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FEATURING AF Advisors // HedgeMark // Innocap // Lyxor Asset Management // Man FRM // SS&C GlobeOp

WEEKHFMS P E C I A L R E P O R T

DIVERSIFICATIONProviding personalised solutions

TRANSPARENCY Complying with regulatory standards

GROWTH Anticipating and utilising market trends

MANAGED ACCOUNT PLATFORMS 2 0 1 6

1 Refers collectively to Innocap Investment Management Inc. (“IIM”) together with Innocap Global Investment Management Ltd (“IGIM”). The assets under management, including their growth, disclosed herein are those of both IIM and IGIM collectively.

This report does not constitute and should not be construed as an offer or solicitation to enter into any transaction in a jurisdiction where such offer would be unlawful under the laws of that jurisdiction.

innocap.com

YOU STEER.WE NAVIGATE.Enabling & protecting

your investment decisions.

MANAGED ACCOUNT PLATFORM

INNOCAP1 CELEBRATES A 129% GROWTH OF ITS ASSETS

UNDER MANAGEMENT

IN 3+ YEARS 2.0

2.5

3.0

3.5

4.0

4.5

5.0

$ Bn$ 4.98Bn

January 2013 – March 2016

H F M W E E K . CO M 3

Published by Pageant Media Ltd LONDONThird Floor, Thavies Inn House, 3-4 Holborn Circus, London, EC1N 2HAT +44 (0) 20 7832 6500 NEW YORK 200 Park Avenue South Suite 1603, NY 10003T +1 646 891 2110

his year’s report centres on how the industry’s rapidly rising appetite for diversification is being fulfilled by the managed account platform, and why this trend shows no sign of slowing down despite recent market volatility.

Following the financial crisis, managed account platforms saw a spike in usage and have continued to gain momentum.

Additionally, many within the industry expect a surge in demand for alternative strategies due to the outcome of the UK’s recent Brexit vote.

A desire for more transparency, direct control and the ownership of assets have assisted in priming the market for the versatile managed accounts platform.

This HFMWeek Managed Account Platform Report 2016 features a range of industry experts who offer an insight into key market developments.

Tom SimpsonReport editor

T

REPORT EDITOR Tom Simpson T: +44 (0) 20 7832 6535 [email protected] HFMWEEK HEAD OF CONTENT Paul McMillan T: +1 646 891 2118 [email protected] HEAD OF PRODUCTION Claudia Honerjager SUB-EDITORS Luke Tuchscherer, Alice Burton, Charlotte Romeyer ASSOCIATE PUBLISHER Lucy Churchill T: +44 (0) 20 7832 6615 [email protected] PUBLISHING ACCOUNT MANAGERS Alex Roper T: +44 (0) 20 7832 6594 [email protected]; David Butroid +44 (0)207 832 6613 [email protected]; Alexandra Bethanis T +44 (0) 20 7832 6618 [email protected] THE MEMBERSHIP TEAM +44 (0) 20 7832 6511 [email protected] CIRCULATION MANAGER Fay Oborne T: +44 (0) 20 7832 6524 [email protected] CEO Charlie Kerr

HFMWeek is published weekly by Pageant Media Ltd ISSN 1748-5894 Printed by The Manson Group © 2016 all rights reserved. No part of this publication may be reproduced or used without the prior permission from the publisher

I N T R O D U C T I O NM A N A G E D A C C O U N T P L A T F O R M S 2 0 1 6

4 H F M W E E K . CO M

M A N A G E D A C C O U N T P L A T F O R M S 2 0 1 6 C O N T E N T S

FUND SERVICES

GENERATING ALPHA THROUGH INVESTMENT VEHICLES STRUCTURATION AND OPERATIONALISATIONJonathan Planté, manager business development and investor relations at Innocap speaks to HFMWeek about the added value generated by the company thanks to its managed account platform’s unparalleled flexibility

FUND SERVICES

DON’T GET LEFT BEHINDDaniele Spada of Lyxor speaks to HFMWeek about the changing investment landscape and how the company keeps up with the rapid rate of development

FUND SERVICES

IN THE DRIVING SEATMichael Turner, COO at Man FRM, examines the customisation and control benefits offered by managed accounts

FUND UPDATE

KNOWING MAPRon Tannenbaum and Colin Keane of SS&C GlobeOp discuss recent developments in the MAP market

FUND SERVICES

HEDGE FUND INVESTMENTS IN RETREAT? Peter Dom of AF Advisors highlights the reasons behind the reduced appetite and lasting added value of hedge funds

FUND UPDATE

GROWING IN MAP Andrew Lapkin and Joshua Kestler of HedgeMark speak to HFMWeek about their success over the past 12 months and recent industry trends

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M A N A G E D A C C O U N T P L A T F O R M S 2 0 1 6

GENERATING ALPHA THROUGH INVESTMENT VEHICLES STRUCTURATION AND OPERATIONALISATION

JONATHAN PLANTÉ, MANAGER BUSINESS DEVELOPMENT AND INVESTOR RELATIONS AT INNOCAP SPEAKS TO HFMWEEK ABOUT THE ADDED VALUE GENERATED BY THE COMPANY THANKS TO ITS MANAGED ACCOUNT PLATFORM’S UNPARALLELED FLEXIBILITY

HFM: What have been the most signifi cant develop-ments to Innocap over the past 12 months?Jonathan Planté (JP): Continuing on previous years’ mo-mentum, we successfully grew assets under management (AuM) by approximately 41% in the past 12 months, hence surpassing the $5bn milestone as of 30 June 2016.

Th ere have been two main areas of growth that have al-lowed us to realise this tremendous advancement. Firstly, structuring and operating Irish liquid alternatives have been a huge source of growth for us. We currently have more than $3bn across four platforms within this jurisdiction, in both Ucits and Qiaif formats. Secondly, we success-fully launched an emerging manager programme which aimed at enabling several asset managers the opportu-nity to receive their fi rst large insti-tutional allocation. Beyond simply increasing our AuM, this project demonstrated our capacity to part-ner with a third-party in charge of the portfolios’ construction.

In both cases, our fl exibility and focus on providing customised in-vestment vehicles for which most of the work is done internally – notably risk management, le-gal, operations, compliance and IT – have been of signifi cant interest for institutional investors.

HFM: What kind of added value does Innocap’s managed account platform off er? JP: If we look at the alternative investment space, most investors are focusing on manager selection to add value to their programme. And they should. Many white papers in the past decade have provided evidence that, on aver-age, top quartile managers substantially outperform their median peers.

Somewhat counterintuitively, Innocap does not provide

sourcing services. We believe that large institutions are typi-cally well staff ed and wisely advised by consultants, and as such we have limited value to add to this investment alpha.

Th at being said, we feel that there is litt le conversation about structural alpha. Th is is where our strength resides, in generating added value through the structuration and the operationalisation of dedicated managed accounts.

