Investment Management Advisory Services kpmg.es

Transcription

1 FINANCIAL SERVICES Investment Management Advisory Services kpmg.es

2 Contents 1. Executive Summary 1 2. Investment Management Industry: Economic, Regulatory and Business Context 3 3. Investment Management Group 7 4. A Wide Range of Products and Services 8 5. KPMG Key Facts Annex I: KPMG Publications and Research Annex II: Credentials Annex III: Spanish Investment Management Team 16

3 Investment Management Advisory Services 1 Executive Summary The recent crisis in the financial marketplace has triggered the reform of the regulatory and supervisory frameworks in the financial sector, particularly in the investment and wealth management industries. The implementation of these new regulations will entail challenges which could place a significant economic burden on firms. Investment managers will need to examine their strategic, business and operating models to increase efficiency, optimise costs and sustain profitability in this new environment. Change dynamics will also have an impact on the value chain affecting fund administrators and other services providers. The wealth management industry may have to review how client needs are assessed, and how their services will be appropriately remunerated. Many fundamental paradigms are under review and the bundled manufacturingdistribution model is in the spotlight. It is quite likely that the Basel III increased capital requirements will sharpen the focus on activities such as investment and wealth management, which are less equity intensive. This will bring about greater competitive pressures. On the whole, firms could see the forthcoming changes as a series of hurdles to be surmounted, or, even better, as an outstanding opportunity to review the fundamentals of their investment and wealth management approach. For some, the onset of new paradigms should be the occasion for an overhaul of their activities in the area, turning risks into enhanced business opportunities. KPMG member firms are amongst the leading global financial advisors to the investment management industry. Integrated teams of professionals from Advisory, Tax, and Audit practices provide clients with an in-depth understanding of the markets in which they operate and support the design and implementation of blueprint strategies or the improvement of existing ones.

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5 Investment Management Advisory Services 3 Investment Management Industry: Economic, Regulatory and Business Context The financial and economic crisis that started in 2007 has taken its toll on many developed countries. There are indeed local issues in this crisis, such as the excess leverage of some British institutions, or the unsustainable dependence on foreign financing in the case of the Spanish financial system. However, the crisis has a global nature as reflected in the existence of many traits that apply to most mature financial markets and which will contribute to shaping the future of the industry over the coming years. The lack of transparency is also behind the current crisis. The mechanisms for risk spreading, including the credit rating agencies, failed not only to properly assess default probabilities, but also to correctly inform final investors about the risks and complexities associated with structured products. After the collapse, the investment management industry has become a focus area for regulators around the world. Ongoing reforms are mainly aimed at enhancing transparency and reporting to improve investor protection and strengthen the financial system. These economic and regulatory pressures may make it necessary to examine strategies, business and operating models, to increase efficiency, optimise costs, and thus achieve and sustain profitability in this new environment. In other words, the challenges of today will help to mould the future of the industry in years to come. The investment management industry has become a focus area for regulators: leading to enhanced transparency, better investor protection and a stronger financial system

6 4 Investment Management Advisory Services Economic A macroeconomic environment with a prolonged period of low interest rates, high liquidity and minimum volatility, resulted in a perfect storm which is behind the current crisis. These factors led financial institutions to underestimate risks and brought about a breakdown of credit and risk management practices. The shortcomings in financial regulation and supervision did not help to improve this situation. Financial institutions unsustainable profits before the crisis were largely due to inadequate risk pricing of many financial offerings. Nowadays, products such as securitised low quality assets, highly leveraged private equity transactions, or low-spread real estate financing are no longer the answer. Additionally, the revised and more stringent solvency requirements will lead to a higher cost of capital. In this environment financial institutions will need to develop more innovative business models to account for fewer revenue sources and tighter margins. As a result there will be a great variety of new business strategies but not all of them will succeed. Financial institutions will need to develop more innovative business models to account for fewer revenue sources and tighter margins Regulatory The rather heavy regulatory pressure on capital markets in recent years has intensified as a consequence of the economic and financial crisis. This has had a significant impact on the investment management industry. The jury is still out on how the reform will impact investment management firms future business strategy Current and future regulatory initiatives will probably place a significant economic burden on firms. However, the jury is still out on how the reform will impact investment management firms future business strategies. Dealing with the revised regulatory framework will rank high on the agenda of banks and other financial institutions. The related changes in legislation have been mentioned as one of the factors that will contribute to reshaping the financial industry. The closer alignment of the revised UCITS and MIFID directives in Europe well illustrates this trend. The revised European directives follow upon a path already paved in the UK by the new RDR (Retail Distribution Review) legislation, as well as in the United States reflected in the new set of Financial Responsibility Rules subject to FINRA (Financial Industry Regulatory Authority). Regulators aim to provide a cohesive approach to financial product design and manufacturing, and to distribution and selling, reducing cross-border barriers and fostering more specialised and efficient financial services providers. Product and cost transparency and avoidance of conflict of interests are common themes that underpin new regulatory frameworks and rules across the world. With regards to solvency requirements, Basel III mainly introduces the global regulatory standards for capital adequacy and liquidity. On the securities settlement side, stock exchange clearers and custodians will be impacted by the Target II Securities initiative which seeks greater integration of the European Securities Markets.

