From UCITS to Newcits Strategies to develop an investment idea into a unique private label fund. September 2011 Frankfurt / Main

Transcription

1 From UCITS to Newcits Strategies to develop an investment idea into a unique private label fund September 2011 Frankfurt / Main

2 Agenda Universal-Investment Why UCITS? Strategic considerations 2

3 Our Shareholders and Company Structure: Clear focus on independence & customer service 3

4 We are shaping the world of funds since 40 years Universal-Investment integrates rule based asset management into its business model. Universal-Investment implements high-end IT systems well before other players Universal-Investment receives multiple number 1 awards in customer satisfaction and comes in first among institutional investors yet again Universal-Investment issues the first private label fund Universal-Investment develops the first master fund and becomes a pioneer in master investment trusts. Universal-Investment ascends to market and quality leader in the field of master investment trusts.! Universal-Investment receives the best master investment trust rating ever awarded in Germany until that point.! Realignment and increase in headcount at Universal- Investment Luxembourg S.A..! Universal-Investment takes the opportunity presented by the amendment of the law to set up its own INVESTMENT-AG.! Universal-Investment provides crossborder insourcing services for the management of funds and securities to Hypo KAG, Hypo Depotbank and Vorarlberger Landes- und Hypothekenbank.! Universal-Investment exceeds the EUR 100 bn threshold in fund assets under administration.! Universal-Investment administers more than fund mandates.! With the mandate of the German branch of Pictet Universal- Investment takes over as a first mover in the KAG business custodian-services accoording to the new BaFin-rules. Universal-Investment is founded as a joint venture and independent investment trust. 4

5 Our Business Stands on a Solid Ground: Size matters! Class needs size: ~400 employees Well-developed expertise: >40 years of experience Half the world as partners: ~350 asset managers Nobody offers more: >30 custodians As per 29/07/2011 5

6 A solid growth despite challenging times! Volume in bn. Euro (29/07/2011) Spezialfonds Publikumsfonds Direktanlagen Insourcing Insgesamt 94,5 17,5 4,4 14,4 130,8 6

7 Good ideas always convince: The development of our Private Label Funds Number of Universal Investment mutual funds (incl. share classes) /

8 Quality - more than one dimension Quality in Consulting Quality in Processes Quality in Know-how! Experienced relationship team! Know-how from conceptual planning to Sales! Independency and neutrality! Reliable high-end administration! Pioneer in private label funds and Master KAG business! Wide-ranging additional services (risk management, reporting) An individual and holistic approach 8

10 UCITS: Strictly regulated and transparent product embedded into European regulation Marktet riskpotential 200%-Limit Eligible Assets Liquidity Riskmanagement Transparency Regulated Ucits-Funds 10

11 Key facts why UCITS became popular Credit crunch 2008 and Madoff fraud case addressed investors concerns, namely transparency, liquidity and regulatory oversight. EU Passport Once authorized in one EU member state, a UCITS Fund can be sold in approximately 40 different countries to almost any type of investor Flexibility The UCITS rules are flexible enough to allow many sophisticated strategies UCITS Label Preferred investment vehicle by many institutional investors All UCITS Funds have to comply with one single set of rules Access to a large universe of investors in Europe, globally, and particularly Asia Liquidity Investments only in liquid assets Minimum bi-weekly liquidity of fund shares Market Total net assets of UCITS reached EUR 5,921 bn at end of June 2011 (official EFAMA figures) 11

12 UCITS framework: Eligible assets and securities List of Eligible Assets! Transferable Securities (TS)! Money Market Instruments (MMI)! TS and MMI with a derivative element (example Convertible Bonds)! Financial Derivative Instruments (FDI)! Open ended Collective Investment Schemes (CIS)! Deposits with credit institutions! Ancillary liquid assets! Financial indices! Repos, reverse repos, stock lending List of non eligible assets! Commodities! Real estate! Private equity! Hedge funds! Non financial indices! Short selling of MMI! Anything that circumvents the investment limits of the UCITS directive! Note that exposure to the above can be gained through financial indices on the underlyings. 12

13 Feasible strategies Beside traditional long only products the following alternative strategies are feasible under UCITS: Long short equity Equity Directional Equity Market Neutral Long short credit liquid markets only Convertible arbitrage Global Macro Fixed income arbitrage definitions of leverage need to be addressed Commodity index funds Only commodity indices are eligible. CTA and Managed Futures Event Driven Funds of UCITS Funds Structured and guaranteed products The following strategies are not recommended for UCITS and fall out of UCITS liquidity and valuation requirements: Less liquid credit strategies, distressed debt, mezzanine, private equity strategies, small and micro cap strategies, highly concentrated portfolios. 13

14 UCITS alternatives - dimensions app. 400 Funds (Strategies) Fund size: average 220 mio. Market size: 88 billion Daily liquidity 78%; weekly, bi-weekly liquidity 22% 38% of the assets in the10 biggest funds; 50% in the 20 biggest Fund launches: Year Launches Until Source: 2n20, per

15 UCITS alternatives - dimensions Domiciles Strategies 1.79% 8.66% 5.97% France GER Ireland UK 8.33% 9.52% 6.85% 2.68% 3.57% 7.74% Arbitrage Convertible Credit CTA 52.24% Lux Other 20.30% 6.55% 3.27% Currency Event Driven Fixed Income Global Macro 11.04% 30.36% 8.04% 13.10% L/S Equity Market Neutral Multi Strategie Source: 2n20, per