HFM: How does Innocap generate this added value?JP: Our philosophy is to be solution-driven. During the

structuration process, our in-house att orneys concentrate on the customisation of the invest-ment vehicle by providing the client with the choice of the juris-diction, the vehicle type and the ability to have a seat on the board of directors of its own funds while also negotiating the trading docu-mentation with the counterparties in order to obtain, for instance, bett er liquidity terms.

Another crucial aspect of our approach is our capacity to retain the appropriate service providers

for the strategy selected by the client. In this process, we never try to sell the services of our shareholders. Th at is why we have currently fi ve administrators on the platform and deal with nearly 70 counterparties. Being able to team up with various specialists emphasises how fl exible our of-fering is. Considering the growing sophistication of asset owners, there is a need to adapt to their specifi c require-ments, which is why we continue to partner with diff er-ent service providers in order to evolve and subsequently fl ourish.

In addition to the fl exibility of our structuration ap-proach, is the quality of the operationalisation. Th is set of processes entails the supervision of daily operations, the

Jonathan Planté has held various positions in the alternative investment industry since 2007, in both Europe and North America. His qualifications include a graduate diploma in Finance from HEC Montréal, a master degree in international business development from ESC Saint Etienne as well as the CAIA designation.

I BELIEVE THAT THE CHANGING FACE OF

REGULATION WILL BE A TREMENDOUS GROWTH FACTOR FOR INNOCAP

”

F U N D S E R V I C E S


conduct of risk management and due diligence as well as en-suring compliance and independent fund oversight.

How do we do it differently? Beyond the granularity of our services, we strive to capitalise on our various cross competencies. For instance, due to the synergies between our risk management, IT and marketing teams, Innocap has demonstrated to large asset owners its capacity to aggre-gate, simplify and display complex investment data in a user friendly format, via a web-based dashboard solution.

Another great example is our independent fund over-sight process. In order to ensure that clients’ funds are properly managed on a daily basis, our teams work together to continuously assess and monitor regulatory changes, monitor and escalate potential investment guidelines breaches and perform multi-disciplinary reviews of asset managers.

HFM: Who can benefit from this added value?JP: Our core business model is to support asset owners in structuring and operating their invest-ment programmes. On top of all the benefits pre-viously discussed with regards to our platform’s flexibility and efficiency, asset owners value our solution for the enhanced control and independ-ent governance over their assets.

Asset managers have also been attracted by our ca-pabilities. Investment management firms who decide to use one of our established Irish investment vehicles, with pre-existing passporting registrations across various European countries, can considerably shorten their time-to-market. In addition, this solution allows them to focus on their strategy and its distribution, leaving the non-portfolio management activities to Innocap’s managed account specialists.

HFM: How can Innocap team up with consultants? JP: Consultants are a natural partner for Innocap. While structuring and operating customised dedicated

investment vehicles, we do not recommend asset manag-ers to our clients or construct portfolios on their behalf. Hence, since there is little to no overlap between our services and that of consultants, our offerings are com-plementary.

Recently, we have experienced this kind of relationship. For the launch of our emerging manager programme, we collaborated with a third-party who handled the portfolio construction. With each group focused on their respective strengths, we believe that the resulting synergy proved to

be in the best interest of the clients.

HFM: What key industry trends will impact In-nocap over the next four to five years?JP: I believe that the changing face of regulation will be a tremendous growth factor for Innocap. The increasing search for transparency in an ever-changing regulatory landscape has resulted in clients requiring a partner with strong reporting development abilities. For instance, regulatory re-ports such as Solvency II can be a nightmare for smaller asset managers to produce. However, Inno-cap’s IT infrastructure has been designed to handle large amounts of data in order to provide custom-

ised reporting. Thus, we provide a solution which aims at reducing the burden of regulatory management for both asset owners and managers.

Going forward, we are also expecting to see a growing appetite for emerging managers. The fact that these manag-ers may offer more competitive fee arrangements in order to receive their first institutional allocation, combined with their tendency to outperform their largest peers, has gen-erated an increasing interest in the field. That being said, it is difficult for large allocators to invest with emerging man-agers as they will often have trouble meeting institutional governance and infrastructure standards. These investors require a controlled environment to deploy capital and In-nocap is well positioned to create this stable ecosystem.

BEING ABLE TO TEAM UP WITH VARIOUS SPECIALISTS

EMPHASISES HOW FLEXIBLE OUR OFFERING IS

”



HFMWeek (HFM): Could you provide a back-ground and context of the managed account industry?Daniele Spada (DS): The managed account industry and the hedge fund industry in general evolve in a con-text of political and financial uncertainty and increas-ing risk aversion. Volatility has been on the lips of all those in the industry for the past few years, and recent events surrounding the outcome of the UK’s EU ref-erendum have only stoked the fire of unpredictability. The expectation from within the industry is that the instability in the equity and fixed income sectors will remain for a while. As a result, investors, both insti-tutional and private, will increasingly need to reduce their directional exposure to risky assets and will look increasingly to sources of diversification.

In other terms, there is a strong need of strategies or investment solutions that may help investors in de-creasing the correlation to traditional assets or in miti-gating the volatility of their portfolios. Hedge funds

can definitely play this role, especially if they are liq-uid, risk-controlled and regulated.

These factors explain the rapid growth and rising appetite for Ucits funds, which we envisage to contin-ue for the next couple of years. This is also the reason why we see a growing interest in dedicated and cus-tomised managed accounts from institutional inves-tors.

HFM: Where do large investors stand in this changing market? DS: In this market context, all investors, institutional or private, are looking for sources of diversification and for strategies that will allow them to achieve their return objectives while limiting drawdowns and miti-gating the volatility of their global portfolio. Large in-vestors need to invest in a wide range of investment solutions ranging from passive daily ETFs, the liquid long-only funds to the less liquid private equity invest-ments. Also, due to the current market context, these

DON’T GET LEFT BEHIND

DANIELE SPADA OF LYXOR SPEAKS TO HFMWEEK ABOUT THE CHANGING INVESTMENT LANDSCAPE AND HOW THE COMPANY

KEEPS UP WITH THE RAPID RATE OF DEVELOPMENT



Daniele Spada is head of managed account platform at Lyxor, where he is in charge of the development and management of the platform, including hedge fund and mutual fund selection, due diligence, and customised infrastructure services. He joined Lyxor in 2007, is a director of a number of investment funds managed by Lyxor and was appointed to his current position in 2014.

investors are definitely more demanding in terms of transparency, risk control and ability to customise and monitor their investments. They need customised risk and performance reports not only by a single manager but also at the level of their global portfolio of manag-ers. This is why we see more and more requests and discussions with large investors around dedicated in-vestment platforms built around their specific invest-ment needs.

A solid and customised platform is a powerful in-strument to tactically manage and risk manage their global asset allocation. Interestingly, these dedicated investment platforms include both alternative and more traditional long-only investments. Investors are increasingly playing the convergence of the two worlds and rely on managed account platform providers to of-fer them the relevant set of services, reports and trans-parent information necessary to manage their global allocation. We are definitely seeing an acceleration of this trend.

