Sutherland insights asset management news flash july 16, 2014

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ASSET MANAGEMENT NEWS FLASH July 16, 2014

Table of Contents Fund Flow ............................................................................................................................. 3 Performance Reporting ......................................................................................................... 9 Strategy .............................................................................................................................. 17

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Fund Flow Income stars Chelverton to launch small-cap fund for new hire July 10, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2354489/income-stars-chelverton-tolaunch-small-cap-fund-for-new-hire Chelverton Asset Management is to launch a small-cap fund in September after expanding its team of fund managers.

The group has appointed small-cap specialist James Baker, a former member of ABN Amro's highly-rated mid- and small-cap team, to run a new UK Smaller Companies fund alongside David Taylor.

Taylor (pictured) and David Horner - who set up the business in 1997 - already run the top performing £330m Chelverton UK Equity Income fund, which has beaten rivals in the IMA UK Equity Income sector over three years and is one of the most consistent outperformers.

Baker will be lead manager of the small-cap fund, an open-ended, growth-focused portfolio. It will invest in stocks which the team expect to grow faster than UK GDP, buying “mispriced” companies with a sustainable competitive advantage, which are capable of funding their own growth over the investment cycle.

Taylor said the fund will complement the group's existing range, which also includes the Small Companies Dividend trust, and the Chelverton Growth trust.

Unlike the Growth trust, the new small-cap fund will invest solely in quoted stocks.

Taylor said: “Chelverton has grown significantly over the last two or three years, and we have been keen to add additional depth to the investment team for some time.

“We have come to know James very well in his capacity as a stockbroker over many years, and he is an excellent stock picker, so we were delighted when the opportunity presented itself to bring him on board.”

Chelverton's assets under management have climbed to £400m after a surge in recent years, driven by inflows into its UK Equity Income fund, and Taylor said the new fund represents a key stage in the business' development.

“We wanted to offer investors something different to what we have, and the new fund will be a very important portfolio for us, representing a new leg for the business.”

The group's flagship UK Equity Income fund has returned 187% over the last five years, almost double the IMA UK Equity Income sector average return of 100%.

3|Sutherland Insights Asset Management News Flash Jul 16, 2014

Natixis unveils high conviction global equity fund July 07, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2353896/natixis-launches-highconviction-global-equity-fund Natixis Global Asset Management has launched a global concentrated equity fund with a focus on longterm value.

The Global Concentrated Equity OEIC, which will be managed by affiliated manager Harris Associates, aims to find underpriced companies with strong fundamentals and shareholder-orientated management teams.

The lead managers of the seven-strong team will be Harris international equities chief investment officer David Herro and US equities chief investment officer Robert Levy.

UK investors will be able to access the fund via platforms including Fidelity FundsNetwork, Ascentric, Novia, Transact, 7IM, and Raymond James with more, such as Cofunds, to come later in the year. It is the fourth product in the firm's UK OEIC range.

Natixis head of UK retail and international products Chris Jackson shared plans for the global concentrated fund with Investment Week in April. He said the firm is committed to developing its UKdomiciled range: “We want to bring the right product from those affiliates at the right pace into the UK marketplace.”

He said of the latest launch: “Today’s financial environment gives UK investors great flexibility over their pensions and savings.

“There is an ever increasing focus on the importance of building durable, long–term portfolios which provide investors with the growth and income they need to meet their personal financial outcomes.”

Headquartered in Paris and Boston, Natixis launches funds through an international network of affiliate asset managementcompanies.

The firm plans to increase the headcount in its London office by at least 25% this year, with staff numbers to reach 65 or higher by the end of the year.

GSAM launches first UCITS multi-asset range July 07, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2353382/gsam-launches-first-ucitsmulti-asset-range

4|Sutherland Insights Asset Management News Flash Jul 16, 2014

Goldman Sachs Asset Management is seeking to woo retirees with the launch of three multi-asset funds designed to meet a series of risk profiles.

The Wealthbuilder Multi-Asset Funds - the group's first foray into the multi-asset retail space - are designed to reduce reliance on equities for returns.

The new range will offer exposure to high yield bonds, emerging market debt, small-caps and passive funds. It will also take tactical views in order to exploit inefficiencies in the markets.

The SICAV funds will be managed by a 70-strong global portfolio solutions team headed by Raymond Chan and David Copsey. It will also be overseen by recently-recruited co-chief investment officer Neill Nuttall and global portfolio solutions international head Kathryn Koch.

Koch (pictured) said the launch marks the team’s expansion from institutional portfolios to retail clients: “One of the things we are focused on is the recent UK spring budget which set out to promote more flexibility for savers at retirement. We really think this will lead a lot of investors to review their longterm wealth approach.