16 ESMA Discussion Paper Structured UCITS Short Summary regarding Structured UCITS: Swap constructions under watch Points of criticism: - Exposure to complex investment strategies and commodity strategies - Discretionary elements - Diversification requirements Policy orientations: Investment Portfolio and Swap has to comply with UCITS diversification rules Extent of discretionary elements should be disclosed in the prospectus If discretionary elements occur, the counterparty should be treated and disclosed as an investment manager Where the approval of the counterparty is required in relation to any portfolio transaction this must be disclosed in the prospectus The Prospectus should include information on the underlying strategy, the counterparties and the type of collateral Source: ESMA discussion paper 16

17 ESMA Discussion Paper Strategy indices Short Summary regarding Strategy indices: Strategy indices = Indices linked to quantitative or trading strategies Index criteria to be eligible: - Sufficiently diversified (20%/35% rule in combination with 5/10/40% rule) - Representing an adequate benchmark - Published in an appropriate manner Policy orientations: Diversification: - Diversification limits have to be explained in prospectus with description of exceptional market conditions which justify this investment. - Impact of one single component on the overall index return limited to relevant diversification requirements (20%/35% rule). Adequate benchmark: - Index must have a clear single objective, universe of the index components should be clear to investors, cash management must not affect the nature of the index calculation methodology. Source: ESMA discussion paper 17

18 ESMA Discussion Paper Strategy indices Policy orientations: Rebalancing: - The rebalancing frequency should not prevent investors from being able to replicate the index. ESMA considers, that indices which rebalance on an intra-day or daily basis cannot satisfy this criterion. - The prospectus should disclose the rebalancing frequency and its effects on the costs within the strategy. Publication: - Index provider must disclose the full calculation methodology to inter alia enable investors to replicate the strategy. - Information has to be accessible with ease (internet); Index performance freely and continually available; index constituents and weightings, calculation and re-balancing methodologies, index changes should be available. Conflict of interest: - UCITS must ensure that any valuation of the swap must include an independent assessment of the underlying index. The financial index should be subject to independent valuation. Source: ESMA discussion paper 18

20 Where to setup an alternative UCITS fund? Leading European fund destinations: Global Brand Leading fund-destination in Europe High regulatory standards Taxe d abonnement Founding costs Focus on UCITS Ireland Germany Luxemburg Fast time to market 4 eye principle High regulatory standards One of the most stable financial places No founding costs Low costs Focus on UCITS Strong Institutional business ( Spezialfonds ) Low taxes Nice Pubs Low regulatory standards Financial sector overleveraged Financial stability at risk (downgrade to noninvestmentgrade Ba1) Focus on Hedgefunds

21 Strategic Key Points Investment Company: experience, corporate size and full service approach creates strong partnership Selection under strategic aspects with a view to a long term corporate objective. Future-proof service provider? Good reputation for avoidance of image risks. Profound support concept available? Professional support in all questions before & after the fund launch. Modular setup: can you choose your custodian, broker, swap counterpart, jurisdiction, etc. (best choice principle)? Optimal combination of all possible involved parties subject to the individual needs of the concept. 21

22 Strategic Key Points One stop shopping / neutral setup advice Investment company in a role of a consultant: independent advice regarding the partner & the setup process. Gain in quality and avoidance of buggy constructions. No access to the market without sales support! Help with approvals for sales in foreign countries, sales agreements and trailer fees. Protecting your strategy: do you want someone to copy your strategy or let it s own hedge fund run against you? Neutral platform without own products or linked investment banking is the best protection of your know-how. Who is in the drivers seat? White labeling : investment company should act as your own company. 22

23 Strategic Key Points Four-eye principle fulfilled? Trend towards higher safety and quality. Division of administrator and custodian (Madoff). Which name stands in front of the fund name? It should be your fund. Easy to find in all data bases. Advantage: marketing and branding. Is an Umbrella the best choice? A stand alone fund has the advantage of individual marketing/sales without supporting a competitor. Collateral: Japanese stocks in a DAX-ETFs? Avoid fully funded swaps with toxic collateral assets. 23

24 References UI-Newcits: UI has succesfully realized over 20 alternative UCITS on its Newcits-Platform: First UCITS fund in Europe with a global Merger Arbitrage strategy Universal Investment placed several currency funds Succesful launch of several Managed-Futures funds Various option based strategies Fund of hedge funds L/S commodity fund Fund of UCITS alternative funds Convertible strategies Event Driven strategies L/S Equity strategies 24

25 Our award-winning work is beneficial for you Every good result motivates us to become even better

26 Disclaimer All rights reserved. The information is intended to provide you with a summary of our service in administrating a potential investment vehicle. The terms and conditions shown are indicative only and do not imply an offer or commitment of any kind. It has been produced solely for your use and that of your professional advisers and should not be reproduced or disclosed to any other person without our consent. The information does not constitute advice or recommendations nor should it be relied upon for any purpose. No liability whatsoever is accepted for any loss or expense incurred from using this information. Any views or opinions (including statements or forecasts) constitute our judgement as of the date indicated and are subject to change without notice. 26

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