Brian Bollen's Blog

DTCC hails move to next DLT phase

The Depository Trust & Clearing Corporation (DTCC) today announced the successful completion of a proof-of-concept to better manage the netting process for US treasury and agency repurchase agreement (repo) transactions leveraging distributed ledger technology (DLT).

Working with Digital Asset, a developer of DLT solutions for financial institutions, the two companies have demonstrated for the first time the successful netting of “start” leg repo transactions with prior end-of-day net securities obligations in the DTCC environment.

With Phase One now complete, DTCC and Digital Asset say they have progressed to Phase Two where they will form a Stakeholder Working Group comprised of leading market participants active in the $3 trillion per day US repo and related transaction market to collect independent feedback and ensure the solution is aligned with industry needs.

Phase Two will also determine whether the solution meets the performance and integration needs of DTCC’s technology environment while allowing for integration with member firms. Phase Two is expected to be completed by June 2017 at which time DTCC will determine whether to move ahead with the development phase of the effort.

Paine joins Schroders

Investment house Schroders is today announcing the senior appointment of Chris Paine, who joins the Multi-asset Investments team from Henderson Global Investors.

Whither now LSE, Deutsche Börse

Whither now the proposed merger between the London Stock Exchange Group and Deutsche Börse?

Record year for Irish funds

Annual data released by the Central Bank of Ireland for 2016 showed record levels of assets and net sales in Irish domiciled funds, as well as record levels of assets in non-domiciled funds administered in Ireland.

DLT payment, clearing and settlement - an analytical framework by BSI's CPMI

The Committee on Payments and Market Infrastructures of the Bank for International Settlements has published a report on distributed ledger technology in payment clearing and settlement.

JTC makes double appointment

JTC Fund Services says it has made a double senior appointment in both Luxembourg and London as it continues to strengthen its globally focused fund servicing business.

Firms slow to embrace new technology

State Street Corporation says it has identified three elements that leaders in financial services will need in order to excel in the new digital era. In its latest report - Finance Reimagined: Finding Long-Term Value in a Digital Age - the findings result from a global survey of 2,000 investors and 500 investment providers.  

PE set for further growth

The private equity industry is set for further growth in 2017 with leading investors globally planning to increase commitments to both primary and secondaries markets, as the outlook on distributions remains positive despite wider economic uncertainty.

These findings come as leading fundraising advisor Rede Partners, today unveils its new industry benchmark, the Rede Liquidity Index (RLI), which aims to assess underlying investor sentiment as an indicator of the health of the private equity industry.

Utilizing the same methodology as the Purchasing Managers’ Index (PMI), an indicator of the economic health of the manufacturing sector, the research was conducted with a select group of global institutional LPs (limited partners), chosen to provide geographic and source of capital diversification. Similar to the PMI, a baseline score of 50 represents no change, whilst a score above 50 indicates an expectation to increase private equity commitments over the next 12 months. Respondents to the inaugural survey represent over €5 trillion in assets under management and approximately €1 trillion in capital allocated to private equity.

Rede says the results clearly demonstrate that investor appetite towards the private equity industry remains strong with an overall RLI score of 67, as 44% of LPs intend to deploy more capital in 2017 than they did in the previous twelve months, with only 11% indicating less. Furthermore, these findings come on the back of record fundraising volumes in 2016.

European LPs were much more bullish (71) than their North American counterparts (56) in regard to their anticipated commitments to primary funds. Notably, investors in the DACH (Germany, Austria and Switzerland, 77) and Nordic (76) regions had the strongest scores, with 62% of DACH investors looking to deploy more in 2017 and no Nordic investors expecting to deploy less. UK LP sentiment (59) was more in line with that seen in the US.

Sentiment varied significantly by type of investor with asset managers (72) and insurance firms (71) the most likely to be increasing commitments to the primary market whilst pension funds (50) indicated their commitments would remain stable compared to 2016 levels.

Scott Church, Partner and Co-founder at Rede Partners said “It’s clear that investor appetite towards private equity remains strong and that major institutional investors view the asset class as an attractive place to put their capital to work.

“The long-term nature of the asset class provides a degree of insulation from widespread economic and political uncertainty while providing significant market opportunities in which investors can generate attractive returns. While not all LP groups are equally bullish, the fact remains that the industry looks set to continue to attract significant inflows throughout 2017.”

Rede says that against this positive outlook, today’s data also highlight strong appetite from LPs to develop new GP (general partner) relationships with an RLI score of 61 as 40% of LPs intend to increase commitments to new managers. Notably this trend is primarily being driven by fund of funds (75) whilst LPs such as pension funds expect to focus on existing relationships (58) and allocate less to new GP relationships (48).

Commitments to existing GP relationships are expected to remain stable, with 57% of LPs reporting no change from 2016 levels resulting in an RLI score of 58 primarily driven by asset managers (69) and family offices (68).

Adam Turtle, Partner and Co-founder at Rede Partners said: “The ongoing maturation of the industry, coupled with its strong performance, means that most LPs continue to look for strong new manager relationships best positioned to address the market environment of today. It is not surprising that fund of funds lead this charge, although we see this trend across other investor groups, as allocations to the asset class continue to increase.”

“However, you also see a consolidation of relationships in the pension community, which represents a large portion of the market. Therefore, for GPs looking to attract new LPs it becomes even more important to clearly articulate their differentiation and carefully plan their investor rollout strategy as part of their fundraise efforts.”

