Dechert partner Monica Gogna has collaborated with the Investment Association to produce important industry guidance around the new obligations which come into force on 3 January 2018 for the acquisition of investment research by EU MiFID firms.

The new guidance, the Intragroup Research Checklist, serves to assist firms in their understanding and implementation of the new research requirements across global firms with multiple legal entities and was contributed to by the most senior level figures at a number of investment management firms.

The guidance highlights two key points:

  • Research acquired out of an asset management firm’s own resources (P&L) may be freely reused across the group without restriction.
  • Research acquired with the clients’ money, either in the EU or outside it, may be reused across the group as long as the firm can demonstrate that there is no material detriment or cross subsidisation to any client and the best execution process is not impacted.

The guidance is available in full to members on the Investment Association website.

Dechert LLP acted as sole external counsel in the drafting of the guidance.

Gogna has served as a member of the Investment Association’s working group responsible for the MiFID II inducement regime and the use of research and was a driving force in producing an industry wide solution and guidance in relation to the cross-border regulatory issues affecting the use of research on an intra-group basis.


Prestige has announced a new series of mandates from institutional investors outside the UK for its private lending credit funds. The mandates are the latest to be received from non-UK institutions that are allocating to the UK-based private lending specialist.

The investors include:

  • A Swiss-based industrial corporate pension fund
  • A South Korean-based financial group
  • A Spanish-based university endowment

Despite last year’s Brexit referendum, Prestige continues to see a high level of institutional interest, including in some of the sterling based share classes of its credit funds. In addition, several dedicated share classes have been created for larger investors such as sovereign wealth funds and state-backed pension schemes.

Craig Reeves, Founder of Prestige, said: “Non-UK investors like the plain vanilla yield characteristics of private lending strategies. Part of the attraction is also our focus on areas of the market neglected by traditional lending institutions, and the diversification of risk across hundreds of individual loans.”

The mandates were secured over the course of the last 12 months, demonstrating the confidence foreign investors still have in the UK economy despite the ongoing Brexit negotiations. Prestige has raised approximately $1.5 billion since 2008 and currently manages approximately $875 million.

Prestige, through its two UK-based, specialist finance operations, has provided almost 15,000 loans to 6,000 clients since it launched. It focuses on two main strategies: a Cambridge-based, credit team that lends to small companies in the agricultural sector with a focus on short and medium term ‘asset finance’ and ‘project finance’, and a London-based, direct lending team with a focus on short term ‘invoice’ and ‘cashflow’ finance. Both teams consist of a number highly experienced former commercial bankers, finance and risk specialists, and both businesses are increasingly playing a consulting role in assisting small firms to ‘finance in’ productivity; and to ‘finance out’ some of their fixed costs, generating significant value beyond simply lending money.

“This is a strategy that is expanding considerably and is increasingly being viewed by some institutional investors as an asset class in its own right,” Reeves commented. Indeed, AIMA, which now operates a dedicated ‘Alternative Credit Council’, recently published significant new research suggesting that assets in private debt funds may grow to USD1 trillion by 2020.

“More funds of this type are launching across many different specialist commercial and industrial sectors so it is important that investors look closely at the expertise of the teams assembled to carry out lending and the due diligence activities on the ground as well as their ability to understand (and mitigate) any non performing exposures. Specialisation and strong sector knowledge as well as remaining close to your customers is key.”


Value Partners’ equity investment team expects Hong Kong stocks to continue its upward trend in 2018 as China’s pledge to deliver quality and sustainable growth, together with Hong Kong’s recent initiatives to bring in additional market liquidity are expected to shore up investor sentiment for Chinese stocks.
Chung Man Wing, Investment Director of Value Partners said, “2017 is a year of recovery for Hong Kong and Chinese stocks.  It has been a very strong rally that is driven by structural instead of cyclical factors.  China has been making further progress to deliver quality and sustainable growth via reforms in the services sector and state-owned enterprises, as well as financial deleveraging.
“As China continues to move towards a more efficient economy with higher return on equity and lower gearing, this will get more international investors turned to Chinese stocks, particularly those listed in Hong Kong, which is a freely accessible market.”
As of 31 October 2017, MSCI China Index, which represents Chinese stocks listing offshore, has risen 48.9% year-to-date, compared with a full-year return of 0.9% in 2016.
“Elsewhere in Hong Kong, a number of initiatives are being discussed to add breadth and depth to the listing universe of the city.  By luring a broader range of companies to list in Hong Kong, this will bolster liquidity and vibrancy of the local bourse,” said Chung.
Investment themes for 2018
Among the Chinese stock universe, there are three types of companies that are more preferred with better investment potential.
1. Consumption upgrade
As China’s urbanization and the growth of middle class continue, this will unleash huge consumption demand, particularly those for consumption discretionary goods and services such as insurance services.
2. Industrial upgrade
The application of automation, robotics and information technology in Asia’s services and manufacturing industries has helped Asian corporates move up the global value chain.  Within Asia, China and South Korea are the key countries demonstrating the industrial upgrade and this can be shown in the increases in exports and patent applications.
3. Technology leaders