HFM: How do you respond to the developing in-vestment landscape?DS: At Lyxor we have responded by reorganising our offering and our teams around investors’ needs. In 2015 we changed our organisation in order to build a broad and comprehensive investment platform, be-yond the existing managed account platform. Today, Lyxor Managed Account Platform is a centre of exper-tise offering our investors not only the access to hedge fund strategies via our managed accounts but also fund research and selection services on traditional and al-ternative strategies, including private equity. We aim at offering our investors an integrated and modular value chain that starts with fund research and selection and relies on our historical expertise in providing managed account solutions. Platform services and technology in particular have also been enhanced in order to answer to the growing needs of flexibility and customisation. By adding these new features to our existing platform, we are able to support investors in managing the com-plexity of portfolio allocation.

HFM: How does Lyxor look to develop further over the next 18 months? DS: In order to answer the evolving investment needs of the investors, we have enhanced our product and service offering as well as our organisation.

Lyxor Managed Account Platform can now provide a fully integrated set of expertise that can assist clients throughout their investment process across different asset classes, on the long-only side, the hedge fund side, and now also on the private equity selection. I be-lieve there are very few asset managers that can offer access to such a large universe of funds through a fully integrated front to back-office approach both in fund selection and multi-management solutions. In that sense, Lyxor presents a unique set of expertise.

In terms of product offering, Ucits is the area in which we have seen the strongest interest over the past two years and it is the area where we are concentrat-ing most of our efforts. At the end of 2015, we reached $2bn of assets on the existing range of Ucits funds. Now, we are primed to launch three new funds in the coming one or two months.

We have tried, and I believe that we have been suc-cessful, in innovating in our platforms. Our launch of a multi-manager Ucits managed account for a large pri-vate banking network has been so positive that we are already launching another one in the coming weeks. This managed account structure is flexible, original and can help decrease the operating costs compared to a fund of funds, by giving investors access to a diversi-fied range of hedge fund strategies in a liquid format and with one single fee. We believe there will be grow-ing appetite from investors for that kind of innovative funds which have the potential to reinvigorate the hedge fund industry.

Additionally, renewed requests for either dedicated investment platforms or dedicated managed accounts for specific managers or for specific clients have posi-tively impacted our growth and continue to be at the centre of our development strategy.

GIVEN THE INCREASING POLITICAL UNCERTAINTY,

INVESTORS WILL INCREASINGLY NEED TO REDUCE THEIR

DIRECTIONAL EXPOSURE TO RISKY ASSETS AND

WILL LOOK MORE THAN EVER FOR SOURCES OF

DIVERSIFICATION

”

HedgeMark, a BNY Mellon company, specializes in supporting institutional clients

in the development and operation of their own private hedge fund dedicated managed

account platforms.

Our Dedicated Managed Account solution allows clients to outsource the set-up,

implementation, ongoing operations and risk and performance analytics associated

with operating their own custom hedge fund managed account platform.

To learn more visit www.hedgemark.com.

An investment in hedge fund strategies is speculative, should be discretionary capital set aside for speculative purposes, involves a high degree of risk and is not suitable for all investors. Investors couldlose all or a substantial portion of their investment and must have the financial ability, sophistication, experience and willingness to bear the risks of an investment long term. Hedge fund strategies may be significantly leveraged and performance may be volatile. Accounts pursuing hedge fund strategies commonly enter into swaps, futures, forwards, options and other derivative transactions for various hedging and/or speculative purposes that can result in volatile fund performance. No representation is made that any Dedicated Managed Account’s investment process, objectives, goals or risk management techniques will or are likely to be achieved or be successful or that any Dedicated Managed Account or any underlying investment will make any profit or will not sustain losses. The risks of investing in hedge fund strategies will not be negated or even mitigated by HedgeMark’s platform, analytic tools, compliance policies or monitoring and no assurance is given that any Dedicated Managed Account will not be exposed to risks of significant trading losses. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. HedgeMark Advisors, LLC is an SEC-registered investment adviser. Services are provided by BNY Mellon and its various affi liates. ©2016 The Bank of New York Mellon Corporation. All rights reserved.

Dedicated Managed Accounts Next Generation Hedge Fund Investing




Michael Turner is chief operating officer of Man FRM, based in London, and a member of FRM’s Management Committee. He is responsible for investment infrastructure within FRM and also oversees the teams responsible for quantitative analysis, managed account transparency and operations, and client services.

Clients know that managed accounts (MACs) off er a number of important potential advan-tages compared to commingled funds. One of the key advantages oft en cited is transparency. With a MAC structure, clients are set up to di-rectly view the assets in the trading accounts

to help bett er ensure that the correct strategy is being fol-lowed and monitor items such as risk limits or liquidity.

Yet, we think operating a successful MAC platform in-volves a lot more than just providing transparency. In par-ticular, we believe the ability to customise these MACs is valuable since it permits the provision of investment pro-fi les that may be more suited to each client’s requirements.

However, one important factor that is sometimes over-looked is the ability to potentially infl uence and exercise more control over certain areas of the investment process. Such control may be vital to some investors and can po-tentially be exercised in tangible ways, such as the ability to more closely control fees, but also more subtle ways, such as control of legal agreements, MAC structure or service pro-viders. All of these factors are important in assisting clients achieve costs savings on their hedge fund investments.

In the current market environment, clients understand-ably are acutely cost conscious. In any exercise to reduce the costs related to investment management, the obvious place to start is fees.

PERFORMANCE AND MANAGEMENT FEESTh ere are good reasons why the hedge fund manager of a MAC may provide lower fees. Th ere are, for example, some ways in which an investment manager may provide less service to a MAC than to their commingled fund. For the hedge fund manager of a MAC, there is no operational oversight of service providers or legal documents (as these are provided by the MAC platform), and no marketing expense; it is thus reasonable to request lower fees for the MAC client.

In our opinion, lower fees in MACs versus a manager’s commingled fund can be achieved where the MAC pro-vider has the scale, expertise and reputation as an estab-lished, quality hedge fund investor.

Size and scale: Th e size of a MAC provider in bring-ing scale and alternative investment industry experience has a signifi cant bearing on negotiating lower fees with a

MICHAEL TURNER, COO AT MAN FRM, EXAMINES THE CUSTOMISATION AND CONTROL BENEFITS OFFERED BY MANAGED ACCOUNTS

IN THE DRIVING SEAT


1 2 H F M W E E K . CO M



manager. When a significant MAC provider allocates to new managers either on its own behalf or on behalf of their clients, they will generally do so in size.

Expertise and experience: Having a significant num-ber of years’ experience in constructing and investing in MACs across all hedge fund strategies means that the launch process for that hedge fund manager is simplified despite the complexity of some hedge fund strategies such as event-driven strategies. The valuable experience gained from implementing highly liquid to less liquid strategies means that hedge fund managers are more likely to negoti-ate their terms and conditions on the MACs versus their reference funds.

