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Impact of the proposed AIFM Directive across Europe
October 15, 2009--Charles River Associates (CRA) was asked by the Financial Services Authority (FSA) to conduct an assessment of the impact of the proposed Alternative Investment Fund Manager Directive (AIFMD) on investors, financial markets and enterprise across the European Union
and enterprise across the European Union (EU).1 The Directive affects a wide variety of fund types and we have investigated the impact of the Directive on: hedge funds; private equity and venture capital funds; real estate funds and investment trusts.
Our research has involved: gathering information on the alternative investment fund (AIF) industry in Europe; around 30 interviews with market participants including professional investors, trade associations at a European level and in the UK (since much of the management of the AIF industry is located in the UK) as well as companies involved in the provision of different fund types; and a cost survey focused on the parts of the Directive where interviewees indicated that the costs are likely to be most significant. Impact of the Directive on investor choice and returns Based on interviews, it has not been possible to identify the proportion of funds currently domiciled outside the EU that will re-domicile into the EU in order to continue to be marketed to EU investors. If funds do not re-domicile, the AIFMD will greatly reduce the availability of AIF for EU investors. Investors expressed concern that they will no longer have access to “best in class” funds from across the globe, thereby reducing both the variety and quality of funds.
view the report:Impact of the proposed AIFM Directive across Europe
Source: Charles River Associates
FSA warns on cost of new EU hedge fund rules
October 15, 2009--European institutional investors face billions in lost annual returns if new EU rules for hedge funds and private equity firms are approved, according to a study commissioned by the Financial Services Authority, the UK’s market regulator.
The findings are the first formal – and independent – impact assessment of the directive from an EU member state authority, and are expected to add considerable heft to efforts from several European countries, led by the UK, to amend the European Commission’s draft alternative investment fund manager directive in the coming months.
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Source: FT.com
UK's Financial Services Authority: Lehman-Backed Structured Products - Update
October 14, 2009--NDF Administration Limited (NDFA) and Defined Returns Limited (DRL) have today announced that they are going into administration. The two firms offered a variety of retail products, including Lehman-backed structured products.
This announcement follows an extensive Financial Services Authority (FSA) review of structured products and subsequent discussions with the firms. The FSA's review looked at the UK structured products market, including those backed by Lehman, and as part of this review examined the firms' systems and controls and marketing literature. As a result, the FSA asked the firms to assess their financial position in relation to potential claims by investors with Lehman-backed structured products.
As these firms are now in administration, consumers who had invested in Lehman-backed products with either of the firms may be entitled to compensation from the Financial Services Compensation Scheme (FSCS).
The firms' joint administrators, Andrew Hosking and Martin Ellis of Grant Thornton UK LLP, will shortly contact all customers who bought products through these firms, setting out what they need to do next.
The FSA's Moneymadeclear website provides further information on what this means for consumers who bought Lehman-backed structured products and other products from NDFA and DRL.
Further information on the FSA's structured products review can be found on the Wider Implications website. The FSA will publish the full findings of its review later this month.
Source: FSA.gov.uk
DB Index Research -- Weekly ETF Reports -- Europe
October 14, 2009-
Highlights
ETF Volume
Exchange based Equity ETF turnover rose by 3% on the previous week. Daily turnover for the previous week was E1.3bn. European fixed income ETF turnover rose by 3.9% to E192.6m, with money market ETFs continuing to be the main focus.
In exchange based bond ETFs, db x-trackers II EONIA TR Index ETF has the highest daily turnover of E20.64m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E69.69m.
There were 17 new listings in the last week. UBS launched 7 new ETFs while Credit Suisse AM launched 3 new commodity ETFs on the Swiss Stock Exchange. HSBC launched 1 new ETF on the London Stock Exchange. BNP Paribas cross-listed 6 ETFs on Borsa Italiana.
European Style ETFs, led by short and leveraged products, kept its position as the leading product area with total turnover of E386m accounting for 30.53% of total ETF turnover, followed by European Regional ETFs with total turnover of E345m with 27.28% of total turnover. The DAX ETFs remain the dominant country products with total average daily volume of E164m across the nine listed products and accounting for 13.0% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 13.8% of turnover trading E175m per day with liquidity split across 26 ETFs and 42 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 35.2% of total turnover. The Euronext NextTrack platform has 22.1% market share. The LSE’s combined Italian Exchange and London market share is now 26.9%.
Assets under Management (AUM)
Total European Equity related AUM rose by 3.5% to E99.8bn during last week. AUM for DJ Euro STOXX 50 ETFs was E19.4bn accounting for 19.4% of total European AUM. Fixed Income ETF AUM remained at about the same level at E33.1bn.
Overall, the largest ETF by AUM was the Equity based ETF, Lyxor ETF DJ Euro STOXX 50 with AUM of E5.0bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.2bn.
