AIFM OR UCITS: WHICH OFFERS THE GREATEST ECONOMIC OPPORTUNITIES?

Transcription

1 APRIL 15TH 2015 AIFM OR UCITS: WHICH OFFERS THE GREATEST ECONOMIC OPPORTUNITIES? REGULATION: BALANCING INVESTOR PROTECTION AND PERFORMANCE POTENTIAL

2 FOREWORD REGULATION DOES NOT DETERMINE WHERE THE GREATEST ECONOMIC OPPORTUNITIES ARE BUT IT CONDITIONS HOW AND HOW CONFIDENTLY YOU CAN ACCESS THESE OPPORTUNITIES.

3 INTRODUCTION TO LYXOR LYXOR MULTI-MANAGER SOLUTIONS

4 LYXOR: UNIQUE POSITIONING, DYNAMIC GROWTH Lyxor Asset Management was founded in 1998» Headquartered in Paris and regulated by the French Financial Authority (AMF)» Wholly-owned subsidiary of Societe Generale» Societe Generale s ratings for long-term debt: Moody s A2 (*), Standard & Poor s A (**), Fitch A (***) A Unique Positioning» Focused on all modern investment techniques, based on risk management and research» A pioneer in selected areas of expertise» Consistently recognized by the industry and peers for quality and innovation 4 *As at 02 June 2014: ** As at 18 July 2014; *** As at 26 March 2014 EUROPE, MIDDLE EAST, AFRICA Paris Geneva Amsterdam Luxembourg Frankfurt London Madrid Milan Stockholm Zurich Lyxor Asset Management S.A.S Lyxor International Asset Management S.A.S Lyxor Asset Management UK LLP AMERICAS New York Lyxor Asset Management Inc.* ASIA PACIFIC Tokyo Shanghai Hong Kong Lyxor AM Japan Co. Ltd. Fortune SG Fund Management Co. $114.5* billion of assets under management & advisory (1) 600 Professionals In 13 Markets Investment & Research Team Business & Sales Presence Business & Sales Presence *(1) Figures as of December 31 st Equivalent to 94.2 bn * incl. Assets under Advisory & USD 5bn AUM from Fortune SG (JV in China) *Lyxor AM Inc. is a US registered advisory subsidiary

5 LYXOR: RESOURCES OF A GLOBAL PLATFORM 5 A TEAM OF APPROXIMATELY 150 INVESTMENT PROFESSIONALS LONDON: 7 Portfolio Management Hedge Fund Research Managed Account Platform PARIS: 120 NEW YORK: 17 Portfolio Management Cross-Asset Research Hedge Fund Research Managed Account Platform Due Diligence Financial Engineering Chief Investment Officer Portfolio Management Cross-Asset Research Quantitative Research Managed Account Platform Due Diligence Financial Engineering Office of the Chief Operating Officer TOKYO: 4 Portfolio Management Hedge Fund Research Financial Engineering As of February 28, 2015.

6 ACCESSING HEDGE FUND STRATEGIES WITH CONFIDENCE LYXOR MULTI-MANAGER SOLUTIONS

7 AIFMD CONFERS MORE INVESTOR PROTECTION A REINFORCED INVESTMENT FRAMEWORK: REGULATED & ONSHORE IN EUROPE 7 A REGULATION OF THE ACTORS: THE ALTERNATIVE INVESTMENT FIRMS KEY BENEFITS KEY PROVISIONS ACCESS TO GENUINE HEDGE FUNDS» AIF: New onshore, EU-regulated Alternative Investment Fund for professional investors IN A REGULATED FORMAT» AIFM: Regulation of Alternative Investment Fund Managers managing AIFs FULLY ON-SHORE IN EUROPE» No additional trading restrictions under AIFMD (unlike UCITS)» Additional depository requirements for control MORE INVESTOR PROTECTIONS» Remuneration guidelines for Alternative Investment Fund Managers managing AIFs ENHANCED DISCLOSURE TO INVESTORS & REGULATORS» Reporting obligations to investors and regulators The above is a summary of the key provisions of the AIFM Directive and is not intended to be exhaustive.

8 UCITS HAS OFFERED INVESTOR PROTECTION FOR YEARS UCITS IS A WELL ESTABLISHED LABEL ACROSS EUROPE AND BEYOND 8 A PRODUCT REGULATION: ALTERNATIVE STRATEGIES IN MUTUAL FUND FORMAT KEY FEATURES UNIVERSAL ELIGIBILITY OF MUTUAL FUND FORMAT KEY PROVISIONS» UCITS: Onshore, EU-regulated Mutual Funds designed for all investors including retail under Mifid COMMERCIALLY EFFICIENT» UCITS: European passport enables broad distribution cross-borders INVESTMENT CONSTRAINTS» Alternative strategies are constrained: eligible instruments, leverage/var, shorting techniques, liquidity» Diversification rules for investors protection TRANSPARENCY BENEFITS» Simplified prospectus, more transparency on fees in the KID SOON UCITS V WILL COME» UCITS V will align UCITS along AIFM-D in March 2016 The above is a summary of the key provisions of the UCITS Regulation Directive and is not intended to be exhaustive.