“These Wealthbuilder funds represent a great retirement option for retirement savings. We are going to continue to put forward innovative solutions in this area.”

The funds will also stand out for their global approach, use of in-house ideas and lack of vulnerability to equity markets, she added.

The multi-asset funds are the first GSAM has created in the UCITS space, and are offered in a range of hedged share classes for GBP, USD and EUR-based investors.

Morgan Stanley closes fourth Asia-focused PE fund at $1.7 billion July 07, 2014 | PIOnline http://www.pionline.com/article/20140707/ONLINE/140709935/morgan-stanley-closes-fourth-asiafocused-pe-fund-at-17-billion Morgan Stanley (MS)'s latest Asia-focused private equity fund, Morgan Stanley Private Equity Asia IV, is closing with commitments of roughly $1.7 billion, said Chin Chou, the Hong Kong-based CEO of MSPE Asia, in a telephone interview.

As with Morgan Stanley's three earlier Asia-focused funds, the firm will invest between 80% and 85% of the new fund in Chinese and Korean companies, said Mr. Chou.

The Chinese market has been the target of roughly half of the $2.5 billion in investments MSPE made through its previous three Asia-focused funds.

Mr. Chou said the latest fund already has made two investments, with another five likely to be made soon. By Sept. 30, between 20% and 25% of the fund's capital could be drawn down, he said.

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Investors in the fund include the $50.4 billion Pennsylvania Public School Employees' Retirement, Harrisburg, and the $9.4 billion Ann Arbor-based University of Michigan endowment.

L&G Investments makes further cuts to active equity range July 03, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2353511/l-g-investments-makes-furthercuts-to-active-equity-range Legal & General Investments is to merge its active North American fund into its much US index fund, as well as merging two of its Asia-Pacific mandates.

The group said its £117m L&G North American Trust - run by Nigel Holland - will merge into its £2.5bn US Index Trust later this month.

The merger is in keeping with an increased focus on passive strategies, following a number of closures of active products in recent months.

Meanwhile the group is also merging away another part of its fund range, merging Paul Hilsley's £75m L&G Pacific Growth fund into the group's £126m L&G Asian Income fund, also run by Hilsley.

Both mergers will take place on 21 July.

A spokesperson at L&G said: “The proposed moves, having received FCA approval, are subject to approval by unitholders at EGMs on 10 July and are in line with LGI's stated intention to offer investors transparent, good value and scalable propositions.

‘We believe the Pacific Growth trust would benefit by moving to the larger Asian Income trust where clients could gain from economies of scale and a more focused approach to investing in mainly Asian securities.”

The spokersperson added the merger of the North American Trust would give unitholders access to a fund with a superior long term track record.

Holland's fund has returned 7.6% over the year to 20 June compared with the index fund's 11.9% gain.

L&G declined to comment on whether US manager Nigel Holland will remain at the group.

6|Sutherland Insights Asset Management News Flash Jul 16, 2014

T. Rowe Price launches frontier markets fund July 02, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2353238/t-rowe-price-launches-frontiermarkets-fund T. Rowe Price has launched a new offshore frontier markets fund for manager Oliver Bell.

The Frontier Markets Equity Fund aims to tap into the long-term growth potential in the most underdeveloped markets, taking on existing rivals including Schroders and Investec Asset Management.

Bell's fund will invest across the entire frontier investment universe, including countries outside the MSCI Frontier Markets index.

Bell said: “In many ways, frontier markets today show similar characteristics to mainstream emerging markets 15 to 20 years ago. Frontier markets have undergone structural changes, and we are now at a stage where the cocktail of ingredients needed for these economies to evolve have come together.

“Economic growth across the region will continue to be strongly underpinned by a young and growing population, improving social trends and an abundance of natural resources. There is a strong runway for growth but, given the starting point of frontier markets, even modest improvements can yield significant results.”

Legg Mason shuts sub-scale European fund July 01, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2353037/legg-mason-shuts-sub-scaleeuropean-fund Legg Mason has wound up its £7m Continental European Equity fund following a run of poor performance, as it continues with the restructure of its US business.

The fund, run by Adam Petryk at US subsidiary Batterymarch Financial Management, has lagged the benchmark since launch in 1997, returning 5% compared to the IMA Europe ex-UK average of 8.5%.

It has also struggled in recent years, returning 9.8% compared to the benchmark of 12.2% over the last five years.

Investors will be able to transfer into another Legg Mason fund free of charge or redeem their investment, the group said.