Asia, particularly in China, has demonstrated its ability to foster world-class high-technology companies and the robust growth in the technology space.  Currently, China has the largest online retail market in the world and it is still growing at a double digit rate year-on-year.


In reaction to comments around Brexit at the Autumn Budget, Michael Metcalfe, global head of macro strategy for at State Street Global Markets has offered his views.
Metcalfe commented: “The government has committed funds to help with the preparation for Brexit contingency planning, but the real challenge for UK markets revealed in the budget came from the Office for Budget Responsibility (OBR) and the significant downgrades to the UK growth outlook. Still high inflation and an expected weakening in growth provide a potentially troubling backdrop for markets even without the political uncertainties created by Brexit.”


Mediobanca SpA and RAM Active Investments SA have announced that they have agreed the terms of a strategic partnership in which Mediobanca will acquire a 69% interest in RAM AI.

Founded in 2007, based in Geneva, RAM AI is a systematic investment manager offering a range of actively managed and alternative systematic fundamental equity and tactical fixed-income funds. As of 31 October 2017, RAM AI had AUM of CHF4.9bn across 14 funds.

RAM AI will maintain its organizational and operational independence, and the transaction will bring several benefits, including a reinforced institutional framework, a long-term seeding commitment to funds managed by the company that will help foster innovation and research, and an improved distribution network across Europe.

The founding partners Thomas de Saint-Seine, Maxime Botti and Emmanuel Hauptmann will retain significant stakes in the company and will remain committed to its development for a minimum period of ten years. Each partner will also reinvest a meaningful part of their proceeds in RAM AI’s funds. As the historical seeder and institutional shareholder of RAM AI, the REYL Group will retain a 7.5% stake in RAM AI.

The transaction is subject to customary conditions, including approval from the relevant regulatory authorities, and is expected to close in the first half of 2018.

“We are very excited by this new phase of RAM AI’s development. Mediobanca is an excellent partner for RAM AI from a cultural and distribution synergy standpoint. This partnership will provide us with additional operational resources and seeding capabilities that will help drive innovation and research at RAM AI while preserving our independence and unique culture. Our aim is to keep delivering differentiated investment solutions to our investors, generating consistent risk-adjusted returns on the foundation of proven investment philosophies” said Thomas de Saint-Seine, CEO of RAM AI.

“The 2016-19 strategic plan approved in November 2016 has marked a clear acceleration in our repositioning through the creation and development of an Asset Management platform. As a meaningful part of this plan Mediobanca is strongly committed to the development of an alternative asset management business, achieved through strategic partnerships with selected managers having high quality management teams, strong track records, and scalable platforms. RAM AI is uniquely qualified to complement Mediobanca active investment management business and will become the cornerstone for the launch of the Group’s systematic strategies and innovation hub for the development of new investment ideas. In addition RAM AI will contribute scale to our alternative platform, will complement the product offering by adding equity strategies and is exceptionally well positioned to benefit from a complementary investor base, distribution network and geographical reach” said Alberto Nagel, Group CEO of Mediobanca.


FIX Trading Community, the non-profit, industry-driven standards body at the heart of global financial trading, has released Recommended Practices for Commission Unbundling as required by MiFID II.

MiFID II has introduced the requirement to explicitly separate commissions into their component parts (e.g. execution, research) with a focus on the specific identification of the research component of the commission. In addition, MiFID II has introduced the concept of a research-payment account (RPA). Previously, commission payments were generally handled in the background by Commission Sharing Agreements (CSA).

