Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
New York (HedgeCo.Net) – Hedge fund pioneers Ellen C. Schubert and Ray J. Iler have joined the hedge fund team of Deloitte LLP’s Asset Management Services practice.
Schubert joined Deloitte in the newly-created role of Chief Advisor to the Asset Management Services practice and is based in New York. Prior to joining Deloitte, Schubert was a managing director and global head of the Fixed Income Hedge Fund Business for UBS Investment Bank from 2006 until 2008.
Iler rejoined Deloitte as the Northwest Pacific hedge fund leader and is based in San Francisco. From 2001 to 2006, he founded the tax practice and served as Audit Partner for Deloitte’s Grand Cayman practice.
The new hires are the latest in a series of strategic growth initiatives executed over the last 18 months by Cary Stier, Deloitte’s U.S. Head of Asset Management Services.
“Challenging times call for new ideas. The breadth of our practice offers us the perspective vital to designing new solutions that help clients prepare for the unforeseen. There has been too much surprise in the market, a trend that cannot continue,” Stier added.
Ten current Deloitte partners have been newly-dedicated to Deloitte’s hedge fund team, joining the global bench of talent in accounting and tax, valuation, anti-fraud, governance and oversight, regulatory and compliance, risk management, technology and operations, structuring, and third party administrator/prime brokerage relationships.
Alex Akesson
Editor for HedgeCo.net alex@hedgeco.net HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
HedgeCo.net (West Palm Beach) – A new research paper by Deloitte LLC: "How Hedge Funds Are Becoming the Ultimate Networked Enterprise," focuses on how hedge fund methods of interacting with prime brokers and third-party administrators needs to be rethought in order to remain profitable as the roles of prime brokers and third-party administrators evolve.
"As investors demand increased transparency and operational risk management, hedge funds are faced with redefining their relationships with prime brokers and third-party administrators," Cary Stier, Deloitte’s U.S. Asset Management Services leader explained.
"While attraction and retention of capital remains a top priority for fund managers, in today’s market performance isn’t the only bull’s-eye a fund has to hit to accomplish these goals. Investors want assurance that the fund’s operating model has taken into consideration the events of the last year and has adjusted accordingly. At the same time, prime brokers, administrators and custodians are looking for new ways to serve managers," said Adam Broun, Deloitte’s Asset Management Services Consulting leader.
The report outlines five areas of focus for both prime brokers and third-party administrators:
Build the Middle-Office that Fits your Operating Strategy
Hedge funds need to determine their optimal operating strategy and factor in roles various service providers will play in providing necessary capabilities. Although most large firms will build their own middle-office, service offerings from fund administrators and custody players will prove to be compelling from both a cost and capability standpoint. Managing the network of service providers will require additional capabilities that the hedge funds will need to build and staff in-house.
The multiprime model will only increase the need for improved collateral management. Some hedge funds will benefit by outsourcing to enterprise collateral management service providers or implementing vendor solutions to efficiently manage their collateral across various parties. In addition to spreading collateral across parties, independent valuation of illiquid assets, zero over-collateralization and optimal collateral composition will be the key focus areas.
Plan Risk Management
Risk management will see a balance of focus between market risk for investment strategies and counterparty risk. In a multiprime model, a single broker’s risk report will show only a partial picture of the risk profile. Risk management will need to be a central function that aggregates positions across all providers. Take this opportunity to separate risk management from investment management.
Choose the Right Mix of Prime Brokers
The choice of prime brokers should be guided by aligning the fund manager’s needs to the prime
Third-party administrators can help hedge funds outsource several middle- and back-office functions. With the increased complexity of the middle- and back-office, hedge funds should at least understand the range of services available from their administrators.
Implications for Prime Brokers
Prime brokers are experiencing a major shift in their business model. Their focus on developing deep relationships with a few hedge fund clients is no longer working in a multiprime environment, where risk diversification and access to capital is taking center stage. As lending stays constrained, prime brokers will be required to improve capabilities to deal with new clients and existing capabilities may lose favor among the hedge funds adopting the multiprime model.