Reputation: Being a well-regarded and respected inves-tor generally makes the MAC provider a more attractive proposition to most hedge funds. Having an established reputation often provides opportunities for the MAC pro-vider to set up MACs on terms that are more beneficial to clients than would normally be available in the commin-gled fund vehicle. Many managers know that infrastruc-ture and experience of the MAC provider will more likely result in less operational burden for them, since the MAC provider takes on work that the manager would otherwise be doing for their reference fund. This can also help achieve discounts to fees which, once again, should transparently flow directly to the end client.

CONTROLLING OTHER COSTSThere are also a number of additional areas where MACs can provide greater control and help reduce costs to clients.

The most obvious area of expenditure beyond headline fees is the cost of service providers. Since service providers are contracted directly to the managed account vehicle, the firm managing the vehicle can actively negotiate the most appropriate service levels and fees. Hence considerable savings can potentially be made through the negotiation of administrator and bro-ker fees as well as audit and legal costs.

As with headline fees, experience and scale can also play an important part in being able to gain the best possible terms with service providers for clients. Having the abil-ity to select from an extensive number of service providers including administrators, prime brokers and Isda counter-parties (rather than being confined to a small set menu of service providers) means that the MAC provider can po-tentially provide an open “architecture” platform to their clients. This open architecture approach can help enable the MAC to better mirror the trading set up of each invest-ment manager which may reduce the often hidden cost of investment slippage.

OTHER CONTROL CONSIDERATIONSThere are also other areas where cost factors may be less tangible or hidden, but still significant. For example, negoti-ating trading agreements with prime brokers, Isdas or clear-ers can lead to improved terms for a MAC, such as helping ensure more favourable treatment of collateral or margin. Similarly, the ability to set up an optimal fund structure for each MAC can help lead to reduced total costs for clients by ensuring that they are able to access the investments more easily, making feeder structures unnecessary.

Identifying the most appropriate MAC provider and partner is crucial for hedge fund clients who are looking to keep their MAC setup costs to a minimum. Clients should be able to draw on the MAC providers’ well resourced, ex-perienced in-house teams to control and minimise costs such as external legal counsel as these costs are charged to the MAC itself. These costs, particularly, in specialist ar-

eas, can substantively increase depending on the strategy being implemented and the number of counterparties (such as prime brokers) involved in the MAC.

Finally, there is the fine detail of how the man-ager sets up the account operationally that can influence overall performance and potentially re-duce costs. Careful attention to operational due diligence can help ensure that important items like unfair trade allocation does not detract from po-tential performance for clients.

CONCLUSIONWe have highlighted how using a MAC to allocate to hedge funds can help give a client greater ability to influ-ence costs and investment conditions. In comparison, the ability to influence these factors with a commingled fund allocation is often quite limited.

FRM’s experience suggests that utilising MACs offers potential opportunities to reduce costs and improve the terms of a hedge fund investment. However, the selection of the right MAC provider is crucial to clients in achieving this.

The products described herein are unregistered private investment funds commonly called “hedge funds” (each, a Private Fund). Private Funds, depending upon their investment objectives and strategies, may invest and trade in many different markets, strategies and instruments (including se-curities, non-securities and derivatives) and are NOT subject to the same regulatory requirements as mutual funds, including requirements to pro-vide certain periodic and standardized pricing and valuation information to investors. There are substantial risks in investing in a Private Fund, which also are applicable to the underlying Private Funds in which a Private Fund may invest. Each Fund’s Offering Documents contain important informa-tion concerning risk factors, including a more comprehensive description of the risks and other material aspects of the investment (including a Fund’s investment program and applicable fees and expenses), and should be read carefully before any decision to invest is made. You should not rely in any way on this summary.

IN THE CURRENT MARKET ENVIRONMENT, CLIENTS UNDERSTANDABLY ARE

ACUTELY COST CONSCIOUS

A private and closed forum designed to educate and inform hedge fund

allocators and their advisersHFMAllocatorNetwork.com

UPCOMING EVENTS FOR 2016/17:

EUROPEAN SUMMITS London: June

Switzerland: September

London: October

London: February 2017

UK DINNERS – LONDON September

November

January 2017

US SUMMITS New York: May

New York: September

New York: November

Dallas: November

New York: January 2017

ALLOCATOR CONTACT Kate Sparrow

Engagement Manager

[email protected]

+44 (0)20 7832 6530

MANAGER CONTACT Alex Roper

Senior Publishing Account Manager

[email protected]

+44 (0)20 7832 6594

US DINNERS – NEW YORK June

September

February 2017



Colin Keane is the head of SS&C Ireland and leads its European Managed Account Platform division. He has over 16 years’ experience in the fund administration industry. Colin special-ises in European regulated investment vehicles and re-cently completed a research masters on the impact of regulation on returns across offshore and European Al-ternative Investment Funds, and Ucits platforms.

HFMWeek (HFM): What has been the driving force in the continued growth of larger managed account platforms, especially within the larger macro picture of declining hedge fund investments overall? Ron Tannenbaum (RT): Recent growth in managed ac-count platform investments stands in sharp contrast to de-clining AuM in direct hedge fund investment. The top 10 managed account platform providers combined have ex-perienced year-on-year growth of 17% ($70bn to $82.5bn according to HFMWeek’s Managed Accounts Platform Uni-verse 2016 published on 25 May 2016).

Colin Keane (CK): The fall in dedicated hedge fund launches is well documented; HFMWeek noted that they are down by roughly 50% when compared to 2014-15.

By contrast, hedge fund allocations are increasing as more and more institutional investors see the value of as-sets allocations to alternative asset classes. The source of these inflows is institutional investors, such as pension funds and insurance companies, seeking absolute returns. Europe and the US in particular have had continuing posi-tive inflows in this asset class.

RT: Traditional growth drivers include the key benefits we always refer to with managed accounts, i.e. the ability to customise platforms to suit the specific individual inves-tors; direct control and ownership of the assets; transpar-ency around positions, risk and performance; and clear governance standards for the operation of the platform. But the most powerful contributor to growth recently has been the adoption of Solvency II capital allocations. Insur-ance companies are well aware that, for a similar economic position, their capital treatment is superior in a managed account as they can look straight through to their owner-ship of the underlying positions. If an insurer holds a port-folio of hedge fund investments, structuring it as a portfo-lio of managed accounts will have better economics.

The trend also is for the top managed account platforms (MAPs) to offer a flexible, more customisable service and structure to large investors. MAPs today enable investors to define what they want for themselves. SS&C GlobeOp services these MAPs in a similarly customised way. We of-fer our services on a modular basis, and will design a solu-tion for any specific function or process the MAP may re-quire. SS&C’s flexible approach to supporting the various tasks and providing the rich daily functionality required to maintain investments in a managed account structure is a key component to our success as the leading provider in the managed account sector.

