Thursday, 23 October 2014
Last updated 4 hours ago
May 30 2012 | 4:16am ET
Bryan Garnier Asset Management, the Swiss-based asset management arm of the French investment bank, is readying a UCITS IV platform that aims to tilt the balance of the regulated funds away from European managers:
“[T]he idea of the platform is…to take on board external hedge funds—primarily U.S. hedge fund managers, not necessarily U.S.-focused strategies but U.S. managers,” Steve Wallace, BGAM’s managing director responsible for commercial activities, told FINalternatives. “And the rationale for that is because a number of investors I speak to are very much interested in seeing U.S. hedge funds within the UCITS universe—and there are not that many, relative to the offshore world…in UCITS—it’s very heavily weighted towards European [managers] because it was more geared that way when people started looking at UCITS.”
Wallace joined BGAM in January from the Chartered Alternative Investment Analyst Association where, he says, he’d “pretty much done as much as I could” and found himself in need of a new challenge. When a friend, BGAM Managing Partner Vania Mareuse, suggested he join that firm, Wallace agreed.
“The rationale for me joining, actually, was the UCITS platform—that was the idea behind me coming on board, to help launch that, to product manage it, market the funds and also assist on the internal funds that they were starting. And in terms of assistance, that was more on the asset-raising side.”
When he signed on, BGAM was running one fund—a long-only credit fund launched in September of 2011 with assets of €3.5 million. In February, the firm brought on Epiphanious Michael to run the long/short equity Leadership Fund, which currently has assets of €9 million. Then in May, the firm hired a manager from Platinium Gestion, who brought his €12 million global macro fund, now called the BG Exclusive Fund, with him. All three are UCITS III funds.
In terms of his asset-raising duties, Wallace characterizes the current fund-raising market as “tough,” although he says they’re starting to see more interest on the advisory side and from institutional investors through consultants. He also says he finds the European market to be “very much more splintered” than it used to be:
“I get asked these questions about ‘How are things in Italy?’ and ‘How are things in France or Germany?’ and it’s really dependent on the end investor, which sounds straight forward, but in the good old days…it was more homogenous, at least within a country.
“It’s a time when people are trying to get their house in order, [to] set up a more sustainable strategy—it’s not a market where you can just be about selling product, those days are gone, it’s really about trying to find solutions, being very close, looking after clients and really just being there for the long term.”
BGAM is clearly hoping one solution that will appeal to investors is UCITS IV funds, particularly those that will be found on its own platform. The firm has two funds signed up already—Denver-based long/short equity fund Madison Street and New York-based long/short healthcare fund Perceptive Advisors—and would ideally like to have six up and running in the near future.
They’re targeting boutique funds, with “reasonable track records” outside UCITS and AUM of at least $100 million, preferably $200 million plus. Also important is a strategy that lends itself to the UCITS framework:
“We’ve been focusing on very much the liquid end of the curve and for those funds that,…if you were to say, ‘Okay, run exactly what you’ve got now within UCITS,’…could do that with either no change or very limited change,” said Wallace.
“If there’s too much tinkering, too many derivatives, either you’ll have problems with UCITS restrictions or you’ll have problems because the investor is getting nervous about the amount of derivatives you’re using. Anything that’s too overly synthetic” says Wallace, makes some investors wary.
Another factor is liquidity. Wallace says getting U.S. hedge funds, which generally prefer liquidity of 30 days, minimum, into the “mindset of weekly liquidity” is a “big shift.”
Wallace says they’re waiting for final regulatory approval to begin actively marketing the platform.
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