7 Investment Management Advisory Services 5 The new Alternative Investment Fund Managers Directive (AIFMD) is another example of increased transparency in a domain that is mainly the realm of institutional investors. Finally, regulators are also conscious of the need to avoid favouring a particular product through regulation. Packaged Retail Investment Products (PRIPs) legislation attempts to create a neutral environment for mutual funds, insurance, and other investment products. Business Global regulatory reforms will affect firms in many ways; for example, there will be technological challenges in terms of upgrade requirements, system sophistication, and service level enhancement. These impacts will most certainly change operating costs, fee structures, compensation, and service delivery models. A possible response from institutions to this new demanding environment could be to develop a piecemeal approach. However, it could also be an opportunity to adopt a blueprint stance and to rethink the business model. From now on, pressure from regulators and clients will leave no room for complacency as the industry evolves in a critical marketplace where trust has to be regained, particularly in the retail area. In the case of the investment management industry the product focus should be complemented with a better understanding and appreciation of clients needs and expectations. Therefore, the urge to develop a culture that breeds both trust and innovation will continue to be key in building an organisational culture that encourages forwardthinking. Opportunities in the short and long run will emerge from this challenge. Some financial institutions will be going through significant restructuring and balance sheet adjustments, others will need to look for new revenue sources, and all of them will have to cope with the ongoing and wide-reaching regulatory overhaul. Opportunities will emerge: some financial institutions will need significant restructuring while others will look for new revenues

8 6 Investment Management Advisory Services A focus on the areas of asset management, private banking, and securities services, covering the whole value chain from strategy to risk management to operations

9 Investment Management Advisory Services 7 Investment Management Group KPMG member firms are amongst the leading financial advisors to the Investment Management industry. Integrated teams of professionals from Advisory, Tax and Audit practices provide clients with an in-depth understanding of the markets in which they operate, and offer strategic advice spanning the lifecycle of products and companies. Within the Advisory Division, the Transaction Services group is a trusted advisor to many of the world s leading corporations and financial investors. Its network comprises 3,500 professionals worldwide with strategy, M&A and advisory skills to preserve and create value in major business situations. Their presence ranges from developed markets to key emerging economies, Asia and many other new economies. As part of its offering, KPMG s Transaction and Restructuring services in the Spanish firm and worldwide include the Investment Management Group, which brings together a number of professionals with extensive experience in financial markets (see Annex III). This group focuses on the areas of asset management, private banking, and securities services, covering the whole value chain of these activities from strategy to risk management to operations. Target clients include investment managers, wealth managers, fund administrators and service providers who focus on mutual, hedge, private equity, real estate, infrastructure and other alternative investment funds as well as sovereign wealth funds and pension vehicles. Universal and private banks are also clients of KPMG s investment management practice. In line with KPMG s standard approach, the Spanish firm s Investment Management Group works in close cooperation with the firms European and global counterparts, which enables the Group to think and act across borders. KPMG s global Investment Management practice Equities Fixed income Commodities Infrastructure Real Estate Derivatives Distressed assets Environmental assets Other...