Over the past two years, FIX members have debated and discussed the European Securities and Markets Authority (ESMA) terminology and responded to updates across a number of different MiFID Working Groups. The FIX MiFID Commission Unbundling Working Group, in conjunction with the FIX Global Post Trade Working Group, has worked on producing a document that provides guidelines for pre-trade and post-trade representation of commission components for all asset classes, using the FIX Protocol.

Dave Tolman, Principal Services Analyst, Itiviti, Co-chair FIX Global Post Trade Working Group, noted, “The FIX Global Post Trade Working Group has worked for a number of years to facilitate industry-wide implementation of post-trade processing via FIX between buy-side and sell-side firms. This is a natural progression to address the MiFID II requirements that will affect many global firms.”

Rebecca Healey, Head of EMEA Market Structure and Strategy, Liquidnet, Co-Chair FIX EMEA Regulatory Subcommittee, commented, “It was important to have consensus across membership, as FIX has done across all MiFID Working Groups, with commission unbundling. With the assistance of the buy-side, sell-side and vendors we have been able to produce these specific guidelines to help the market address this requirement.”

David Pearson, Head of Post-trade, Fidessa, Co-chair FIX Global Post Trade Working Group, said, “After a detailed analysis of the regulations, and extensive industry consultation, the FIX Working Group recognised that the current guidelines and message specification needed to be enhanced to allow the post-trade process to handle multiple commissions on the allocation instruction and confirmation messages. This document provides important guidelines to assist firms ahead of the January 2018 deadline.”

The Recommended Practices document can be found here.


J.P. Morgan Asset Management (JPMAM) is pleased to announce that its first two European ETFs have listed on the London Stock Exchange (LSE) today: JPMorgan ETFs (Ireland) ICAV - Managed Futures UCITS ETF (JPMF) and JPMorgan ETFs (Ireland) ICAV - Equity Long-Short UCITS ETF (JELS).
The ETFs will seek to provide returns similar to hedge fund strategies by using advanced factor based investing techniques. Both strategies will be built using a systematic, rules-based investment approach, with the goal of providing returns that are uncorrelated to traditional asset classes.
JPMorgan Managed Futures UCITS ETF will seek to provide factor exposure across the major asset classes. The strategy will be constructed bottom-up by taking long and short positions in futures markets. The ETF has a return target of cash +4% (gross of fees), risk target of 6-8% per annum[1] and a total expense ratio (TER) of up to 57 basis points.
JPMorgan Equity Long-Short UCITS ETF will seek to provide long-short exposure to developed equity market factors. The portfolio will be constructed bottom-up by taking long and short positions in individual equity securities. The ETF has a return target of cash +4% (gross of fees), risk target of 6-8% per annum, expected beta of up to +0.3[2] and TER of up to 67 basis points.
“Having pioneered alternative beta investing in UCITS nearly a decade ago, we’re now the first provider in Europe to introduce systematic, bottom-up capture of hedge funds styles into an ETF,” said Massimo Greco, Head of European Funds at JPMAM.    
“The increasing availability of lower cost, more liquid and transparent forms of alternative investing has gradually been democratising hedge fund investing for the last several years. Both strategies offer innovative building blocks intended to help investors build stronger portfolios and reduce a portfolio’s overall volatility without sacrificing return potential,” said Bryon Lake, International Head of ETFs at JPMAM.
Both ETFs were designed by JPMAM’s Quantitative Beta Strategies team, a team of quantitative research analysts and portfolio managers dedicated to factor-based investing across strategic beta (long-only) and alternative beta (long-short) strategies.
Yazann Romahi, PhD, is the Chief Investment Officer of Quantitative Beta Strategies at JPMAM, and has been focused on quantitative research the development of alternative beta strategies for over a decade. JPMorgan Funds - Systematic Alpha Fund was one of the first strategies to make the concept of alternative beta investable upon its launch in 2009.
Further European listings of JPMF and JELS will be announced in due course. J.P. Morgan Asset Management's US-based ETF suite currently features thirteen product offerings with $2.2 billion (as of 25/09/17) in assets under management.


FIA today released a statement from Walt Lukken, president and chief executive officer of FIA, regarding an announcement by the China State Council that the ownership restrictions on certain segments of the financial services industry will be phased out over the next several years.

"FIA welcomes China’s decision to ease restrictions on foreign ownership of securities brokers and futures companies, which will enable many institutions to engage more directly in China’s expanding markets. As more foreign firms offer their services in China, this will expand the range of options that Chinese investors and hedgers can use to access Chinese futures markets and will contribute to the development of China's financial sector."