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The closure of its European mandate comes after a major restructure of its US business. In May, Legg Mason announced it would lay off 62 members of staff at Batterymarch, having purchased another US investment house - QS Investors - two months before.

Just twelve staff members will remain at Batterymarch's headquarters in Boston after the restructure.

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Performance Reporting Ashmore AUM jumps 7% for quarter, drops 3% for year July 10, 2014 | PIOnline http://www.pionline.com/article/20140710/ONLINE/140719994/ashmore-aum-jumps-7-for-quarterdrops-3-for-year Ashmore Group reported $75 billion in assets under management as of June 30, a 7% increase from three months earlier, due to a combination of net inflows and positive market performance. However, it was a 3% decrease compared with a year earlier.

The emerging markets money manager said total net inflows were $1.6 billion, while market gains added $3.3 billion.

Strategies across equities and fixed income benefited from net inflows, with corporate debt, blended debt and local currency assets in particular demand. The manager said in its financial update Thursday that multistrategy assets experienced institutional demand, offsetting expected outflows from Japanese retail funds. Multistrategy assets under management increased 12.5% in the quarter, to $2.7 billion, due to net inflows and positive investment performance.

However, external debt and overlay/liquidity strategies saw net outflows.

“Improving sentiment and the consequent market recovery have benefited those investors who remained focused on the economic and political fundamentals in emerging markets and who took the opportunity to invest in mispriced assets earlier in the year,” said CEO Mark Coombs in a statement accompanying the firm's financial report. “Looking ahead, the prospects for investment returns are enhanced by the ongoing development of the asset class. New countries being represented in indices broadens the diverse range of opportunities available and supports increasing allocations by dedicated investors.”

Artisan Partners Asset Management Inc. Reports June 2014 Assets Under Management July 10, 2014 | CNBC http://www.cnbc.com/id/101827524 Artisan Partners Asset Management Inc. (NYSE: APAM) today reported that its assets under management (AUM) as of June 30, 2014 totaled $112.0 billion. Separate accounts accounted for $47.2 billion of total firm AUM, while Artisan Funds and Artisan Global Funds accounted for $64.8 billion.

9|Sutherland Insights Asset Management News Flash Jul 16, 2014

ASSETS UNDER MANAGEMENT BY STRATEGY As of June 30, 2014 - ($ Millions) Global Equity Team Non-U.S. Growth Non-U.S. Small-Cap Growth Global Equity Global Small-Cap Growth

29,121 1,665 328 186

U.S. Value Team U.S. Mid-Cap Value U.S. Small-Cap Value Value Equity

15,802 3,593 2,154

Growth Team U.S. Mid-Cap Growth U.S. Small-Cap Growth Global Opportunities

16,713 2,894 3,885

Global Value Team Non-U.S. Value Global Value

18,298 15,811

Emerging Markets Team Emerging Markets

1,237

Credit Team High Income Firm Total

311 $112,041

1Includes an additional $42.5 million in assets managed in a portfolio not currently made available to outside investors to evaluate its potential viability as a strategy to be offered to clients.

ABOUT ARTISAN PARTNERS Artisan Partners is an independent investment management firm focused on providing high valueadded, active investment strategies to sophisticated clients globally. Since 1994, the firm has been committed to attracting experienced, disciplined investment professionals to manage client assets.

Artisan Partners has six autonomous investment teams that oversee fourteen distinct U.S., non-U.S. and

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global investment strategies. Each strategy is offered through multiple investment vehicles to accommodate a broad range of client mandates. The firm’s principal offices are located in Milwaukee, San Francisco, Atlanta, New York, Kansas City and London.

Deutsche Bank says asset management unit back on track

July 08, 2014 | Reuters http://www.reuters.com/article/2014/07/08/us-deutsche-bank-funds-idUSKBN0FD2BA20140708 Deutsche Bank AG said its asset and wealth management unit was back on track after two years of restructuring, and was growing quickly with new client money pouring in at an accelerating pace.

Michele Faissola, who has led restructuring efforts in the underperforming division, said on Tuesday he was on track to meet a target of 1.7 billion euros ($2.3 billion) in pretax profit by 2015, more than double last year's total and more than 10 times its 2012 result.

“Our ambition is to be the growth engine for the Deutsche Bank group,” Faissola said, in part by winning over super-rich clients in Asia in direct competition with similarly positioned banks such as JP Morgan and Credit Suisse.

New client money in the second quarter of 2014 poured into the division at the fastest pace ever, Faissola said, after some quarters in the recent past saw net outflows. The bank plans to report detailed quarterly results on July 29.