9 BUT REGULATED ALTERNATIVES ARE STILL HEDGE FUNDS 9 MANAGER SELECTION AND RISK MANAGEMENT ARE PARAMOUNT Alternative UCITS and AIFs are a source of diversification for investors, but invest in complex strategies that require a specific approach in terms of fund selection and risk management The pedigree of the manager, the performance engine, the operational structure and the risk monitoring process are just as important investment criteria as they are in the offshore hedge fund world With more than 17 years of experience, Lyxor is an expert in analyzing and selecting hedge funds Typical Risks when selecting a Regulated Alternative Fund* How to Mitigate These Risks? * The full disclosure of risks are provided in the legal documentation of the Fund.

10 AND REGULATION IS NOT AN EXEMPTION OF DUE DILIGENCE 10 Although AIFMD and UCITS offer greater investor protection the necessity of a thorough Due Diligence still applies and the value proposition of managed accounts is intact HEDGE FUNDS OFFSHORE AIFMD COMPLIANT UCITS COMPLIANT FRAUD RISK REPUTATIONAL RISK STRATEGY REPLICATION RISK LIQUIDITY RISK VALUATION RISK RISK MANAGEMENT (MARKET & COUNTERPARTY RISK) TRANSPARENCY TO INVESTORS ONSHORE REGULATED NO LIQUIDITY SAFEGUARDS INDEPENDENT BUT NOT EXTERNAL NO LIMITS IMPOSED BY REGULATORS REGULATED ON- SHORE (EU)

11 IMPACT OF REGULATION ON RETURNS

12 AIFM-D VERSUS UCITS POTENTIAL IMPACT OF INVESTMENT CONSTRAINTS ON STRATEGY RETURNS 12

13 ALL HEDGE FUNDS VS UCITS POTENTIAL IMPACT OF INVESTMENT CONSTRAINTS ON STRATEGY RETURN 13 AIFM?

14 CASE 1: EVENT-DRIVEN SPECIAL SITUATIONS THE CASE OF CANYON 14

15 CASE 1: EVENT-DRIVEN SPECIAL SITUATIONS THE CASE OF CANYON 15 EVENT-DRIVEN - SPECIAL SITUATIONS Lyxor / Canyon Credit Lyxor / Canyon Value Strategy Fund Realization Fund UCITS Today: OFFSHORE Jersey Tomorrow: AIFM Luxembourg Institutional Share Class USD Class B USD % 12.90% % -0.38% Q % 1.16% Total Return 15.67% 13.78% ARR 6.68% 5.90% UCITS Fund partially replicates Offshore Fund and focuses on most liquid instruments UCITS Fund has Weekly liquidity, Lyxor Offshore Fund is Monthly Therefore returns are not expected to be identical

16 CASE 2: EVENT-DRIVEN MERGER ARBITRAGE THE CASE OF TIEDEMANN 16 EVENT-DRIVEN - MERGER ARBITRAGE Lyxor / Tiedemann Lyxor / Tiedemann Arbitrage Strategy Fund Arbitrage Fund UCITS Today: OFFSHORE Jersey Tomorrow: AIFM Luxembourg Institutional Share Class USD Class B USD % 10.17% % -0.78% Q % 1.90% Total Return 11.19% 11.39% ARR 4.83% 4.91% Merger Arbitrage is a liquid strategy deployed through listed equities Both UCITS Fund and Lyxor Offshore Fund offer Weekly liquidity Returns are expected to be extremely close

17 CASE 3: CTA TREND FOLLOWING THE CASE OF WINTON 17 CTA - TREND FOLLOWING Lyxor / WNT Fund Lyxor / Winton Fund UCITS Today: OFFSHORE Jersey Tomorrow: AIFM Luxembourg Institutional Share Class USD Class B USD % 6.41% % 12.67% Q % 4.60% Total Return 22.61% 25.41% ARR 9.48% 10.58% Both UCITS and Lyxor Offshore offer Weekly liquidity UCITS Fund has no exposure to Commodities Inclusion of the single equity program was introduced in the UCITS only recently when Fund crossed USD 250 million of assets

18 CONCLUSION

19 AIFM-D AND UCITS ARE COMPLEMENTARY THE CASE FOR CONVERGENCE IN REGULATIONS 19 For investors: Economic opportunities can be accessed in UCITS and/or AIFM format, it depends on the strategy being considered and the preference for liquidity Private Banks, Insurance Cos for Life products prefer UCITS Pension Funds, Insurance Cos for own account prefer AIFM or Offshore funds according to their liquidity concerns For hedge funds managers UCITS and AIFM Funds both allow an active marketing to each audience group The passporting across Europe simplifies distribution Both regulations facilitate the promotion of alternative strategies and this is good for investors at this point of the economic cycle UCITS V will come into force in March 2016 and a partial convergence towards AIFM-D is expected Vibrant segment of the asset management industry and watch out for new launches...