A Guide to Fund Management (2022)

The fund management industry manages and administers investment assets on behalf of their clients. In 2010 some US$62 trillion of assets were under management, generating fee revenues of over US$500bn illustrating how large and important this financial industry segment is.

In order to capture the revenue opportunity senior officers in fund management companies have to apply best practice and understand operational issues. This is not as easy as it sounds. They have numerous calls on their time and their core focus should always be investment performance. It was to address the resultant time optimisation dilemma that this guide was compiled.

This book gathers together accepted industry best practice, structure, operations and procedures. As a result, readers can spend less time rummaging through industry white papers and more time on the strategic direction of the firm.

The guide is up to date, which is something that immediately makes it more relevant than the multitude of papers and operational notes that senior management is confronted with. It aims to offer one stop shopping on how to run a firm.

More Information
ISBN 9781906348182
Navision code MGFM
Publication date 6/8/10
Size 155mm x 235mm

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Dr. Daniel Broby

As a senior figure in the asset management industry,Daniel Brobyis a champion of capital markets. His focus on high level principals, integrity and best practice underlie his professional success.

Daniel built his career on the back of a strong grounding in finance theory. He has an MPhil in economics and an MSc in investment analysis. He was elected an individual member of the London Stock Exchange in 1990; is a Fellow of Chartered Institute of Securities and Investment; a Fellow of CFA UK; and a Visiting Fellow at Durham University. He was presented with the CFA Institute’s Society Leader Award in 2006.

Daniel has had a number of C’ level positions at the largest asset managers in Scandinavia and Russia. These include chief executive officer, chief investment officer and chief portfolio manager. His career, however, has revolved around the London market. He was a board member of CFA UK, and it predecessor, for over 10 years.

Daniel’s focus has always been active asset management. His success in investment performance was recognised by Morningstar who rated the flagship fund he managed for eight years with five stars

Daniel has pioneered a number of investment solutions. He introduced the first regulated hedge fund and pioneered structured products in the Danish market. He has launched various investment funds, including a number focused on frontier markets such as Africa.

Daniel has written two highly recognised books on the profession and numerous articles for industry journals. He was commissioned by theFinancial Timesto writeThe Changing Face of European Fund Management.

Daniel has also contributed to the body of financial knowledge by writingA Guide to Equity Index Constructionfor Risk Books.Securities & Investment Reviewobserved that it “explores in intricate detail the various workings of modern portfolio theory, choosing a benchmark, measuring risk and sampling and selection procedures.“Professional Investormagazine opinioned that “rarely does a book genuinely represent a first in its field."

Preface

About the Author

Introduction

Definitions

1 The Business Model

Introduction

How the fund management industry evolved

The drivers of growth

The threats to growth

The profit dynamics

The cost dynamics

The productivity dynamics

Overcoming the downward pressure on fees

Taking advantage of the economies of scale

Delivering ?value added’ to clients

Implementing structured decision making

Developing strong distribution capabilities

Starting up a new fund management venture

Conclusion

2 The Industry

Introduction

Recent evolution

Growth markets

The Alpha industry

Active return

The Beta Industry

Systemic return

The Asset Class Spectrum

Examples of different house styles

Segregated funds

Comingled, Pooled or Collective funds

Industry codes and standards

Asset Manager Code of Professional Conduct

Research Objectivity Standards

Trade Management Guidelines

3 The client spectrum

Introduction

Targeting the right segment

Overview of Institutional investors

Pension funds

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Investment goals

Endowments and Foundations

Investment goals

Insurance companies

Investment goals

Private Investors

Investment goals

Safeguarding client assets

Conclusion

4 Legal and regulatory landscape

Introduction

Rules versus principles based compliance

Regulatory trade-offs

Self regulation versus government regulation

How to operate and maintain adequate compliance functions and procedures

Understanding the key regulatory concepts

Integrity

Skill, care and diligence

Fiduciary responsibility

Prudence

Market conduct

Money laundering

Chinese Walls

Fit and Proper

The geographic differences in regulation

US

UK

Europe

Far East

Offshore domiciles

Compliance, operations and procedure manuals

What should be included in an operations manual?