“The flows are starting to kick in. Q1 was a positive quarter and Q2, I'm pleased to report, so far, has been the best quarter,” he said at a conference.

The division has no plans to sell any of its activities and has, rather, added 1,000 staff in the past year, with plans to recruit more wealth managers specializing in elite clients in London and in Asia, he said.

“We are progressing quite fast. 2013 showed we were delivering on our ambitions and that the strategy is working,” Faissola said.

Outsourced assets top $1.2 trillion after a 26% increase in a year July 07, 2014 | PIOnline http://www.pionline.com/article/20140707/PRINT/307079972/outsourced-assets-top-12-trillionafter-a-26-increase-in-a-year Increasing complexity, use of LDI fueling the demand for investment outsourcing Investment outsourcing gained steam as assets managed worldwide for institutional investors rose 26% in the year ended March 31.

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In aggregate, $1.206 trillion was managed worldwide for institutions on a full or partially discretionary basis at the end of the first quarter, up from $955 billion a year earlier, Pensions & Investments' third survey of investment outsourcers shows.

(In 2013, P&I's data included only firms managing at least $1 billion in outsourced assets under investment management).

Thanks to a boom in liability-driven investment and increasing investment complexity, survey respondents' outsourcing programs worldwide — including advisory-only assets — grew 25% to $1.329 trillion in the year ended March 31 from $1.066 trillion as of the same date in the prior year.

The rank order of the four largest outsourcers based on worldwide assets under management for institutional investors remained unchanged from 2013: •

Russell Investments was in first place with $115 billion, up 6%;

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Cambridge Associates LLC, second, with $98.7 billion, a 12.9% increase;

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Mercer Investments, third, with $91.6 billion, a 23.9% rise; and

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SEI Investments (SEIC) Co., fourth, up 7% to $71.8 billion.

A new entrant, Wells Fargo & Co., ranked fifth, with $71.6 billion. (A Wells Fargo spokeswoman said in an e-mail that she was unable to arrange an interview by press time with Wells Fargo executives about the firm's outsourcing business because of scheduling conflicts.)

Asset growth All but two of the 25 largest outsourcers had growth of assets under investment management in the year ended March 31, led by Pyramis Global Advisors, which enjoyed a 73% gain to $13.3 billion. That bumped the firm to 23rd from 30th last year.

Outsourced strategies under investment management by BNY Mellon Investment Management declined 26% to $16.1 billion in the year ended March 31, the biggest decline among the largest outsourcers. BNY Mellon Investment Management dropped to 19th in P&I's 2014 ranking from 13th the prior year.

BNP Paribas Investment Partners also experienced a 13.6% drop in outsourced assets under investment management to $27.3 billion, moving the firm down to 15th from 11th.

The three largest managers of worldwide institutional assets under investment management with full discretion held the same positions as they did in 2013: Mercer, $91.6 billion; Northern Trust Asset Management, $52.8 billion; and Hewitt EnnisKnupp, $41.2 billion.

New entrants to P&I's discretionary outsourcing assets under investment management — Credit Suisse AG, $38.9 billion, and Goldman Sachs Group (GS), $37.8 billion — displaced Alan D. Biller and Associates Inc., with $32 billion, and SEI Investments (SEIC), with $28 billion, for fourth and fifth, respectively.

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The growth of outsourcing in six years from nearly nothing to more than $1 trillion under management was driven to a huge extent by the devastation wrought by the 2008 market meltdown, especially among smaller pension plans.

“The movement to outsource — as one of the industry's big ideas — continues apace. In difficult, volatile markets, fund executives are increasingly turning their portfolios over to third-party experts,” said Kevin P. Quirk, co-founder and partner of specialist money management consultant Casey, Quirk & Associates LLP, Darien, Conn.

“The same market conditions that pushed small plans to move into outsourcing after the financial crisis now are pushing larger plans to look at outsourcing,” said Phillip de Cristo, president of Mercer Investments, who works in the Boston office.

Mercer's new client wins are getting bigger — $1 billion and larger — and more multinational companies are choosing to outsource management of all of their pension assets to a single manager.

Mr. de Cristo declined to identify Mercer's new multinational corporate outsourcing clients.

Still fairly small Despite the reported rise in outsourcing hires by bigger pension plans, endowments and foundations, most moves still are fairly small, sources said.

