The UK Financial Conduct Authority has responded to AIMA's request for clarification on delegating management functions to firms outside the EU when the revised Markets in Financial Instruments Directive takes effect. A firm that delegates must "take steps to secure for its clients substantively equivalent outcomes as they would expect to receive on the relevant investor protection provisions in MiFID II," the FCA said.
An NEPC survey of 62 endowment and foundation business officers finds nearly two-thirds expect to continue exposure to marketable alternatives, such as hedge funds, while less than a third have shrunk allocation this year. Thirteen percent of respondents have no hedge fund exposure, compared with 26% last year and 2% in 2014.
The secondary loan market has attracted the likes of private equity funds, collateralized loan obligations, loan mutual funds, hedge funds, brokers and pension funds. These groups have made the market more active than in the past, when dominant banks and insurers typically took a buy-and-hold approach.
Tier 1 banks have historically shown disinclination to offer client fund accounts to brokers dealing in over-the-counter foreign exchange derivatives, but an analysis finds London banks have become more welcoming, Andrew Saks-McLeod writes. Banks are realizing the competitive benefits of working with the sector, Saks-McLeod writes.
Brexit, gridlock in Washington, D.C., and sanctions against Russia are all geopolitical issues that could affect markets in the second half of 2017. Upheaval in Venezuela could disrupt the oil-producing nation.
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The effort to reform post-crisis financial regulation, particularly capital and liquidity requirements for large institutions, is "dangerous and extremely shortsighted," said Federal Reserve Vice Chairman Stanley Fischer.
European regulators reportedly are divided on when derivatives should be considered traded on a trading venue, a criterion for determining whether the derivative is subject to transparency requirements. "There isn't enough clarity in the [Markets in Financial Instruments Directive] II text as to whether this is determined at real time or not," said Sassan Danesh of the Association of National Numbering Agencies Derivatives Service Bureau.
Recruitment firms in the City of London are reporting unexpectedly brisk business in the traditionally quieter summer season, recording the fourth consecutive month of activity growth in July. Managers appear to be rushing to fill positions, with candidates equally eager to secure them, before the UK's Brexit negotiations start to exert long-term effects on the financial sector.
With the London Interbank Offered Rate looking likely to be terminated by 2021, derivatives traders are weighing the task of amending hundreds of thousands of legacy contracts in accordance with the replacement benchmark, which has yet to be fully established. One trader called the task "gargantuan," while another said "it is not going to be easy to transition a $350 trillion market."
Most alternative investment management firms are able to turn a profit and expand with considerably less than $100 million in assets, according to "Alive & Kicking," a survey of sub-$500-million firms by AIMA and prime brokerage GPP. The joint survey of 135 alternative asset managers globally also sheds light on the impact of broader trends and themes on this segment of the industry, such as fee pressures, the impact of post-crisis regulations, demands for ever-greater methods of alignment of interests, and the optimum mix between having dedicated in-house staff and outsourcing.
Six months ahead of the implementation deadline for the revised Markets in Financial Instruments Directive, alternative asset managers still face uncertainty, with 34% of firms undecided, for example, on how to pay for research, according to a survey by AIMA. Fund managers globally cited as their biggest MiFID challenges uncertainty around what the MiFID II rules mean -- both in scope and substance -- as well as what they perceived to be a lack of clarity relating to the cost and nature of services provided by brokers. The AIMA survey showed that, among the two-thirds of alternative asset managers that have made decisions around how to pay for research, 80% plan to charge investors and the remaining 20% intend to absorb the costs themselves. Access the full survey, which is available to AIMA members. Separately, earlier this year, AIMA published a MiFID Guide for Investment Managers. The full guide is for AIMA members; read the executive summary.