HFM: Are you aware of investors in managed ac-counts, specifically larger institutions, considering development of their own in-house proprietary man-aged account platforms? RT: This may be a natural course of events over time. SS&C GlobeOp is aware of a couple of investors who have asked how they could develop and implement a managed account portfolio of their own. Ultimately, the process may replicate how the hedge fund market grew in the early 2000s. Prior to 2007-08, most investors were represented through funds of hedge funds. That’s the way institutions learned how to invest in hedge funds and to manage di-versified alternative investment portfolios. Large funds of hedge funds still exist, but more recently medium-sized funds of hedge funds have been all-but decimated. Many institutional investors have brought such hedge fund port-folios in-house. Many large investors, especially the US pension funds and insurance companies, maintain what are essentially “funds of funds of one” that they manage themselves. Having said that, if large MAPs continue to customise their offering to investors, and provide their ser-vices at a fair price, then institutions may never be moti-vated to rebuild such a complicated process in-house.

HFM: SS&C GlobeOp has dominated servicing the MAP sector for a number of years. What are you doing differently to maintain your competitive edge? CK: Our success is built on partnership and the ability to provide a value add solution to each mandate. While we can provide our products and services as a comprehensive packaged solution, they can also be compartmentalised and provided independently. For example, we can provide market leading regulatory reporting solutions and valua-tions capabilities as standalone services. Our services are driven by investor requirements in partnership with the platform manager. Furthermore, we continue to improve the way we report to investors and the managed account platform providers. We are simplifying our reporting platforms, moving towards user-defined exception-based reports allowing our clients to focus on the areas they feel are most important. Key areas are risk management, investment management, and governance, for example providing full position-level transparency across the plat-form to help investors meet their increased regulatory and governance needs.

Our reporting relies on our ability to produce timely, reconciled, secure and accurate data, and our ability to normalise and validate that data and is critical to building a smarter operating environment.

RON TANNENBAUM AND COLIN KEANE OF SS&C GLOBEOP DISCUSS RECENT DEVELOPMENTS IN THE MAP MARKET

KNOWING MAP

Ron Tannenbaum is a managing director of Busi-ness Development for EMEA in SS&C GlobeOp’s alterna-tive fund services business. Tannenbaum was a partner and co-founder of GlobeOp Financial Services, which was acquired by SS&C in 2012. For the previous 3 years he was a founding partner of AltB Partners LP. focusing on global market-ing and sales.

F U N D U P D AT E


HFM: What do you mean by a “smarter operating environment”? CK: Our culture is innovation. We continue to streamline data flows to build straight-through processes. A “smarter operating environment” is about managing the flow of that information from the trade capture side straight through to the investor end product. SS&C has pioneered an automated, transparent, Excel-free NAV reporting package, providing clear structure and an audit trail around the NAV components. Additionally, SS&C GlobeOp has digitalised our subscription documents so investors can manage the process for themselves by logging into our portal. Our focus is to get the data right at source, create one fully reconciled warehouse for the cus-tomer, and create scalable reporting on that data.

HFM: Statistically, it looks like the larger MAPs are experiencing continued growth. Does this mean smaller MAPs will struggle? RT: MAPs that are medium-sized will struggle. Smaller platforms must concede they cannot cre-ate alpha by picking hedge fund strategies based on fundamental analysis. There is no predictive value in any data to help decide what’s going to be the next top strategy. Smaller platforms will not be able to charge investors for this illusion of alpha creation.

It comes down to using position data wisely. For MAPs, real value resides in building a robust and controlled in-vestment process. This includes managing a diversified, well governed portfolio of hedge funds and the ability to minimise large drawdowns by choosing managers who

demonstrate a proven ability to mitigate losses on the downside over several market cycles.

An important benefit that larger MAPs create is using their own T+1 position data and the direct ownership of positions to control unwanted risks. This includes market

risk, credit risk and operational exposures.On a daily basis, we enable MAPs to spot larger

than expected concentration exposures across sev-eral funds pursuing similar strategies. We also help MAPs identify market risk exposures beyond tol-erance limits.

Operationally, on T+1, MAPs rapidly view through exception-based reports which of their accounts have clean cash, position and trade rec-onciliations. MAPs can control credit exposure on collateral movements, how cash balances are de-ployed, where cash and collateral is held, etc.

Most importantly, our SS&C GlobeOp tech-nology puts the managed account holder entirely in control of position valuations and collateral movements. For each MAP, SS&C delivers a unique daily valuation and collateral manage-ment service based upon our ability to value every product using our own independent pricing models and inputs. SS&C calculates variation and initial margins in the precise manner agreed with

the MAP (not the fund manager) and the MAP counter-parties. We are the industry standard for generating our own values and uploading any other price sources the MAP or the counterparty require. We then provide for the online tools for further analysis and ratification of the valuation matrix. n

RECENT GROWTH IN MANAGED ACCOUNT

PLATFORM INVESTMENTS STANDS IN SHARP

CONTRAST TO DECLINING ASSETS UNDER

MANAGEMENT (AuM) IN DIRECT HEDGE FUND

INVESTMENT



Peter Dom is the co-founder and managing partner of AF Advisors. His primary areas of expertise are managed accounts and investment structuring. He advises large institutional investors on the establishment of dedicated managed platforms and illiquid investment structures in Europe and the US.

HFMWeek (HFM): What types of services does AF Advisors provide with respect to managed accounts? Peter Dom (PD): AF Advisors is a consultancy fi rm that focuses on investment structuring and organi-sational consultancy within the investment industry. In relation to managed accounts, we assist a range of institutional investors in sett ing up their own dedicated managed account platform. More-over, AF Advisors concentrates on three key categories:

• Structuring: design of the managed accounts structure, advise on governance and the roles and responsibilities

• Selection: selection of the best possible managed account platform provider and related service providers

• Implementation: embed all managed accounts pro-cesses and procedures with the platform provider and the client and help with the onboarding of the fi rst couple of manager.

HFM: What is the impact of a seemingly reduced appetite for hedge funds for the managed ac-counts platforms? And, are there contrasts in the appetite for managed accounts per region? PD: In essence, there certainly is less appetite for hedge fund investments, especially in Eu-rope. Disappointing performance combined with substantial fees is a diffi cult story to sell to your pension board and participants.

Additionally, there can be issues posed by pension boards that

have diffi culties understanding complex trade strategies.

PETER DOM OF AF ADVISORS HIGHLIGHTS THE REASONS BEHIND THE REDUCED APPETITE AND LASTING ADDED VALUE OF HEDGE FUNDS

HEDGE FUND INVESTMENTS IN RETREAT?