To request a copy of the report click here
Source:Aram Flores and Shan Lan -DB Index Research
FSA outlines its approval and interview process for significant influence functions
October 14, 2009-The Financial Services Authority (FSA) has written to the CEOs of 5,000 regulated firms to reinforce how its intensive regulatory approach applies to approving and supervising senior personnel performing significant influence functions (SIFs).
The letter reminds CEOs that the responsibility to assess whether a candidate is fit and proper to carry out a role rests with the firm and that firms should, therefore, have robust recruitment, referencing and due diligence processes in place.
As part of the SIF approval regime, the FSA has said it will undertake close vetting of appointments and will expect to interview candidates applying for SIF roles. Therefore, firms are being encouraged to engage with the FSA early in the recruitment process and for major firms, this should be at the point of drawing up a shortlist rather than waiting until the preferred candidate stage.
Firms are also urged to provide sufficient information with their applications (including supporting documents – for example head-hunter reports) and the rationale they have used to conclude that the candidate is fit to proper to perform the role. Applications must be made in a timely manner and any failure to engage promptly with the FSA may impede a firm’s plans to publicly announce a new appointment.
The enhanced SIF regime is one of the FSA’s responses to the financial crisis, which exposed governance and risk management shortcomings across numerous firms in roles such as chair, CEO, and finance or risk director. In the 12 months since October 2008 the FSA has conducted 172 SIF interviews, resulting in 18 candidates withdrawing their applications which shows there is considerable scope for some firms to be more robust in their own recruitment processes.
Graeme Ashley-Fenn, FSA director of permissions, decisions and reporting, said:
“It is crucial, that at a time when effective governance has never been more important, candidates have the right levels of competence and capability to perform these senior roles and that they are fully aware of their responsibilities.
“The onus is on firms to ensure candidates applying for influential positions are fit and proper to perform the role. Our individually tailored approval interviews will help us assess whether the individual has the right experience and understanding but also whether they will enhance the overall management strength and insight of the firm.”
Source: FSA..gov.uk
Alliance Trust buys back shares
October 14, 2009--Alliance Trust, the FTSE 100-listed investment company, has bought back shares for the first time in its 121-year history.
The company spent £15.4m ($24.6m) to buy back 0.72 per cent of its share capital at 317p a share. Although this represented a discount to net asset value of 18 per cent, the shares are trading at their highest level in a year after a rally in equity markets.
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Source: FT. com
ETF Landscape: European DJ STOXX 600 Sector ETF Net Flows, week ending 09-Oct-09
October 14, 2009-Highlights-Last week saw US$39.0 Mn net inflows to DJ STOXX 600 sector ETFs.
The largest sector ETF inflows last week were in Insurance with US$23.4 Mn and Media with US$17.3 Mn while Industrial Goods & Services experienced net outflows of US$24.8 Mn. Industrial metals top performing commodity in quarter three read full story SEI signs ten collective investment trust managers
SEI has specialised in the CIT market for more than 15 years, but has experienced even stronger growth as the adoption of CITs in the retirement space becomes more prevalent. Public policy and litigation has increased the scrutiny of retirement plan costs and fees, pushing plan sponsors toward lower-cost solutions such as CITs. Technology enhancements have also played a role in increasing the appeal of CITs. read more
CESR Consults On Definition Of Advice Under MiFID
- The presentation of recommendations;
- Perimeter issues around the definition of personal recommendation; and
- Issues around the form of communication.
CESR invites responses to this consultation from all stakeholders by 14 December 2009. view the CESR Consultation Paper- Understanding the definition of advice under MiFID
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Year-to-date, Banks has been the most popular sector with US$305.2 Mn net new assets, followed by Utilities with US$278.8 Mn net inflows. Retail sector ETFs have been the least popular with US$48.5 Mn net outflows YTD.
Source:ETF Research and Implementation Strategy, BGI
October 14, 2009-Commodities built on strong growth from the first half of the year with the ETFS Forward All Commodities DJ-UBSCI-F3SM up 12 per cent during 3Q 2009 and 238 per cent over the past ten years, according to ETF Securities.
ETFS industrial metals was the best performing exchange-traded commodity, with YTD growth of 54 per cent and 22 per cent during Q3 09. Industrial metals have also significantly outperformed developed market equities, bonds, cash and real estate since the start of 2009 as market appetite for high beta assets has accelerated.
Source:ETF Express
October 14, 2009--SEI has signed ten new collective investment trust managers over the past eight months.
According to Cerulli Associates, CITs represented about USD733bn in employer-sponsored retirement plans, including defined benefit and defined contribution plan assets as of 30 June 2009.
SOurce: ETF Express
October 14, 2009--CESR issued today a consultation paper seeking to clarify and illustrate situations where firms will, or will not, be considered as providing investment advice. Investment advice is an investment service under MiFID, which is why the distinction is important.
The main areas of the consultation focus on topics including:
- The provision of personal recommendations;
Source: COMMITTEE OF EUROPEAN SECURITIES REGULATORS (CESR)