10 8 Investment Management Advisory Services A wide Range of Products and Services KPMG s innovative approach is supported by extensive experience in the investment management, securities services, and private banking industries. It can provide guidance and add value in different areas: from reviewing or designing a long-term strategy in line with new regulations, to helping in the implementation of a detailed business plan, to assessing the coherence of an existing business model. KPMG firms have been involved in many business optimization mandates and have an established approach and methodology to deal with large-scale projects: including the integration and separation of businesses; the design and implementation of target operating models; the selection of providers; or the implementation of specific technologies. This experience together with financial knowledge allow KPMG professionals to find a way forward that best meets business needs, delivering a long-term cost effective strategy. Some of the Investment Management Group s services are linked to the current upheaval in the regulatory environment, whereas others seek to help lay the foundations for sound long-term client positioning, looking, for example, at the growth opportunities for global players or new sources of revenue for local institutions. In the asset management domain, services include advice on fund distribution strategies; assessment and action plans on the impact of the revised UCITS regulations; enlargement of the product design approach by looking at investment vehicles and their role in the asset allocation process; or the review of alternatives in asset management such as pursuing external growth, reinforcing the business, or simply disposing of it and favouring open architecture. On a more technical level, KPMG can also advise on the design, assessment, or implementation of risk governance and risk models that cover market, liquidity, credit, operational, or currency risk. KPMG can also contribute with its experience in numerous internal control projects with clients to strengthen their operational framework. KPMG firms can also assist institutional investment managers in implementing GIPS (Global Investment Performance Standards) to facilitate global acceptance of products, or in verifying due compliance with these standards by looking at composites and other relevant information. Although private bankers may be regarded as clients of investment managers they may require a different suite of products. The services provided in this area include the review of business models and strategies in light of the need to regain client trust, cope with the increasing focus of clients on absolute returns and risks, or to deal with the higher pressure from regulators to clearly differentiate between execution and advice. Other areas of cooperation include looking at external versus organic growth possibilities, and, in the case of acquisitions, providing post-deal advice to reduce client drainage. KPMG can also contribute to reinforcing existing wealth management methodologies by considering the risk-based and liability-based styles as extensions of the traditional return-based approach, or by reviewing the consistency of the business at both wealth and geographical levels. The service offering also includes the review of securities services strategies to accommodate the upcoming Target II Securities related norms, or the analysis of alternative banking models in light of the new and more demanding capital and liquidity requirements.

11 Services include the advice on private banking strategies, fund distribution, the impact of regulation, new approaches to product design, or the assessment of alternatives to grow the business Investment Management Advisory Services 9

12 10 Investment Management Advisory Services KPMG Key Facts KPMG is a global network of member firms that provides Advisory, Audit, and Tax, services to local, national and multinational organisations (see the chart below). Advisory Transactions and Restructuring Risk & Compliance Performance & Technology Transaction Services Financial, tax, commercial, legal, labour, and environmental due diligence process Vendor due diligence Commercial and strategic due diligence Market studies Going public process profitability improvement programs Accounting advisor in transactions and consolidations Strategic advisor Post-integration advisory Business plan design or assessment Investment management: asset management, private banking and securities services M&A financial advisors Audit Corporate Finance Project finance and infrastructure Valuations and independent purchase price allocation (PPA) Debt advisory Fundraising Administration of bankruptcy Restructuring Operational, organizational, and financial restructuring Post-integration restructuring Independent business review (IBR) Tax

13 Investment Management Advisory Services 11 KPMG s global network KPMG was formed in 1987 through the merger of Peat Marwick International and Klynveld Main Goerdeler. It operates in 150 countries and has 138,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In the Financial Sector, over 9,000 of the firms professionals specialise in advising institutions worldwide, with a double-digit market share in America, Europe and Asia. KPMG Europe LLP In the last few years, KPMG firms across Europe have advanced in reinforcing the integration and cooperation of domestic member firms with the creation of KPMG Europe LLP. KPMG Europe LLP (also affiliated to KPMG international) currently encompasses sixteen independent member firms: Belgium, CIS (Armenia, Georgia Kazakhstan, Kyrgyzstan, Russia, and Ukraine), Germany, Luxembourg, the Netherlands, Norway, Saudi Arabia, Spain, Switzerland, Turkey, and the UK. Its approach is focused on acquiring and nurturing those capabilities required to provide the firms clients with advisory services in areas that are most critical and strategic for them. Having one go to market approach allows KPMG Europe LLP firms to share best practices more efficiently, and to have a broader range of views and industry experience for the benefit of the firms clients. The firm that went on to become KPMG in Spain was established in 1965, and formally became part of KPMG Europe LLP in October The Spanish firm has over 2,250 professionals in its 16 offices and provides Advisory, Audit and Tax and Legal Services. KPMG is a global network of member firms that provides Advisory, Audit and Tax services to national and multinational organisations

