.1 269.0 248.1 265.6 14.3 12.4 47.3 42.8 209.0 204.1

34.9 14.9% 17.5 7.1% -1.9 -13.3% -4.5 -9.5% -4.9 -2.3%

Trends by investment type Q2 2013 (€ trillion)

Netherlands

73 79 45 25

Balanced

Norway Poland Portugal Romania Slovakia Slovenia

FAIF

Equity fund assets worldwide increased 5.8% during the third quarter to €9.2 trillion as well as net assets of balanced/mixed funds 1.9% to stand at €2.6 trillion. Net assets of money market funds recorded a slight increase of 1.1% during the quarter to €3.5 trillion. Over the same period net assets of bond funds fell 2.18% to stand at €5.3 trillion.

Structured

Equity and diversified funds benefited from last year’s stock market rally with an increase of respectively 14.9% and 7.1%. Money market funds decreased of 13.31% and bond funds by 2.3%.

Bonds

4 4 2

- - -

Money market

363.7 315.9 -47.8 -13.31%

Others (FCPE, FCPR, FCIMT)

389.5 413.6

24.1 6.2% 17.4 1.2 %

1,506.0 1,523.4

TOTAL

Spain

185 200 357

2.0% 2.0% 3.7% 0.2%

Source: AMF and AFG estimates for “Other“ FAIF: Funds of alternative investment funds

Sweden

Money Market Bonds Balanced

Equity

Switzerland

Turkey

Sweden 2.6%

Luxembourg 0.6% Ireland 0.3%

United Kingdom

1,121 9,788 6,866 2,922

11.3%

Fund Management in Europe Based on the countries in which the financial management of investment funds is actually performed, France is now third with a 18.1% market share, following the UK (19.6%) and Germany (18.8%).

Italy 4.5%

Total UCITS

100.0%

Spain 1.8%

Belgium 2.3%

70.1% 29.9%

Non-UCITS

Switzerland 7.6%

France 18.1%

European trends in assets by UCITS type Q42013 (€ billion)

USA 13.4%

Germany 18.8%

Equity funds increased of 5.8% to stand at €2,531 billion at quarter end. Bond fund net assets rose 1.0% or €20 billion to €1,942 billion. Net assets of balanced funds increased 4.5% during the quarter to €1,113 billion. In contrast, money market fund net assets reduced 2.3% during the quarter to €912 billion.

2011

2012

2013

Others 10.5%

Net Sales of Investment Funds Q3 2013 (€ billion)

United Kingdom 19.6%

Source: EFAMA, AFG, CSSF, IFIA

Investment funds worldwide registered net inflows amounting to €182 billion in the third quarter, up from €109 billion in the second quarter.

Money market Bonds Balanced Other (incl.FoF)

Equity

Fund domiciliation in Europe

2,800

26.6%

2,400

369

320

2,000

In terms of fund domiciliation Luxembourg remains the European leader with a 26.6% market share, followed by France ranked second (15.8%), Germany (14.3%) and Ireland (13.8%) of the European fund market.

15.8% 14.3% 13.8%

11.2%

193

1,600

182

167

102 147

109

1,200

2.1% 1.8%

800

Q3 Q4 -104

Italy

Q3 Q4

2013 Q1 Q2 Q3

Spain

400

France

Ireland

2011

2012

Germany

Luxembourg

United Kingdom

Source: AFG/EFAMA/ICI

2012

2013

Split by region of UCITS distribution Q3 2013

Number of asset management companies (units)

Net Sales of UCITS Q4 2013 (€ billion)

Others 2.6%

0 100 200 300 400 500 600 700 800 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20 30 40 50 60 Number of Asset management companies Number of company formations

Brazil 5 . 1%

Net sales of UCITS totaled €51 billion in the last quarter of 2013 to reach €229 billion in 2013 the highest level since 2006.

Australia 5 . 2%

The number of asset management companies in France rose last year, with 38 new firms being created. At the end of 2013, there were 613 fund firms in the country, compared with 604 at the end of 2012.

USA 50 . 1%

132

Europe 28.6%

China 1 . 3%

Canada 3.7%

Japan 3.4%

Source: AMF

2012

2013

Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8

Made with FlippingBook - professional solution for displaying marketing and sales documents online