A representative list of institutions both large and small that are searching for or hired outsourcing managers in the year since P&I's last survey includes: •

George Washington University, Washington, which seeks a single firm to assume management of its $1.4 billion endowment;

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Royal Shakespeare Theatre Pension Scheme, Stratford-upon-Avon, England, which hired P-Solve LLC for full fiduciary management of its defined benefit plan. The size of the plan could not be learned;

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Allegheny County Port Authority, Pittsburgh, which selected Peirce Park Group Inc. as the outsourced chief investment officer of two multiemployer pensions plans and two defined contribution plans totaling $91 million; and

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Sembcorp Utilities (U.K.) Ltd., Middlesborough, England, which named SEI Investments (SEIC) outsourcing manager of its £95 million ($162 million) pension plan.

Outsourcing manager upgrades still are rare, given the youth of the industry, observers said.

“Outsourcing assets have proven to be fairly sticky, at least so far,” said Andrew McCollum, managing director and a consultant at Greenwich Associates Inc., Stamford, Conn.

“Investors probably will stay with their current outsourcers until there's a reason to switch — for instance, the bottom falling out of the market. Post-2008, there was an uptick in investment consultant changes because institutional investors needed to have someone to blame. The same kind of stress may unseat investment outsourcers,” Mr. McCollum said.

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A notable exception is Delta Air Lines Inc., Atlanta, which in August moved the outsourcing of its $8.9 billion defined benefit plan to Wurts & Associates Inc., replacing Segal Rogerscasey. The outsourcing arrangement, with both Wurts and Segal Rogerscasey, is a partnership with UBS Asset Management.

Delta's defined benefit plan was 46.9% funded as of Dec. 31, up from 38.1% a year earlier. In May, company officials said they want to increase the funded status to 80% and will contribute about $1 billion per year through 2020 to reach that goal (P&I, May 6).

The funded status of corporate DB plans has been an increasingly important reason for the growth in investment outsourcing as companies move to an LDI approach, industry sources agreed.

“Increased funded status means that plan executives are trying to derisk their portfolios and protect that position,” said Joseph W. McInerney, managing executive of Chicago-based Northern Trust Asset Management's multimanager solutions unit.

“More and more corporate plans are adopting a glidepath and are handing over management to us. We are finding that LDI is a very big driver of corporations' decision to outsource both large and small defined benefit plan management,” Mr. McInerney said.

Mr. McInerney declined to name Northern Trust's new corporate outsourcing clients.

Northern Trust had $52.8 billion in outsourcing strategies under investment management as of March 31 and was ranked eighth.

Seeing strong inflows Aon Hewitt, Lincolnshire, Ill., continues to see strong inflows into its outsourcing strategies from frozen and active defined benefit plans of all sizes, said Kemp Ross, head of solutions and operations for investment consulting.

“Corporations with underfunded plans need management of the growth portion of their portfolio and, once they are close to fully funded status, need help with the complex implementation of the LDI part of the portfolio,” Mr. Ross said.

Hewitt EnnisKnupp, an Aon Hewitt subsidiary, had $46.8 billion of outsourced assets under investment management as of March 31, the ninth largest in P&I's ranking.

Mr. Ross, who is based in Aon Hewitt's Chicago office, declined to name clients.

Although still young compared to other investment management industry segments, the investment outsourcing playground already is “a very overcrowded place,” ripe for consolidation, said Greenwich's Mr. McCollum.

P&I's universe of investment outsourcers with assets under investment management has grown steadily, from 32 in 2011 to 56 in 2013 to 71

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CalPERS passes $300 billion in assets for the first time July 03, 2014 | PIOnline http://www.pionline.com/article/20140703/ONLINE/140709943/calpers-passes-300-billion-in-assetsfor-the-first-time The asset size of CalPERS, the largest defined benefit pension plan in the U.S., crossed the $300 billion mark for the first time.

California Public Employees’ Retirement System, Sacramento, reached $300.4 billion on Wednesday, spokesman Brad Pacheco said in an e-mailed statement.

Mr. Pacheco said in the statement that recent performance of the stock market has helped the pension fund achieve the milestone, but he also expressed caution about the future.

“While this is good news, there is still much more work to be done,” Mr. Pacheco said. “CalPERS has approximately 70% of the assets necessary to pay long-term retirement benefits. When our assets fell during the downturn, our pension liabilities never stopped accruing.”

CalPERS assets had reached $253 billion on Dec. 31, 2007, but one year later, assets had dropped by more than a quarter to $183.3 billion.

The Federal Thrift Savings Plan, Washington, is the only U.S. retirement plan with more assets than CalPERS; its defined contribution plans had combined total assets of $403 billion as of March 1.