The importance of adequate capital

Conclusion

5 Investment process and philosophy

Introduction

Stating the investment Philosophy

Defining an investment process

The Investment Policy Checklist

Understanding the mathematical relationship between risk and return (CAPM)

Alternatives to CAPM

Active or passive management?

Accommodating style tilts and factors

Implementation of the investment process

Incorporation of models into the investment process

How to Index an investment fund

Conclusion

6 Skills and Structure in the front office(Portfolio construction and support)

Introduction

Setting a vision

Team or star manager approach

Avoiding groupthink

Incorporating the process driven value proposition into daily activities

Top-down

Bottom-up

Quantitative analysis

Qualitative analysis

What systems are required by the front office?

Front office systems providers

What Skills does a portfolio manager require?

Training

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Ethics and Standards of Professional Conduct

How the chain of command works in practice

Personality type

Competence

Composition and role of the trading team

Conclusion

7 Skills and structure in the middle office(Risk and oversight)

Introduction

Integrating the structure of the middle office with the rest of the firm

Risk oversight policy implementation

Middle office Risk and Performance systems

Monitoring style drift

Staff, Skills and Shared Values

Responsibility for operational risk

Responsibility for business continuity risk

Preparing a Business Continuity Plan

Counterparty risk

Portfolio Risk Control

Backtesting and stress-testing portfolios

Using factor models and optimization software

Undertaking competitor and peer group analysis

Monitoring fund leverage

Conclusion

8 Skill and structure in the back office (Operations and support)

Introduction

Having robust systems and database

Handling derivative instruments

Handing day to day fund accounting

Ensuring efficient pre and post trade processing

Trade processing vendors

Implementing Straight-Through Processing (STP)

Establishing a records retention policy

Integrating the accounts function

Outsourcing

Fund administrators

Prime brokerage

Adapting to accommodate short selling and securities lending

Back-office personnel issues

Conclusion

9 Job functions

Introduction

How to write internal and external job descriptions

Criteria for ’good’ and ’bad’ remuneration policies

How to decide on compensation

Performance-related compensation

The Chief Executive Officer

Transitioning to a New Chief Executive

The Chief Operating Officer

The Chief Financial Officer

The Chief Investment Officer

The Head of Trading

The Head of Technology

The Compliance Officer

The Risk manager

The Marketing manager

The relationship manager

Head of Performance

Establishing and employee review process

Maintaining an employee handbook

How to build a team spirit

Conclusion

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10 Client acquisition

Introduction

Business development as a means to win new clients

Basic Foundations of client relationships

Communicating the right message

The role of Investment Consultants

Answering Request for Proposals

Writing Fact Sheets

Equity fact sheets

Debt fact sheets

Lead management and the importance of monitoring client contact

Marketing analytics

How to undertake systematic brand management

Building reputation

Addressing poor performance from a communications perspective

Having a public relations strategy

Employing third party marketeers

Drafting investment mandates

Adding constraints to an investment mandate

The internets role in client acquisition.

How to ensure efficient ?Client on-boarding’

Conclusion

11 Client retention

Introduction

Communicating with clients

Communicating with Consultants

Using open architecture as a distribution channel

Understanding core-satellite asset allocation and its implications for client retention

The ?Know your client’ requirement

Handling tracking error and investment constraints

Understand and surpassing expectations

Obtaining feedback from existing clients

Fostering good press and media relations

Goals and Objectives when dealing with the media

Crisis management when things go wrong

Managing client functions

Preparing performance reviews and client visits

How to treat the competition

Buying a fund management company7

Due diligence: Organization and Good Standing

Due diligence: Financial Information

Due diligence: Physical Assets

Due diligence: Employees and Employee Benefits

Due diligence: Mandates and funds

Due diligence: Taxes

Due diligence: Material Contracts

Due diligence: Open Ended Funds and Closed Ended Funds

Due diligence: Customer Information

Due diligence: Litigation

Due diligence: Incidentals

Conclusion

12 Performance reporting and valuation

Introduction

Choosing appropriate benchmarks

Understanding attribution analysis

The Brinson Hood Beebower Model

Building a Reporting interface

Fair reporting

Accurate reporting

Timely reporting

Utilising factor models in reporting

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Value at Risk as a tool to understand risk

The performance report format

The asset allocation report format

The transaction report format

Pricing and valuation

Global Investment Performance Standards

Soft Dollar Standards

Conclusion

13 Product design

Introduction

Building the Product

Composition and structure of the product team

Establishing a timeline for product intorduction

Determining fee levels for new products

When to use performance fees.

