slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Family Office Forum Wiesbaden 5-7 May 2014 PowerPoint Presentation
Download Presentation
Family Office Forum Wiesbaden 5-7 May 2014

Loading in 2 Seconds...

play fullscreen
1 / 32

Family Office Forum Wiesbaden 5-7 May 2014 - PowerPoint PPT Presentation


  • 116 Views
  • Uploaded on

How to select an Alternative Fund Manager under UCITS. Family Office Forum Wiesbaden 5-7 May 2014. How to select an Alternative Fund Manager under UCITS. Agenda. Hedge fund trends – how investors include hedge funds in portfolio construction/ how this has changed through time

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

Family Office Forum Wiesbaden 5-7 May 2014


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
    Presentation Transcript
    1. How to select an Alternative Fund Manager under UCITS Family Office Forum Wiesbaden 5-7 May 2014

    2. How to select an Alternative Fund Manager under UCITS Agenda Hedge fund trends – how investors include hedge funds in portfolio construction/ how this has changed through time Why liquid alternatives make sense now - a new tool in the tool kit, liquidity/ regulation, volatility management/ downside protection Alternative UCITS trends – UCITS vs Offshore growth, largest UCITS funds/ largest platforms, very strong demand from private banks and family offices How to select Alternative UCITS Funds – Alternative UCITS platforms – high level overview, example of the benefits of including alternatives UCITS vsequity markets Source: Schroders

    3. Two Key Hedge Fund Trends

    4. 1. Rationale for using hedge funds has changed through time Downside Protection Investors now see hedge funds as "shock absorbers" Diversification & Risk-Adjusted Returns Capture Excess Performance Source: Citi Prime Finance analysis, MSCI, S&P, Bloomberg, HFR, as at December 2012

    5. 2. Hedge funds now included in clients ‘core’ portfolio Illustrative Risk-Aligned Institutional Investor Portfolio A risk aligned approach to portfolio construction, positioning strategies by directionality and liquidity Source: Citi Prime Finance, as at November 2013

    6. The Rise of Alternative Mutual Funds A new tool in the toolkit for private banks and family offices

    7. Overall Hedge Fund AUM Expected to Grow Strongly Liquid alternatives expected to grow to 1/3rd of total hedge fund AUM Source: Citi Prime Finance analysis, SEI, Strategic Insight, Federal Reserve Current Populations Survey, Cerulli Associates, Deloitte Center for Financial Services, as at August 2013

    8. European Hedge Fund Industry Evolution of AUM and Number of Funds Source: Eurekahedge, as at 28 February 2014 AUM bn No. of Funds European Hedge Fund AUM back to all time peaks

    9. European Hedge Fund Industry AUM: Offshore hedge funds vs. UCITS hedge funds Flows: Offshore hedge funds vs. UCITS hedge funds Investors now clearly prefer UCITS hedge funds Source: Eurekahedgebased on head office location Europe plus geographical mandate Europe, to 28 February 2014

    10. Alternative UCITS Growth Evidence of strong investor demand Source: ALIX Capital, 28 February 2014 • Alternative UCITS AUM has increased substantially since 2009 and now stand at c.€200bn (c.$290bn) • There are 768 single manager alternative UCITS in the market today, 75% of these have been launched since 2009

    11. Similar Growth Dynamics in the US Mutual Fund (40Act) The rise of the liquid alternatives market in the US Source: Strategic Insight, Morningstar, as atJune 2013 • Offshore hedge funds 18x larger than 40 Act alternatives but only received 1.5x 12 month net flows • 40 Act alternatives industry grown at CAGR 33% (vs. 14% for offshore hedge fund industry) • 40 Act alternative funds managed by a hedge fund manager have grown even faster at 83% CAGR

    12. 2013 Hedge Fund AUM by Investor Segment UCITS hedge fund growth fuelled by European Private Banks and Family Offices Source: Towers Watson Global Pension Asset Study, Towers Watson Global Alternatives Survey, Swiss Re Sigma Report, NA CUBO-Common fund Institute Endowment study, Wharton Global Family Alliance Single Family Office Study, Scorpio Partnership Global Private Banking Asset Allocator, OECD Sovereign Wealth and Pension Fund Issues, and strategic Consulting 2014 Market Sizing Model, as at December 2013

    13. Will Liquid Alternatives Follow Same Trajectory as ETFs? Adoption by more advisors contribute to growth over next 5-10 years – similar to ETF’s c.400 US40Act alternative mutual funds today – same as ETFs in 2006 Sources: Goldman Sachs, Simfund, Cerulli Associates, as at December 2013 "Retail Liquid Alternatives: the next frontier" is a US$ 2 trillion AUM 5 to 10 years from now. Goldman Sachs

    14. Why Liquid Alternatives now?

    15. Liquid Alternatives have superior risk adjusted returns HFI Alternative UCITS Index vs. traditional 60/40 portfolio Source: Citi Prime Finance analysis, Hedge Fund Intelligence Alternative UCITS Composite Index, Bloomberg, MSCI Note: Traditional Investment Portfolio comprised of 60% equity investment represented by the MSCI World Index and 40% fixed income investment represented by the Citigroup Big Bond Index, as at February 2013

    16. Main reservations and typical alternative allocations Fees, Liquidity, Education Sources: Goldman Sachs, Morningstar/Barron’s, McKinsey, Simfund, November 2013 Can retail allocations to alternatives increase with the introduction of Liquid Alternatives?