Liontrust sees £190m net inflows in Q2 pushing AUM to £3.8bn July 03, 2014 | Citywire Wealth Manager http://citywire.co.uk/wealth-manager/liontrust-sees-190m-net-inflows-in-q2-pushing-aum-to-38bn/a760069 Liontrust attracted £190 million of net inflows in the second quarter, helping push the group's total assets under management up to £3.8 billion.

This was down from £302 million in the same period last year, although £179 million of that figure was down to the launch of its credit strategy.

The Global Strategic Bond fund was launched for Michael Mabbutt last February. who joined from Thames River to become Liontrust's head of global credit. The fund has a tough start and is down 5.89% over one year ranking it 94 out of 111 funds in the Citywire Global Bonds sector.

Chief executive John Ions said: 'Liontrust continues to make good progress. Our strategy, combined with the talent at Liontrust to execute it, puts us in an excellent position to capitalise on the opportunities ahead.'

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Biggest Public Pension Funds Gain 9.4% in 2014 July 02, 2014 | Barron's http://blogs.barrons.com/focusonfunds/2014/07/02/biggest-public-pension-funds-gain-9-4-in-2014/ The 100 largest U.S. public pension funds reaped $73.2 billion from investment earnings in the first quarter of 2014, according to a report from the U.S. Census Bureau’s Quarterly Survey of Public Pensions.

The funds had a combined $3.218 trillion in cash and securities as of March 31, up 9.4% higher from a year ago. That’s the highest asset total for the public plans since the survey was first conducted in 1968.

The public plans The top 100 funds account for 89.4% of U.S. public pension fund assets. According to a report from P&I, the performance of various asset classes played out as follows: Corporate stocks made up 34% of all holdings and decreased 3.1% in the quarter, to $1.095 trillion. That asset amount was up 8.3% for the year.

Corporate bonds, at 10.8% of all holdings, totaled $347 billion, a 2.6% increase from Dec. 31 and a 6.8% increase from the same period last year.

International securities, at 21% of all holdings, rose 2.1% from three months earlier and 12.9% from the end of the first quarter of 2013 to $675 billion.

U.S. government securities, at 8.5%, totaled $274 billion, rising 3.3% for the quarter and 1.8% for the year.

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Strategy Global alternative assets jump to $5.7trn July 14, 2014 | fundweb http://www.fundweb.co.uk/news-and-analysis/alternatives/global-alternative-assets-jump-to57trn/2012285.article The amount of money invested in alternative assets across the globe surged by 11.8 per cent last year, the latest research from Towers Watson shows.

Investors have flocked to alternative assets over recent years as they continue to search for returns outside traditional asset classes. Over the past year, the value of global alternative assets jumped from $5.1trn (£3trn) to $5.7trn.

Towers Watson’s Global Alternatives Survey reveals that hedge funds managed the lion’s share of the world’s alternative assets in 2013, overseeing some 27 per cent of the total held in this space.

Real estate comes in second place with 24 per cent of total assets, followed by private equity, private equity funds of funds, funds of hedge funds, infrastructure and commodities.

Towers Watson global chief investment officer Craig Baker says: “Throughout the crisis, investors continued to move away from simply holding equities as their main growth asset and to make greater use of alternative assets; and we expect this to continue in the future.

“We think the effort to diversify in this way is worthwhile but investors need to be cautious about choosing the best and most efficient vehicles, not forgetting the increasing number of cheaper and lower governance routes for improving investment efficiency such as using smart beta - notably in the alternatives space.”

The total assets of the world’s top 100 alternative investment managers globally reached $3.3trn in 2013, up from $3.1trn in the previous year. Real estate managers have the largest share of assets, followed by private equity fund managers.

Pension funds were the largest investors in alternative assets, owning 33 per cent of the top 100 alternative managers’ assets. Wealth managers account for 18 per cent, putting them in second place followed by insurance companies, sovereign wealth funds, banks, funds of funds and endowments & foundations.

Baker says: “For almost all of the past 11 years of this research we have seen increasing allocations to alternative assets by a wide range of investors.

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“Not only has the appeal of alternative assets broadened to include many more insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond the likes of hedge funds and infrastructure to include real assets, illiquid credit and commodities.”

PPF's new strategy boosts illiquid assets July 10, 2014 | PIOnline http://www.pionline.com/article/20140710/ONLINE/140719991/ppfs-new-strategy-boosts-illiquidassets Pension Protection Fund, London, has created a hybrid asset allocation strategy, with increased investment in illiquid assets with hedging characteristics, said Barry Kenneth, chief investment officer at the fund.