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15 Investment Management Advisory Services 13 Annex I: KPMG Publications and Research KPMG member firms are continuously engaged in analysing different market and industry sectors aiming to face forwardthinking investment challenges Some examples of publications include: Defining the Future of Swiss Private Banking UCITS IV Planning for the Future Creating a New Mould for Banking. September From Transfer Agency to Fund Distribution. November Basel III, Pressure is building. December 2010 Evolving Banking Regulation: A marathon or a sprint? Global Financial Services. November 2010 Third edition of the Luxembourg Regulated Investment Vehicles Brochure Beyond The Credit Crisis: the impact and lessons learnt for investment managers Fill the Glass to the Brim. Analysis of the tax implications of UCITS IV and the impact for funds operating cross-border Keeping Ahead of the Curve. Investment Management in the new regulatory landscape. May Transformation: The Future of Alternative Investment. June Hungry for More? Acquisition appetite and strategy in the private banking and wealth management industry Luxemburg. Clarifications of Definitions Concerning Eligible Assets for Investments of UCITS (2009). KPMG periodically publishes articles that follow the financial industry trends: The State of the Investment Management Industry. This regular publication provides an overview of the current issues including fund statistics, consolidation and convergence, marketing and distribution, bank and insurance fund activity, the international arena and technology and legislative matters. Regional analysis is published in Europe, Asia Pacific and Australia/New Zealand. Frontiers in Finance, published four times a year. This is KPMG s Financial Services practice flagship publication which brings together the insights of our firms professionals to provide informed perspectives on the critical issues facing financial services organisations. Convergence and Divergence: New forces shaping the investment universe. The sixth edition of these series of reports on global investment management, is produced jointly by CREATE Research and KPMG International. The survey highlights the forces of convergence and divergence between and within long-only and alternative investments. It is based on the views of CEOs, CIOs and Board Directors of 348 companies from 28 jurisdictions. Funds and Fund Management Survey and Hedge Funds Survey are an annual survey updated by the investment management practices of KPMG member firms around the world. The Funds and Fund Management Survey covers key jurisdictions for fund managers in over 60 countries. The Hedge Funds Survey covers key jurisdictions for hedge funds/hedge fund managers in over 20 countries.

16 14 Investment Management Advisory Services Annex II: Credentials KPMG s professionals have been and are involved in a wide range of transactions and advisory mandates, some of which are listed below as a guide to the firms services Pre-deal strategy Financial advisory services to many of the Spanish savings banks with respect to their merger or integration processes. Merger of a global private equity group. Analysis of the best fund structure for clients requirements and the implications of transferring clients from one type of structure to another. Articulation of the client s desired IFA network proposition and understanding of the capabilities and functionality of wrap platforms. Development of the long-term strategy on an IFA services network. Vendor due diligence engagement on behalf of a leading debt purchaser. IT, financial and tax due diligence on three potential targets in the hedge fund administration sector on behalf of a large global bank looking to enter this rapidly growing market. Strategic growth and brand options available for a client to support a targeted threefold increase in profits within three years. Strategy for a large insurer-owned investment management house with strategy focused on the retail collective investment market. Review of the secondary fund PFI market in the UK as part of the due diligence conducted by a potential investor. Wealth Management and Fund Management Transactions Strategic review of the distribution channels of one of the major Swiss Private Banks. Advisory role on the sale, merger and acquisition of wealth management firms. Acquisition of an interest in a fund operator. Valuation of certain insurance operations in connection with a corporate re-organisation process. Integration / separation activities Fairness opinion for several Spanish savings banks for the transfer of assets. PPA analysis required under IFRS3 and USGAAP to Spanish listed banks and saving banks. Financial advisor in the acquisition of Asset Managers by Spanish banks. Support for the general Transaction Services department in the distribution growth and strategy in relation to the acquisition of a foreign fund manager distribution by an insurance company. Advisory role on the post-merger of 200 funds in the retail investment management business. Transfer of investment products from one legacy platform to another. Analysis of a fund manager s remuneration schemes for a global asset manager.