HEDGE FUNDS CAN STILL PROVIDE A UNIQUE COMBINATION OF HIGH

DIVERSIFICATION POTENTIAL AND LOWER EQUITY

AND FIXED INCOME BETA EXPOSURE



These issues amalgamate and deter large institutional in-vestors from entering hedge fund investing or cause them to disinvest their hedge fund investments. Consequently, the lower the number of hedge fund investors, the lower the appetite for managed accounts for hedge funds.

We might not always agree with these arguments, but we understand the reasoning. We believe that hedge funds can still provide a unique combination of high di-versification potential, at a lower equity and fixed income beta exposures, and are superior to traditional mecha-nisms to reduce tail risk. Hedge fund selection is key and does require skill. Investors should not be misled by av-erage hedge fund performance, because there is a huge dispersion between top and bottom quartile performers.

Despite the lack of appetite, I would say that managed accounts remain the most progressive option because they fit perfectly with the more traditional ways of insti-tutional investing, i.e. highly customised and controlled like a discretionary mandate. Almost all managed ac-count platform providers now offer managed accounts in Luxembourg or Ireland, which highlights that the provid-ers are finding solutions for having fully transparent man-aged accounts that are regulated.

As far as regional diversification is concerned, there is a lot more appetite for managed accounts in the US. A large number of retirement plans publically announced that they are considering hedge fund investing, The main reason behind the consistent interest from the US is that managed accounts are seen as a diversification tool for their beta exposure. These institutions either need assistance on the advisory side, i.e. se-lection of hedge funds or consider building dedi-cated managed account platforms for themselves.

HFM: Based on your database what can you tell us about the recent trend in terms of opened/closed managed accounts? PD: At the moment there are more managed accounts closed than opened. The driving force behind this is the profitability of the platform pro-viders. Platform providers can improve their P&L by closing unprofitable managed accounts as less smaller managed accounts means less costs. This highlights why there is an increase in the closure of managed accounts that do not have that much assets under management and have a not-so-suc-cessful manager.

The AuM for managed accounts is, however, increasing and is recognised by your own annual report made in regards to AuM. Moreover, there is a large concentration of assets under manage-ment by clients as the top three to five clients are really important for the AuM base of each of the managed account platform providers.

HFM: What should investors consider when imple-menting a dedicated managed account platform and what are the greatest pitfalls to avoid? PD: There must be a careful consideration before you start building a managed account. The key is to fully un-derstand the roles and responsibilities of the platform provider and the client. Knowing what the client is look-

ing for and what the objectives are is also vital. Without a clear idea of how to proceed, there is a risk that the inves-tor may end up in a structure that is not working as en-visioned. Ultimately, leading to dissatisfaction and cost implications.

HFM: Has the perceived added value of man-aged accounts changed over the last years? PD: Certainly, there have been changes over the past few years. While asset control is still the most important added value for commingled managed accounts, the added value of dedicated man-aged accounts has moved more towards mainly the possibility of customisation. With dedicated managed accounts, clients can apply for instance their own exclusions and customise the level of leverage. The argument of asset control will, how-ever, resurface once there is a blowup of a man-ager or a fraud.

HFM: What are the trends in the market of managed account platform providers? PD: The competition between platform pro-viders is fierce, therefore, their fees are under pressure. Additionally, over the years fees have decreased, and consequentially, the number of providers is decreasing. Also the management fees of hedge fund managers are decreasing. The old model of 2% management fee is long gone, and now flat fees of below 1% to even 0% manage-

ment fee have been seen in the market. This is clearly an opportunity for hedge fund investments and especially for managed accounts. Furthermore, Ucits managed ac-counts are still a trend in Europe as the equivalent 40 act funds in the US. The number of Ucits managed accounts is increasing over the years because the Ucits status al-lows many institutional investors to invest in in hedge fund strategies. I think this is still going to be something to continue.

THERE CERTAINLY IS LESS APPETITE FOR HEDGE FUND INVESTMENTS,

ESPECIALLY IN EUROPE, AND THE CAUSES CAN

BE ATTRIBUTED TO LACKLUSTRE PERFORMANCE

AND THE RETENTION OF SUBSTANTIAL FEES COMPARED TO OTHER

STRATEGIES

For more information please contact

AF Advisors – Peter [email protected]

+ 31 10 412 96 16www.af-advisors.nl

Partners to build your customized Managed Account Platform

Have the ambition to build your own customized platform but fear the complexity involved?

AF Advisors has the experience to realize your ambitions. As strategic advisor and project manager for a number of large institutional investors, we know the best way to approach design and implementation projects and how to reduce complexities.

By applying our multi disciplinary approach, not only will we streamline your project goals, but also build a platform that is tailored to your needs and adds value.




Joshua Kestler is president and chief operating officer, and is responsible for oversight of legal/compliance, structuring, onboarding, accounting, operations and business development.

HFMWeek (HFM): HedgeMark experienced major growth in 2015, jumping up to number four in our survey. What were the drivers of this growth? Andrew Lapkin (AL): One of the key factors driving our growth has been the continued increase in large institu-tional investors embracing dedicated managed accounts as an improved structure for investing in hedge funds. Our growth has come primarily from two types of insti-tutional investors – fund of funds advisors and corporate and government pension plans. For fund of funds busi-ness, the enhanced control and position-level transpar-ency off ered through a dedicated managed account structure can improve their value proposition to clients. Dedicated managed accounts can provide fund of funds advisors with the transparency and control to improve their investment and risk oversight of managers, and al-low for more customised investment solutions for their clients. We expect to continue to see signifi cant growth from this client segment.

We have also experienced growth from pension plans shift ing to dedicated managed account programmes. Pension plans have been subject to increased pressure to reduce fees, obtain expense and position-level transpar-ency and to improve the overall governance and control of their hedge fund investments. We are fortunate to have pension clients who are some of the early thought leaders and innovators in the managed account space. Th ese clients have had success implementing their plat-forms, securing managers and negotiating reduced and custom fee structures. As a result of the success of these early managed account adopters, we are starting to see a material increase in interest in managed accounts from other pension plans including several 2016 RFIs and RFPs.

HFM: Why do you think HedgeMark’s 2015 growth was greater than many of your competitors? Joshua Kestler ( JK): We believe that our connection to BNY Mellon is certainly a key diff erentiator. BNY Mellon is one of the largest asset servicing funds in the world and is known for having strong core competencies in custody, accounting and operations. Th e services that HedgeMark provides to dedicated managed account clients draw from many of the same BNY Mellon strengths. BNY Mellon’s history and reputation as a leading custody bank resonates with clients and provides them with a feeling of stability and safety. We believe that institutional investors

are ultimately looking for many of the same att ributes in a managed account platform provider that they look for in a custodian.

Th e breadth of HedgeMark’s service off ering is also a crucial diff erentiator from our competitors. Th e services that we provide are extremely comprehensive in terms of the ability of our clients to outsource the implementation and operations of their dedicated managed account plat-form to HedgeMark without having to overburden exist-ing staff , hire additional staff or develop new technology. Many of our competitors only off er certain components of our service off ering and rely on either the client or other service providers to fi ll in the gaps. We believe that clients are looking for a seamless and comprehensive out-sourced solution which puts HedgeMark at an advantage compared to many of our competitors.