The strategy features increased allocations to alternative, hybrid and liability-driven investment assets at the expense of equities and government bonds. Examples of hybrid assets are real estate leases, debt infrastructure, corporate index-linked bonds and direct lending, Mr. Kenneth said in an e-mailed comment.

The PPF aims to implement this strategic allocation within the next three years.

The strategic target allocations will change as follows: •

Cash and bonds, 58% from 70%;

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Alternatives, 22.5% from 20%;

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Equities, 7% from 10%; and

•

Hybrid assets, new 12.5% allocation.

“There are a number of challenges facing the fund in the next few years associated with using over-thecounter derivatives,” Mr. Kenneth said. “The requirement of central clearing will cause the cost of hedging to increase, and financial regulations are challenging banks' abilities to warehouse risk.

Investing in hybrid assets enables the PPF to prepare for these changing market conditions by acquiring assets that provide long-term cash flows and have less reliance on derivatives.”

When asked whether the PPF's new strategy will mean increased searches for managers, Mr. Kenneth said: “We will continue to look at investment and fund manager opportunities that fit within the revised statement of investment principles.”

The changes were part of the PPF's revised statement of investment principles, published Thursday. The £15.6 billion ($26.7 billion) fund also altered its risk budget, adding illiquidity as a separate factor.

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FCA launches review of competition in fund management sector July 09, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2354417/fca-launches-review-ofcompetition-in-fund-management-sector The Financial Conduct Authority (FCA) is to launch a probe into competition within the asset management industry, focusing on whether practices in the wholesale space are having a negative effect.

As part of a wider review of other industries, the FCA said it will look at wholesale financial markets given their importance to the wider economy.

The FCA's review will look specifically at behaviour within the asset management space that could inhibit or distort competition.

It is assessing whether there are potential barriers to entry or expansion for new or smaller players, conflicts of interest, and the effects of cross-selling or bundling of services.

The FCA said it is seeking views on these and other issues.

Christopher Woolard, director of policy, risk and research at the FCA, said: “It is vital that wholesale financial markets are efficient, fair and competitive. We are publishing this call for inputs today to seek views and evidence from stakeholders on areas where they think competition may not be working effectively.

“Effective competition within the wholesale sector can lead to an increase in institutional efficiency, lower prices, greater innovation and can improve the quality and range of financial services provided.

Improvements in competition should contribute to the sustainable development of the financial system, and have positive knock-on effects for retail consumers and real economy businesses.”

The FCA wants responses from fund groups over the next three months, with the review closing on 9 October.

Canadian pension funds putting down roots abroad July 07, 2014 | PIOnline http://www.pionline.com/article/20140707/PRINT/307079975/canadian-pension-funds-puttingdown-roots-abroad Asset owners opening offices across globe to be closer to areas where they're making investments.

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More large Canadian pension funds and the crown corporations that manage their assets are opening offices beyond their borders, looking to enhance their alternative investments outside of Canada.

So far in 2014, the C$114 billion (US$106.3 billion) British Columbia Investment Management Corp., Victoria, and the C$70 billion Alberta Investment Management Corp., Edmonton, have opened their first international offices in London. And in June, Michael Sabia, president and CEO of the C$200.1 billion Caisse de Depot et Placement du Quebec, Montreal, announced the fund would open offices in Washington, Mexico City and Singapore, in addition to its current offices in New York and Beijing.

They join several other Canadian plans with offices abroad: •

Canada Pension Plan Investment Board, Toronto, which oversees C$219.1 billion in assets for the Canada Pension Plan, Ottawa, with offices in New York, London, Hong Kong and, most recently, in Sao Paulo;

•

C$140.8 billion Ontario Teachers' Pension Plan, Toronto, with offices in New York, Hong Kong and London; and

•

C$65.1 billion Ontario Municipal Employees Retirement System, Toronto, with offices in New York and London.

Boots on the ground With so many foreign offices for Canada-based pension funds or their management companies, one might think there's a glut. Not so, said Leo de Bever, AIMCo's CEO, who added that because the Canadian pension funds do a lot of direct investing, that makes it more important for those plans to have boots in the countries where they invest.

“There are 10 of us (large Canadian plans) with a total of C$1 trillion. The U.S. pension fund market is much bigger, but the grasp of their investments isn't like ours. You'll see Canadian names more often (in overseas offices), but that's because we have a different model without third-party managers.”

Ryan Bisch, senior consultant, principal and head of Canadian alternative investments for Mercer Canada Ltd., Toronto, concurred, saying most of the plans with foreign offices opened them in regions around their existing investments.

“It is a trend for sovereign wealth funds and large pension funds like the Canadian plans,” Mr. Bisch said.