17 Investment Management Advisory Services 15 Merger integration advisory Restructuring and sell side advice for a German Private Bank. Independent assessment and coordination of possible synergies arising from a company transforming acquisition. Market Review Review of the hedge fund and hedge fund administration markets for input into a 2010 strategy and planning paper for the board. Re-positioning of large German IFA. Vendor Due Diligence On a financial consultancy firm specialising in derivatives trading. On a UK retail wealth manager, in relation to its acquisition by a Private Equity House. Modelling Assessment of the feasibility of a UK Investment Manager acquiring an industry competitor. Working capital review in preparation for an IPO. Advice and support for a relevant Regulator and Stock Market on the implementation of the fund cross border distribution dispositions. Customer Due Diligence For an international investment manager seeking to launch an IPO on the London Stock Exchange. To provide post acquisition analysis on a leading UK IFA and benefits consulting business. On behalf of a leading UK provider of wrap platforms to the investment industry. For potential acquisition of an interdealer broker. Commercial Due Diligence On a leading market hedge fund to support the refinancing of its business. On the Head Institutional Sales for a major UK investment manager to define the business. On a wealth manager as part of a proposed refinancing. On the market drivers in the UK retail, UK hedge funds and US institutional investment management markets.

18 16 Investment Management Advisory Services Annex III: Spanish Investment Management Team José Luis Velasco Partner. Investment Management Prior to joining KPMG, Mr Velasco held senior management positions in a number of stockbrokers and financial entities, including RBC Dexia where he was CEO of its Spanish bank, Chairman of its French subsidiary and Managing Director in Luxembourg. He has extensive experience and knowledge of asset management, private banking, capital markets, securities services, fund distribution, strategy analysis, and corporate finance. In addition to his professional career he has served as a Board Member of the CFA Institute (Charlottesville, Virginia), the local chapter of CFA in Luxembourg and as Chairman and Vice Chairman of the CFA Institute in Spain. He holds a BSc in Economics from the Universidad Autónoma of Madrid and an MBA from the IMD (Lausanne). He is a Spanish Certified Accountant and a Chartered Financial Analyst (CFA). Esther Castro Manager. Investment Management [email protected] Ms Castro joined KPMG as part of the Corporate Finance department after spending several years at BBVA Research and Santander Private Banking in the US where she held the position of Vice President - Senior Investment Analyst. During her career at Santander she also sat on the Asset Allocation Committee. She has relevant experience in private banking, equity research and valuations for the banking industry, and extensive knowledge of international stock markets. Ms Castro holds a BSc in Business Administration and a BSc in Insurance Actuary from the Universidad Complutense of Madrid and she is a Certified International Investment Analyst (CIIA). John Siska Senior Advisor Investment Management [email protected] Mr Siska has held senior executive roles in global financial institutions in Madrid, London, Chicago, and Mexico City, amongst others, CIO of Santander Asset Management, Head of European Client Account of ABN AMRO Equities in London, and Managing Director of ABN AMRO Equities in Madrid. Currently, he advises UHNWI and institutional investment managers, including pension plans, across Europe. His experience in financial markets and risk management cuts across corporate banking, asset management, private banking and equities. He holds a BSc in Economics and Business Administration from ICADE and an MSc in Finance from Northern Illinois University. He is a Chartered Financial Analyst and founding President of CFA Spain. He is co-author of Investment Securities (McGraw-Hill). Global network Investment Management Group contacts: Wm. David Seymour Global Chair Americas region KPMG in the US [email protected] Bonn Liu ASPAC region KPMG in Hong Kong [email protected] Tom Brown EMA region KPMG in the UK [email protected] John Li Fund Centers Group KPMG in Luxembourg [email protected] Jonathan Thompson Real Estate Funds KPMG in the UK [email protected] John Hubbe Pensions Group KPMG in the US [email protected] Mireille Voysest Global Executive Investment Management KPMG in the UK [email protected] Mikael Johnson Hedge Funds KPMG in the US [email protected] Rustom Kharegat Sovereign Wealth Funds KPMG in the UK [email protected] Gerold Hornschu Audit KPMG in Germany [email protected] James Suglia Advisory KPMG in the US [email protected] Hans-Juergen Feyerabend Tax KPMG in Germany [email protected] Tony Rocker Infrastructure Funds KPMG in the UK [email protected]

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20 2011 KPMG Asesores S.L., a limited liability Spanish company, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.