Overall expectations of future distributions remain stable with an RLI score of 52. However, the drivers of this score showed significant variation amongst investors with roughly equal numbers expecting distributions to decrease as increase. 

Distribution expectations varied significantly by investor type with pension funds (70) the most optimistic in terms of future distributions increasing whilst several investor groups such as consultants (41), insurance firms (41) and family offices (47) expect distributions to decrease.

Once again, there was a divergence of opinion amongst different geographies. Investors from the UK (30) were the least optimistic with 52% of LPs expecting distributions to decrease relative to last year, a trend which was also seen in the Benelux (44). LPs from France (63) were the most bullish with those in the DACH (59) and Nordic (55) regions also expecting distributions to increase.

Commenting Kristina Widegren, Principal at Rede Partners said “LPs’ distribution expectations are typically shaped by a combination of confidence in their existing investment portfolios, as well as their views on wider market conditions. Despite global political and economic uncertainty, equity markets have performed well, providing GPs with a healthy environment for realisations not just in terms of valuation but also in terms of the exit routes available to them.

“In this context, the bearishness of UK-based LPs is unsurprising given the long-term uncertainty being driven by on-going Brexit discussions and the wide-spread impact this could have on existing investments.”

The inaugural Rede Liquidity Index also demonstrated the continued appetite for deployment of capital into the secondaries market with an RLI score of 55 for the secondaries deployment sub-indicator.

Crucially however, it is useful to note the bifurcation between those investors that tend to deploy capital in the secondaries market directly through their own managed vehicles (fund of funds and consultants) and those that tend to deploy capital in the secondaries market through commitments to secondary vehicles managed by third party managers (rest of respondents). The former have a secondaries deployment RLI score of 71, while the latter have a respective score of 44.

This is understandable, Rede says, given that many direct secondary market participants now have substantial dry powder that they are eager to deploy, at least in the short term.

Commenting, Yaron Zafir, Head of Secondaries at Rede Partners said: “The secondary market continues to provide a strong source of capital with investors becoming more creative as there is significant dry powder in the market and it is becoming highly competitive. We expect this to continue and in particular in the GP-led secondaries space. There has been a growing sophistication in transaction structuring coming into this end of the market and GPs, like LPs, increasingly recognise the valuable role secondaries can play as a portfolio management tool.”

Northstar picks Maples Fund Services

Maples Fund Services, an independent global fund services provider and division of MaplesFS, says it has been selected as the administrator for the Northstar Enterprise Opportunity Fund I.

NN IP bolsters responsible team

NN Investment Partners reports that it has bolstered its newly established Responsible Investment team with three new hires.

Banking is not pretty

Mint – Blain’s Morning Porridge

Sure, we don’t trust our government, but we don’t trust the population either

SWIFT welcomes Turkmenistan, Uzbekistan to KYC

SWIFT announces today that the financial community in Turkmenistan has signed up to use its Know Your Customer (KYC) Registry, a centralised repository that maintains a standardised set of information about correspondent banks, funds distributors and custodians required for due diligence processes.

MAPFRE appoints BNP Paribas Securities Services

Spain's MAPFRE Inversión, which specialises in long-term savings solutions, says it has selected BNP Paribas Securities Services as global custodian for its worldwide portfolio of assets worth €60bn. It says this decision will allow it to reduce costs and allocate additional resources to its core activity.

MAPFRE INVERSIÓN says it previously delegated its custody operations to a number of different service providers. Following a comprehensive internal analysis, the company has decided to centralise this outsourced work to a single securities custodian, giving rise to significant annual cost savings.

Among other advantages, this move will free up resources for use in its core business, simplify balancing items and generate direct and indirect cost savings.

MAPFRE says these changes reflect both its global management approach and the Group’s strategic plan, moving toward specific development of the MAPFRE INVERSIÓN business, with a team of 150 investment specialists and direct management in 26 countries.

Madden joins Moore

Independent fund services provider Moore Management has reported the appointment of Scott Madden as funds director. effective immediately.

Russia's stagnant stability

A recent trip to Moscow on the 100th anniversary of the 1917 revolution revealed not a whiff of revolutionary change in the economy, but rather stagnant growth mixed with structural stability, according to Yacov Arnopolin, emerging market portfolio manager at PIMCO. “We could simply call it stagnant stability,” he suggests.

BNY Mellon appoints Declan Turner

BNY Mellon says it has appointed Declan Turner as a business development manager for its Corporate Trust team in Europe, the Middle East and Africa (EMEA).

Northern Trust to buy UBS fund administration arm

UBS Group and Northern Trust Corporation have announced that UBS AG has entered into an agreement for Northern Trust to acquire UBS Asset Management's fund administration servicing units in Luxembourg and Switzerland.

Russia's NSD hails 2016 advances

Russia's National Settlement Depository (NSD) says it has completed the annual assessment of its compliance with the CPMI-IOSCO Principles for Financial Market Infrastructures (PFMIs).

ICE to buy TMX Atrium

Intercontinental Exchange, an operator of global exchanges and clearing houses and provider of data and listings services, is to buy TMX Atrium, a global extranet and wireless services business from TMX Group.

Doyle takes new BNY Mellon role

BNY Mellon has appointed Stephen Doyle to the newly created role of head of UK institutional relationship development for asset servicing.