HFM: A number of investors have been att racted to managed accounts as a way to reduce fees. Are fee reductions real? AL: Yes – many of our clients have had success in using dedicated managed accounts as a tool to reduce manager fees. Th ere continues to be increased industry pressure from investors to reduce hedge fund managed and per-formance fees. As a result, the ability to reduce fees is of-ten one of the fi rst topics mentioned by clients who are exploring the use of dedicated managed accounts. Suc-cessful fee negotiations with managers are oft en linked to the size of an investor’s allocation. Some of our large institutional clients can make allocations of greater than $100m or even $200m per manager. Th ose clients would tend to have greater success in negotiating fee reductions than investors who allocate smaller amounts of capital. At least one of our clients has been quite public about their ability to reduce fees (in their case, by 30-60%) through the use of dedicated managed accounts.

We have also seen that clients are not simply focused on lowering fees, but also in creating new fee structures which result in a bett er alignment of the manager and in-vestor’s interests. We have seen a fair number of clients use hurdle rates for manager performance fees. We have also seen management fee only and performance fee only structures. Claw backs are another structure being used by investors, so that if a manager’s performance is up in year one but then down in year two, the investor gets some credit for the fees that they have paid when the fund experiences losses.

ANDREW LAPKIN AND JOSHUA KESTLER OF HEDGEMARK SPEAK TO HFMWEEK ABOUT THEIR SUCCESS OVER THE PAST 12 MONTHS AND RECENT INDUSTRY TRENDS

GROWING IN MAP

Andrew Lapkin is chief executive officer and is responsible for overall management of the firm. Prior to joining HedgeMark in 2011, Lapkin was the co-founder, president, and chief operating officer of Measurisk, a JP Morgan company formerly affiliated with The Bear Stearns Companies.




HFM: Is the transparency afforded by managed ac-counts being put to good use? AL: Historically, it hasn’t been. For many investors, the shift to managed accounts results in the challenge of managing and deciphering the large quantity of the data that is now available to them. HedgeMark has spent sig-nificant time and resources developing ways to synthe-sise this data for investors as well as building out user-friendly risk and performance analytics and reporting tools to empower investors to use this information effi-ciently. Our proprietary technology and data enrichment and aggregation process has been one of the key areas of our success. From an internal HedgeMark perspective, the availability and use of position-level data is also cru-cial to the delivery of our managed account services. The same data that we use for client reporting is also used by our internal staff to manage certain key processes such as daily investment guideline monitoring.

HFM: You mentioned how investors were very focused on viewing data in light of the Brexit vote. What impact do you think Brexit will have on hedge fund managed account use? AL: Our view is that the volatility created following the outcome of the UK’s EU referendum will actually result in an increased demand in hedge funds. Despite the glob-al uncertainty arising out of Brexit, we believe that the various tools available to hedge funds and the flexibility of many hedge fund strategies will allow many funds to profit from this market event. We expect to see hedge funds used both defensively and offensively in order to add diversification to portfolios in the coming weeks and months.

HFM: On top of some of those headline negatives on fees and transparency, there recently have been a few other high profile hedge funds that have gated inves-tors after receiving significant redemptions to their fund. Would an investor with a managed account

with one of those managers also be gated? JK: No – an investor in a dedicated managed account would not be gated as a result of redemptions in the manager’s commingled fund. One of the most signifi-cant benefits of investing through a dedicated managed account structure is that the investor has asset control and cannot be gated or suspended by the hedge fund manager. The dedicated managed account structure re-moves the co-investor risk that is inherent in a commin-gled fund. In a managed account structure, the investor has the ability to determine its destiny. For example, if a manager is under regulatory investigation, there will likely be a flood of redemptions that may result in a gate, suspension or even the liquidation of a commingled fund. In that situation, a dedicated managed account in-vestor will have the power to remain invested if they have conviction in the manager or the investor can choose to liquidate either immediately or in a more orderly fash-ion. Importantly, the ultimate decision is in the hands of the investor rather than dictated by the behaviour of the manager or other investors.

HFM: Investors considering managed accounts are probably most worried about hedge fund participa-tion. What are you experiencing in this regard? JK: We have continued to experience an increasing will-ingness of managers to offer managed account structures. This trend began following the financial crisis and has continued to accelerate each year since. As institutional investors increasingly shift to managed account struc-tures, managers have been under increased pressure to offer managed account structures as a way to retain ex-isting investments and attract large, new allocations from this investor segment. As the overall asset raise environ-ment has become more challenging and scale has become more important than ever, we have seen an increasing number of managers which are willing to accommodate managed account requests. Ultimately, it’s the investors themselves who are driving this change.

Lyxor’s Alternative UCITS Platform is the result of more than 18 years of analyzing and selecting the best hedge funds in the industry, taking into account the pedigree of the manager, the performance engines, the operational structure and the risk monitoring process.

PIONEER IN FUND SELECTION SINCE 1998.

*Source : TOP 10 UCITS Platform by HFM Week (Jan. 2016); Figures as of May 30th, 2016.

Canyon1 Event Driven, Credit

Capricorn2 Long/Short EquityEmerging Markets

Winton3 CTA Diversifi ed

Lyxor4

CTA

Tiedemann6

Merger Arbitrage

THIS COMMUNICATION IS FOR PROFESSIONAL CLIENTS ONLY AND IS NOT DIRECTED AT RETAIL CLIENTS. Not all advisory or management services are available in all jurisdictions due to regulatory restrictions. None of the hedge fund experts mentioned herein (“HF”) take any responsibility for the accuracy or completeness of the contents of this document any representations made herein, or for the fi nancial performance of their own strategies. Lyxor Asset Management (Lyxor AM) and each HF disclaims any liability for any direct, indirect, consequential or other losses or damages, including loss of profi ts, incurred by you or by any third party that may arise from any reliance on this document. Each HF is neither responsible for or involved in the marketing, distribution or sales of the Fund nor for compliance with any marketing or promotion laws, rules, or regulations; and no third party is authorised to make any statement about any of the relevant HF’s respective products or services in connection with any such marketing or sales. Lyxor Asset Management, Société par actions simplifi ée, having its registered offi ce at Tours Société Générale, 17 cours Valmy, 92800 Puteaux (France), 418 862 215 RCS Nanterre, is authorised and regulated by the Autorité des marchés fi nanciers (AMF). This communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorised by the Financial Conduct Authority in the UK under Registration Number 435658.

1 Canyon Capital Advisors LLC, 2 Capricorn Capital Partners UK Limited, 3 Winton Capital Management Limited, 4 Lyxor Asset Management, 5 Och-Ziff Capital Managment Group LLC, 6 Tiedemann Investment Group Advisors LLC, 7 Chenavari Investment Managers.