Implications for Third-Party Administrators
Third-party administrators are being challenged by handling increased product complexities, technology scalability and international growth. While hedge funds outsource middle-offices and evaluate ways to reduce costs, third-party administrators will need to cut costs and potentially look into moving their back offices to cost-effective locations. Some may offer prime broker-like services to improve profitability and further increase competition in the market or go global; others will more closely align with custodians or consolidate for scale.
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HedgeCo.net (West Palm Beach) – International hedge fund manager and Swiss banking group, SYZ & CO, has acquired 50% of the asset management company owned by Spanish alternative investment group N+1.
The joint venture, named “N+1 SYZ Gestión”, will provide asset management services to high level clients in Spain, providing discretionary or advisory mandates for large family groups or institutional clients, as well as for investment funds and funds of hedge funds.
“As has been the case in Italy, we have preferred entering into a partnership with a solid and well-established local partner. This enables us to provide offerings that are adapted to the specific nature of the local market”, said Alfredo Piacentini, Managing Partner at Banque SYZ & CO. “We are particularly satisfied with our partnership with N+1, a group we have known for many years, and with which we share the same vision and values.”
“The Spanish asset management market is in the midst of dramatic change and today there is real demand for high level international asset management expertise; our alliance with SYZ & CO will enable us to successfully meet this demand”, said Santiago Eguidazu, N+1’s President. “SYZ & CO enjoys a strong reputation in the Spanish market and there are strong synergies between our two asset management groups.”
N+1 Group company currently has approximately CHF 400million ($353 million) in assets under management. The transaction is subject to approval by the CNMV, the Spanish financial markets regulatory authority.
SYZ & CO’s total assets under management now exceed CHF 20bn ($18.6 billion).
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West Palm Beach (HedgeCo.net) – In an interview with Dan Dolan of Select Sector SPDRs on how the economic crunch is affecting trading rhythms, Dolan presented a broad overview of sector SPDRs and how more hedge funds and institutional investors are utilising the option of buying baskets of securities over single stock options.
Dolan developed and runs the Select Sector SPDR Trust, the ETFs which divide the S&P 500 into nine component sectors. With more than $27 billion in assets, the Trust is well into its 10th year of business.
"While most ETF providers continue to position their products as substitutes for traditional mutual funds, an attribute from which we also benefit, we’re seeing increased usage of Select Sector SPDRs as substitutes for equities, to reduce single stock exposure." Dolan said, "SPDR trading volume has averaged well over 200 million shares per day in 2008 as institutional investors take advantage of the outstanding liquidity to implement their trading strategies."
Sometimes considered speculative and volatile, sector investing has finally earned a place in many portfolios either as part of “core and explore” strategies, or as a way of betting on sectors about which investors feel especially bullish. Some investors have even diversified some of their mutual fund holdings to ETFs, opting for passive products, especially during market routs.
Dolan characterizes his products as the “new blue chips,” substitutes for large concentrated positions in widely-held stocks, and a way to provide investors with downside protection by avoiding headline risk. Select Sector SPDRs were the first sector family of ETFs and is the largest based on assets and trading volume.
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West Palm Beach (HedgeCo.Net)- Leading UK investment manager, Hermes Fund Managers Limited (Hermes), announced the appointment of US hedge fund manager Northern Trust, to provide middle office outsourcing fund administration and custody.
With an anticipated £23 billion ($45 billion) in assets under management, the middle office plans to include the UK’s largest Pension Scheme ("BTPS"), which will be in excess of £45 billion ($88 bilion).
As part of the arrangement Northern Trust will also support the launch of Hermes’ new range of Dublin-based funds providing trustee, custody, fund accounting and transfer agency services.
"Northern Trust was appointed following a rigorous selection and due diligence process from a short-list of two providers." Rupert Clarke, Chief Executive of Hermes said, "Outsourcing these functions is consistent with our strategy of focusing on growing a specialist investment management business."
Northern Trust, a multibank holding company based in Chicago, has international offices in 15 locations in North America, Europe, the Middle East and the Asia-Pacific region. Northern Trust had assets under custody of $4.0 trillion, and assets under investment management of $778.6 billion.
Hermes currently has £36.2 billion ($70.4 billion) under management, investing assets on behalf of 206 clients, including pension funds, insurance companies, government entities and financial institutions, as well as charities and endowments.