“Investing is global. It's important to have people on the ground to find additional investment opportunities.”

In seeking new investments, the competition is strongest in infrastructure, especially among Canadian plans, U.K. and European pension funds, and sovereign wealth funds that are opening offices in the same cities.

“The competition is more fierce in infrastructure investments,” Mr. Bisch said. “Fewer investment opportunities are available for investment, and there's more competition for a limited amount of opportunity set.

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“There's really no dominant force in infrastructure,” Mr. Bisch added. “U.K. (pension) funds, European pension funds, sovereign wealth funds, Canadian funds all are battling it out or joining forces to get into infrastructure. And at the end of the day, it's very, very competitive.”

Still, Mr. de Bever said, AIMCo is very discerning on committing to infrastructure investments. “We don't want to win an asset and then be stuck with it for 20 years at 5%,” he said. “We sometimes lose by a lot because sovereign wealth funds (we're competing with for investments) are less disciplined. The economics for them look a lot different than what they look like for us.”

Less competition Among pension funds and sovereign wealth funds, there is less competition for other international alternatives investments, like private equity and real estate, Mr. Bisch said. “The broader private equity and real estate opportunity set is quite vast,” he said.

Those kinds of investments, particularly in Thames Water Utilities Ltd., Open Grid Europe GmbH and Canary Wharf Group PLC, spurred BCIMC to open its London office, said spokeswoman Gwen-Ann Chittenden. In addition, BCIMC plans to open an office in Singapore. “Increasing our local footprint in these regions reflects our global investment mindset and the importance of the U.K., European and Asian markets to our investment strategies. In addition to bringing us closer to many of our existing investments ... a local presence serves to strengthen our existing relationships and provide new opportunities for investment partnerships in both our private and public asset classes,” Ms. Chittenden said.

Maxime Chagnon, spokesman for Caisse, said that while private equity, real estate and infrastructure “are an important part of our strategy ... they are not the only ones. We want to identify the best opportunities, the right partners and strengthen our investment team's expertise and global orientation.”

There's also a basic reason for opening foreign offices, Mr. Bisch added. “Historically, those with no offices who had investments outside the country had to fly people in and out,” he said. “It makes sense to have someone there more permanently. ... Nurturing partnerships is easier when someone's on the ground there.”

“It's very simple: logistics,” added AIMCO's Mr. de Bever said. “We had people making 40 flights a year between London and Edmonton. You look at the wear and tear that creates, and that's part of why we're there. We have a number of people here with young families. It's much more convenient to be there, particularly with regulated assets, like monitoring real estate investments. It's just more efficient to have someone there.”

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Asset management sector grows as banks recover July 03, 2014 | FT Adviser http://www.ftadviser.com/2014/07/03/investments/asset-management-sector-grows-as-banksrecover-isj55iylRQneZ0aG0dYMKN/article.html The asset management sector has established itself in investment funding as the banks are still reeling from the financial crisis, a report by the Bank of International Settlement has revealed.

In its 246-page Annual Report, the Basle-based bank stated: “As banks reorganise their business lines and retreat from some capital market activities, market-based financial intermediaries have been gaining ground. The growth in the asset management sector is a case in point.”

BIS said that this increased the power of the asset management sector and enabled it to affect market functioning and the funding costs of governments, businesses and households.

According to the report, the ascent of the sector presents both opportunities and challenges for financial stability, enabling it to provide a complementary channel for advisers whose clients need funding but have not been able to get it from a bank.

But caution is required, the BIS report said, as advisers are watching asset managers to see what their performance is like, and moving client money out of what are perceived to be poorly performing investments.

The report said: “Portfolio managers are evaluated on the basis of short-term performance, and revenues are linked to fluctuations in customer fund flows. These arrangements can exacerbate the procyclicality of asset prices, feeding the market’s momentum in booms and leading to abrupt withdrawals from asset classes in times of stress.”

The BIS report also warned that global banks are still at risk to over-indebted borrowers. They should avoid excessive expansion through acquisition or mergers at this stage, but focus on recognising losses and recapitalising.

Also according to the study, the markets are out of step with financial reality, owing to the ultra-low monetary policy pursued across the world, and they should not fall into the trap of being forced to raise rates too slowly or too late.

This is because, the report claimed, the forces that led to the crisis remain unresolved.

Adviser View Matthew Smith, director of London-based Buckingham Gate Financial Planners, said: “Anything that helps with raising funds for projects can not be a bad thing. If asset management are going to fund it, then it almost becomes another asset class for retail investors to consider. As with any new type of investment, there is a period of time to see some sort of performance first and let it be established.”

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