Choosing the legal structure for new products

Open ended

Closed ended

Master feeder funds

Multi-Class Funds

Taking taxation into consideration

Design considerations

When to incorporate leverage

Handling the liquidity of the underlying instruments

Taking capacity into account

Clearly stating fees

What to put in the ?Prospectus’

Recent product innovations

How to structure solutions for clients

Wrap funds

Offshore products

How to design Index Funds

How to address investment fund board independence

Conclusion

14 Alternatives

Introduction

Socially Responsible Investment (SRI)

Shari’ah Compliant Investment

The use of leverage

The use of derivatives

Structured products

Hedge funds

Counterparty credit risk exposure

Trading practices of hedge funds

Hedge fund fees

Commitment Period (lock-ups)

The use of side letters

Selecting a Maximum Fund Size

Imposing redemption terms (gates)

Types of hedge fund

Convertible Arbitrage funds

Distressed Securities funds

Fixed Income Arbitrage funds

Long/Short funds

Macro funds

Risk/Merger Arbitrage funds

Private Equity

The role of Limited Partnerships

Property

Closed-ended funds

Open-ended funds

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Investment trusts

Conclusion

References

Improve your IT help desk processes with service request management. The Ascent covers how the service request management process works.

ITIL defines a service request as a "formal request from a user for something to be provided -- for example, a request for information or advice; to reset a password; or to install a workstation for a new user.". Service request management is one of four ITSM process management areas:. Service request management is often confused with ITIL incident management.. Service request management responds to requests for specific services such as resetting a password, setting up a new company laptop, or moving equipment from one location to another.. Larger businesses that generate multiple daily service requests should use IT help desk software to separate this process from incident, problem, and change management.. An authorized user/employee submits a request for a service from the IT service catalog.. Each service request needs a supply list, estimated time for completion, and the requestor's contact information so the assigned tech can complete the request satisfactorily.. Overarching service request management priorities include enhanced customer relations, streamlined service activities, and the application of ITIL principles.. Users requesting services know what to expect, and some IT help desk software will let them track the progress of their service tickets.. A comprehensive online service catalog, based on the history of previous service requests and ITIL issue management, will help prevent this problem.. An online knowledge base, whose initial entries are based on the history of prior service requests and ITIL incident categories, is another component of effective service request management.. ITIL service request management creates multiple benefits: more efficient IT services and activities, increased CSAT scores, and lower operating costs.

Learn the options and statutory requirements to set up a fund management company in Singapore and discover how Rikvin can help you.

Under the Securities and Futures Act (SFA), companies wishing to engage in the business of fund management in Singapore are either a licensed fund management company (LFMC) holding a Capital Markets Services (CMS) licence in fund management, or a registered fund management company (RFMC) with the Monetary Authority of Singapore (MAS).. But the advantages are lesser compliance requirements (as these are governed by the Limited Partnership Act in Singapore and not by the Companies Act) and far less required public disclosure than companies.. Competitive, transparent and efficient territorial low tax regime Extensive tax treaty network worldwide (currently over 76 full and eight limited treaties in place) No capital gains tax Several tax exemptions schemes such as 13R, 13X, and 13CA (detailed below) specifically for the fund management industry Benefits from various other tax incentives schemes available to all Singapore companies such as Corporate Tax Rebate, PIC etc.. A/I LFMCs – carrying on fund management business with qualified investors only, with no restrictions on the numbers.. Registering with MAS as an RFMC through the Corporate Electronic Lodgement or CeL Applying for CMS licence in fund management through CeL and, where applicable to the applicant’s business model, such additional SFA regulated activities of dealing in securities, trading in futures contracts, and/or leveraged foreign exchange trading.. Applying for CMS licence in fund management through the hardcopy of SF(LCB)R Form 1 and, where applicable to the applicant’s business model, such additional SFA regulated activities that include activities not listed above.. But under this scheme, input GST on nearly all expenses borne by the fund in relation to the fund’s investment activities will be eligible for relief.. Resident Fund Scheme (13R)Enhanced Tier Fund Scheme(13X)Offshore Fund Scheme (13CA)Aimed at Singapore resident. funds incorporated as a company and managed by a Singapore FMCall funds (company, trust or limited partnership) over S$50 million managed by a Singapore FMC which employs at least 3investment professionals earning at least S$3,500 per monthnon-Singapore funds (non-Singapore company, trust or limited partnership). managed by a Singapore FMC Fund expenditure at least S$200,000 in business spending including operating costs, salaries and management feesNo restrictions Rikvin’s expertise is unrivaled in Singapore.