Och-Ziff5

Long/Short Equity USSpecial Situations

BEST ALTERNATIVE MANAGERS IN A RISK-CONTROLLED UCITS FORMAT.

ONE OF THE FASTEST GROWING UCITS PLATFORMSWITH MORE THAN $2BN AUM*.

Visit lyxor.com or contact [email protected]

Chenavari7 European Long/ShortCredit

T H E P O W E R T O P E R F O R M

ETFs & INDEXING • ACTIVE INVESTMENT STRATEGIES • INVESTMENT PARTNERS


S E R V I C E D I R E C TO R YM A N A G E D A C C O U N T P L A T F O R M S 2 0 1 6

AF Advisors, [email protected] // + 31 10 412 9616 // + 31 6 20 26 96 68

AF Advisors is an independent boutique research and consultancy fi rm servicing the investment management industry. AF Advisors is able to cover the whole value chain of product structuring - legal and fi scal affairs, compliance, risk management, operations and business development. This breadth of knowledge and experience means that AF Advisors is not only able to provide clients with intelligent, commercial and practical advice but is also able to support implementation.

HedgeMark Advisors, LLC Jean-Francois Crousillat, CAIA, Managing Director, HEDGEMARK, A BNY Mellon Company // 780 Third Avenue, 44th Floor // New York, NY. 10017 // Main: (212) 888-1300 // Mobile: (917) 991-2707 // [email protected]

HedgeMark, a BNY Mellon Company, specializes in supporting institutional clients in the development and operation of their own private hedge fund dedicated managed account platforms. HedgeMark’s dedicated managed account services and position-level risk and performance analytics are aimed at institutional investors seeking increased customization, transparency, control and governance around their hedge fund investments. HedgeMark's team is led by well-established industry professionals with extensive experience in the structuring, operations, monitoring and oversight of hedge fund managed account structures.

Lyxor Asset Management Amber Kizilbash, Global Head of Sales and Client Strategy // [email protected] // T: +331 4213 3131

Lyxor Asset Management Group (“Lyxor Group”) was founded in 1998 and is composed of two fully-owned subsidiaries1,2 of Societe Generale Group.It counts 600 professionals worldwide managing and advising $129.2bn* of assets. Lyxor Group offers customized investment management solutions based on its expertise in ETFs & Indexing, Active Investment Strategies and Multi-Management. Driven by acknowledged research, advanced risk-management and a passion for client satisfaction, Lyxor's investment specialists strive to deliver sustainable performance across all asset classes. www.lyxor.com

1 Lyxor Asset Management is approved by the «Autorité des Marchés Financiers» (French regulator) under the agreement # GP98019.2 Lyxor International Asset Management is approved by the «Autorité des Marchés Financiers» (French regulator) under the agreement # GP04024.*Equivalent to 115.9bn - Assets under management and advisory as of end of May 2016

Man FRM Michael Turner, Chief Operating Officer // email: [email protected]

Founded in 1991 and joining Man Group in 2012, Man FRM is a global alternatives investment specialist, with $12.1 billion of assets under management and 65 professionals located in London, New York, Tokyo, Guernsey and Switzerland*. With a predominantly institutional client base, Man FRM is an open architecture, full service hedge fund platform including customised and advisory solutions and commingled strategies, all which can be enhanced by its $8.9 billion investment driven managed account platform*

*As of 31 March 2016.

Innocap [email protected]

With more than a decade of experience in the hedge fund industry, Innocap1 operates a managed account platform across various jurisdictions.The fi rm designs, implements and operates dedicated investment infrastructures, all while providing rigorous risk management and fund governance to enable and protect asset owners’ investment decisions. Characterized by its specialized legal knowledge and its operational and risk management skills, Innocap facilitates institutional investment decisions via an enhanced investment framework, fl exible and capable of meeting evolving needs. Innocap has the advantage of leveraging the infrastructure of its shareholders, two large fi nancial institutions, while still remaining fl exible.

1Innocap Investment Management Inc. together with Innocap Global Investment Management Ltd

Punit Satsangi, EMEA Managing Director // [email protected] // T: +44 (0)20 3310 33041 St. Martins Le Grand, London, EC1A 4AS // www.sscglobeop.comSS&C GlobeOp is a leading fund administrator providing the world's most comprehensive array of fi nancial technology products and services under a public, independent, single platform. Our expertise in business process outsourcing supports complete lifecycle capabilities, available on a stand-alone basis to hedge funds, fund of funds, private equity funds, family wealth offi ces, and managed accounts. Furthermore, our dedicated regulatory solutions group com-bines expertise and technology to provide our clients with the infrastructure and support they require to stay compliant. By outsourcing to SS&C GlobeOp, clients can reduce their technology investment and operational risks, leaving them more time to focus on asset generation and portfolio management.

How did SS&C become one of the world’s fastest growing fund

administrators? First we built the industry’s most experienced team

of fund accounting experts. Then we gave them the industry’s gold

standard in fund accounting and management software, which

we own, support, and enhance ourselves.

Outstanding experience, expertise, technology, independence, and

transparency. That’s how SS&C drives the future of fund administration.

ssctech.com/fundadministration

Driving the future of fund administration

HEDGE FUNDS

PRIVATE EQUITY FUNDS

FUND OF FUNDS

The value of an investment and any income derived from it can go down as well as up and investors may not get back their original amount invested. Alternative investments can involve signifi cant additional risks. This material is for information purposes only and does not constitute an offer or invitation to invest in any product for which any Man Group plc affi liate provides investment advisory or any other services. The content is not intended to constitute advice of any nature nor an investment recommendation or opinion regarding the appropriateness or suitability of any investment or strategy and does not consider the particular circumstances specifi c to any individual recipient to whom this material has been sent. Unless stated otherwise this information is communicated by Financial Risk Management Limited and Man Investments (UK) Limited which are both authorised and regulated in the UK by the Financial Conduct Authority. In Australia, communicated by Man Investments Australia Limited ABN 47 002 747 480 AFSL 240581, which is regulated by the Australian Securities & Investments Commission (ASIC). This information has been prepared without taking into account anyone’s objectives, fi nancial situation or needs. In the US, distributed by Man Investments, Inc. which is authorized and regulated, but not endorsed, by the US Securities and Exchange Commission, the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. P/16/1020/GL/DI/AOW

INNOVATIVE ALTERNATIVE SOLUTIONS

INSTITUTIONAL FRAMEWORK

Man FRM (‘FRM’) is one of the largest and most experienced providers of alternative investment solutions. Working in partnership

with institutional investors worldwide for over two decades, we offer a comprehensive suite of innovative solutions, drawing on the

resources of one of the world’s preeminent alternative investment groups. FRM is focused on the need to help investors maximise the

benefi ts they receive from alternative investments. To accomplish this, we offer a range of hedge fund and liquid alternative investment

options in a number of formats, including our state-of-the-art managed account platform.

frmhedge.com