    17. Barbell Approach – Blending ETFs With Liquid Alternatives Barbellingexpected to help drive liquid alternatives growth What is the “barbell”? As investors are focussed on fees and increase allocations to ETFs for cheap beta these fee savings can support the growth of the more expensive liquid alternative mutual funds and potentially see allocations increase from 4% currently to 16% over the next 5-10 years Source: Goldman Sachs Global Investment Research, as at November 2013

    18. How to select Alternative UCITS Funds

    19. Manager Selection Process and Monitoring Overview Source: Schroders, April 2014 Strategy Selection Investment Due Diligence Operational Due Diligence Ongoing Risk Management

    20. Strategy Selection Search for products that fit within the UCITS framework Source: Schrodersas at 31 March 2014Note: this chart is meant to be indicative only. There will be different types of funds within each of these strategies which may or may not be eligible for UCITS. Each hedge fund needs to be evaluated on a case by case basis. Sophisticated UCITS funds can potentially permit high leverage, so long as VaR limits are respected More leverage Fixed income arbitrage  Macro & CTA Convertible bond arbitrage  Long short credit Event driven (credit) Event driven (Equity) Long biased convertible bonds Emerging Market credit Long short equity (trading) Long short equity (fundamental) Long short equity (small cap) No Leverage Liquid Less Liquid

    21. Investment Manager Selection Perform full due diligence based on key requirements for a given strategy Source: Schroders, April 2014 Investment Due Diligence Operational Due Diligence Risk Due Diligence • Experience • Track record and skill • Investment Process • Integrity • Size • Reputation • Initial review of available regulatory, marketing, and personnel materials • Full documentation review covering all key business areas • Onsite visit including thorough validation of all points and processes raised in the documentation review • Risk management capabilities • Fit with UCITS constraints • Liquidity • Eligible assets • Leverage • VaR

    22. Introducing Alternative UCITS Platforms

    23. Alternative UCITS Platforms Source: Kepler Partners LLP as at December 2013

    24. Schroder GAIA is a Market Leading Platform Largest alternative UCITS platforms by AUM Source: Schrodersand Bloomberg as at 31 March 2014 AUM USD(m) No ofFunds

    25. Schroder GAIA Dedicated platform for liquid alternative strategies Offers access to leading hedge fund managers in a transparent format The individual mutual funds on the platform are subject to ‘gold standard’ regulation The funds are directly invested as opposed to a master feeder/index approach Active risk management performed by managers and independently by Schroders Schrodersperforms extensive due diligence on each external manager There are no side pockets or investor lock ups Source: Schroders

    26. Schroder GAIA Source: Schroders as at 31 March 2014. *hard closed **scheduled hard closure *** subject to CSSF approval Overview of sub-funds

    27. Schroder GAIA Alternative UCITS funds Focus on well established managers with long track records Source: Morningstar. Analysis shown from January 2002 (common inception date) to February 2014. CQS has been excluded given the strategy launched in 2008. The data shown for ‘Paulson’ and ‘NGA’ is the net performance of existing offshore hedge fund strategies we plan to launch on Schroder GAIA during 2014. The performance is indicative only and the past performance of the offshore fund should not be taken as a guide to future performance of the potential GAIA fund NGA Paulson Egerton Avoca Sirios MSCI World Avoca Sirios Egerton NGA MSCI World Paulson

    28. Schroder GAIA Alternative UCITS funds All strategies have outperformed equity markets on a risk adjusted basis Source: Morningstar. Analysis shown from January 2002 (common inception date) to February 2014. *Planned launches in 2014. The data shown for ‘Paulson’ and ‘NGA’ is the net performance of existing offshore hedge fund strategies we plan to launch on Schroder GAIA during 2014. The performance is indicative only and the past performance of the offshore fund should not be taken as a guide to future performance of the potential GAIA fund Egerton Sirios Avoca Paulson NGA MSCI World

    29. Leading Alternative Investment Managers Combine Managers for Superior Risk Adjusted Returns

    30. Schroder GAIA Alternative UCITS funds Combining alternative funds provides superior risk adjusted returns Source: Morningstar. Analysis shown from January 2002 (common inception date) to February 2014. * The data shown for ‘Schroder GAIA Alternative UCITS’ represents a 20% allocation to each of the existing Schroder GAIA funds (Egerton, Sirios and Avoca) and a 20% allocation to each of the strategies we plan to launch on Schroder GAIA during 2014 (Paulson and NGA). This portfolio is a simulation and has been used for illustrative purposes only Schroder GAIA Alternative UCITS* MSCI World NR LCL

    31. Conclusion Source: Schroders, April 2014 • Alternative mutual funds represent a new and rapidly growing asset class for investors • Long short strategies make sense now to help diversify client portfolios • Investors should consider blending long only strategies together with long short strategies and include alternative funds within the core portfolio as opposed to an alternatives bucket • Family Offices and Private Banks should focus on established managers that have a proven track record of producing consistent risk adjusted returns • Emphasis should be on strategies with uncorrelated returns streams, reduced volatility and proven downside protection • The Schroder GAIA platform offers a select group of high quality alternative investment managers within the safeguards of a liquid mutual fund format which is subject to ‘gold standard’ regulation.

    32. Important information This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder GAIA (the “Company”). Nothing in this presentation should be construed as advice and is therefore not a recommendation to buy or sell shares. Subscriptions for shares of the Company can only be made on the basis of its latest prospectus together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copied of which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A. An investment in the Company entails risks, which are fully described in the prospectus. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Schroders has expressed its own views and opinions in this document and these may change. Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider's consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third party data. The Prospectus and/or www.schroders.lu contains additional disclaimers which apply to the third party data. Schroders has expressed its own views and opinions in this presentation and these may change. This presentation is issued by Schroder Investment Management Ltd., 31, Gresham Street, EC2V 7QA, who is authorised and regulated by the Financial Conduct Authority. For your security, all telephone calls are recorded.