Nov. 20, 2020

Rule 12d1-4 permits a registered investment company or business development company (referred to as “acquiring funds”) to acquire the securities of any other registered investment company or business development company (referred to as “acquired funds”) in excess of the limits in section 12(d)(1) of the Investment Company Act subject to certain conditions.. Rule 12d1-4 permits acquiring funds to acquire the securities of acquired funds in excess of the limits in section 12(d)(1) of the Investment Company Act while applying a consistent set of conditions to such fund of funds arrangments.. Rule 12d1-4 requires an acquiring fund to aggregate its investments with the investments of its advisory group when it assesses control of an acquired fund and assesses whether voting restrictions apply to its investments in an acquired fund.. An acquiring fund that is part of the same fund group as the acquired fund, or an acquiring fund that has a sub-adviser that acts as adviser to the acquired fund, is not subject to the rule’s control and voting conditions.. To address concerns that an acquiring fund could exert undue influence over an acquired fund or charge duplicative fees and expenses, rule 12d1-4 requires certain evaluations and findings to be made before the acquiring fund invests in an acquired fund in reliance on the rule.. For a management company that is an acquiring fund, the acquiring fund’s investment adviser must evaluate the complexity of the structure associated with the acquiring fund’s investment in the acquired fund, and the relevant fees and expenses, and must find that the acquiring fund’s fees and expenses do not duplicate the fees and expenses of the acquired fund.. For separate accounts funding variable insurance contracts that invest in an acquiring fund, the final rule requires an acquiring fund to obtain a certification from the insurance company issuing the separate account that it has determined that the fees and expenses borne by the separate account, acquiring fund, and acquired fund, in the aggregate, are consistent with the standard set forth in section 26(f)(2)(A) of the Investment Company Act.. For management companies that are acquired funds, the rule requires the acquired fund’s investment adviser to find that any undue influence concerns associated with the acquiring fund’s investment in the acquired fund are reasonably addressed, after considering: the scale of contemplated investments by the acquiring fund and any maximum investment limits; the anticipated timing of redemption requests by the acquiring fund; whether, and under what circumstances, the acquiring fund will provide advance notification of investment and redemptions; and the circumstances under which the acquired fund may elect to satisfy redemption requests in kind rather than in cash and the terms of any redemptions in kind.. At a minimum, the fund of funds investment agreement must include the following: any material terms regarding the acquiring fund’s investment in the acquired fund necessary to make the required evaluations and findings under the rule; a termination provision whereby either the acquiring fund or acquired fund may terminate the agreement subject to advance written notice no longer than 60 days; and a requirement that the acquired fund provide the acquiring fund with information on the fees and expenses of the acquired fund reasonably requested by the acquiring fund.. However, the rule permits an acquired fund to invest in excess of the section 12(d)(1) limits in securities of another investment company that is: acquired in reliance on section 12(d)(1)(E) of the Investment Company Act ( i.e. , master-feeder arrangements); acquired in reliance on rule 12d1-1; a subsidiary wholly-owned and controlled by the acquired fund; received as a dividend or as a result of a plan of reorganization of a company; or acquired pursuant to exemptive relief from the Commission to engage in interfund borrowing and lending transactions.

Learn the dos and don'ts of mutual fund trading before you invest, including how trades are executed and what fees to expect.

Investing in mutual funds isn't difficult, but it isn't quite the same as investing in exchange traded funds (ETFs) or stocks.. As with any investment, you need to know what you're getting into.. You can only purchase mutual fund shares at the end of the trading day.. If you want to invest $1,000, for example, you can place your order any time after the previous day's close, but you won't know how much you'll pay per share until the day's NAV is posted.. If the day's NAV is $50, then your $1,000 investment will buy 20 shares.. Mutual funds carry annual expense ratios equal to a percentage of your investment, and a number of other fees may be charged.. These fees do not go to the fund; they compensate brokers who sell shares in the fund to investors.. Instead of a traditional load fee, some funds charge back-end load fees if you redeem your shares before a certain number of years have elapsed.. Mutual funds may also charge purchase fees (at the time of investment) or redemption fees (when you sell shares back to the fund), which go to defray costs incurred by the fund.. The date when you place your order to purchase or sell shares is called the trade date.. The Securities and Exchange Commission (SEC) requires mutual fund transactions to settle within two business days of the trade date. If you place an order to buy shares on a Friday, for example, the fund is required to settle your order by Tuesday, since trades cannot be settled over the weekend.. If you are investing in a mutual fund that pays dividends but you want to limit your tax liability, find out when shareholders are eligible for dividend payments.. To discourage excessive trading and protect the interests of long-term investors, mutual funds keep a close eye on shareholders who sell shares within 30 days of purchase – called round-trip trading – or try to time the market to profit from short-term changes in a fund's NAV.. Mutual funds may charge early redemption fees, or they may bar shareholders who employ this tactic frequently from making trades for a certain number of days.

Oct. 12, 2017

On February 22, 2018 the SEC adopted an interim final rule that revised the compliance date for the provisions of rule 22e-4 related to the classification of funds’ portfolio investments, highly liquid investment minimum, board approval of the liquidity risk management program, Part D of Form N-LIQUID, and the liquidity-related amendments to Form N-PORT by six-months.. Assessment, management, and periodic review of a fund’s liquidity risk; Classification of the liquidity of fund portfolio investments; Determination of a highly liquid investment minimum; Limitation on illiquid investments; and Board oversight.. Funds are required to classify each investment into one of four liquidity categories: highly liquid investments, moderately liquid investments, less liquid investments, and illiquid investments.. Amendments to the portfolio holdings reporting form (Form N-PORT) require a fund to maintain in its records position-level liquidity classification information and information regarding a fund’s highly liquid investment minimum on a monthly basis, as well as its holdings of cash and cash equivalents.. For the provisions of rule 22e-4 related to the classification of funds’ portfolio investments, highly liquid investment minimum, board approval of the liquidity risk management program, and Part D of Form N-LIQUID, the compliance date for larger entities—namely, funds that together with other investment companies in the same “group of related investment companies” have net assets of $1 billion or more as of the end of the most recent fiscal year of the fund—is June 1, 2019, [2] and for smaller entities is six months later, December 1, 2019.

Learn the definition of portfolio management, what a portfolio manager does day-to-day, and some best practices for good measure.

Portfolio management involves the right people and technology so an organization can successfully select, manage, and execute projects on a grand scale.. Put plainly, project portfolio management assigns responsibility, so the organization always has a individual or a group of people closely monitoring the performance of the company’s project investments.. Active portfolio management Passive portfolio management Discretionary portfolio management Non-discretionary portfolio management. Project management typically involves managing temporary or unique endeavors focused on a specific product or service Program management entails a coordinated approach to managing related projects in a manner that aligns their connected objectives Portfolio management takes a group of projects and/or programs and manages these collectively as a group, ensuring they’re consistently aligned with the overall strategy. Ultimately, a good portfolio manager will identify overlapping project proposals early and cut off any projects with poor business cases upfront, to ensure better alignment between management and stakeholders.. With updates in hand, the portfolio manager can then input the data into their project portfolio management software and assign a status.. The best tool is one that also considers your project managers’ needs since their data needs to trickle up to higher-level portfolio managers and their corresponding boards and dashboards.. For starters, portfolio managers absolutely treat planned and in-progress projects across the organization as individual investments, much like a financial manager would treat bonds and stocks as investments.. Day-to-day, a portfolio manager is responsible for gathering data, monitoring project performance, closely watching marketing conditions, and influencing the organization on which decisions to make and which projects to prioritize.

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