Fund Structuring and Product Development in Asset Management

Day One

The first day will focus mainly on the process of idea generation and operational structuring of new investment products.

09.00 - 09.15 Welcome and Introduction

09.15 - 10.00 The process of Idea Generation

In this chapter we will talk about methodology for idea generation in Asset Management. While a bottom-up approach is the main approach used (sales or client feedback, market watch etc.), a top-down approach may sometime provide a competitive advantage for product managers. For this, he/she will need to identify global economic and regulatory trends (emergence of a new sector, change of policies, new regulation impacting some clients etc.) that may impact your clients. The objective is to anticipate their future needs and offer customised and tailored solution.

Different practical case will be provided using my personal experience as Fund Structurer such as (1) Multi-Asset Income Fund or Auto-Call payoff in formula fund or High Yield ETFs for retail clients in a context of a low yield environment and (2) providing more transparency on Hedge Funds to Insurance Companies in a context of Solvency II implementation.

10.15 - 13.00 Underlying, Payoff and Investment Style

The second phase of product development is the actual economic structuring of the project. Three aspects must be taken into account carefully.

  • One is the underlying, or the asset class that will ultimately deliver the performance of the product.

  • Second is the payoff. The idea is to use specific financial instruments or management technics to modify the risk profile of an underlying to match in more details the needs of the client. We will study how the use of options and insurance portfolio technics can achieve this objective.

Different study case and Excel exercise will be done to see how these technics can modify the economic profile of a product.

  • Third is the Investment Style: Will the product be managed actively by an asset manager or use passive management technics to achieve more transparencies?

13.00 - 14.00 Lunch

14.00 - 17.00 Fund Set-up, Fund Administration & Maintenance, Distribution and Service Providers

Approval process and pass-porting will be detailed in this section. UCITS directive and AIFM directive propose the possibility to passport funds in Europe. This process will be developed. During the life of a Fund, terms and condition may change which lead to an amendment of the prospectus and other key materials. This process is submitted to specific rules and condition that will be detailed.

A mapping of all the different service providers will be developed with a specific focus on the administrator in charge of the NAV calculation and the accounting of investment funds, the transfer agent in charge of the reception, centralisation, aggregations of subscription-redemption and the holding of registers, and the distributor in charge of dealing with the end-client directly. In this respect, liquidity and subscription / redemption schedule need careful attention to ensure equal treatment of unit-holders. They will depend on the liquidity of the underlying but also on the operational organisation of all different service providers.

We will also focus on some operational aspects that need careful attention such as Fees (we will here develop the different type of fees and their calculation methods (ongoing fees, up-front fees, performance fees etc.), the structure of class of shares, structure of sub-funds within Umbrella structures, master-feeder etc.

Day Two

This second day will focus on regulatory constraints which will impact how investment products are structured. In the first part of this second day, we will present the current regulatory framework in asset management in Europe and we will focus on the rules that significantly impact the structure of funds. This first chapter will help to understand what will follow in the second chapter. In this second chapter, we will focus on the impact of regulation on the global structure of the investment product and on the rationales that determine the optimal wrapper for a new investment product.

08.30 - 12.00 Regulation in Asset Management

In this section, we will discuss where we stand in terms of regulation in Europe. UCITS remains the main regulatory framework in Europe for retail funds. This regulation will be presented and the main changes from UCITS I to UCITS V will be highlighted as well as the discussed topics toward UCITS VI. More specifically, we will concentrate on the rules that significantly impact the structure of funds. For example, the way leverage limits are measure, eligibility of assets and indices are defined shape the way funds are originated.

In this chapter, many different practical cases will be used using Excel to illustrate how investment restrictions are applied in practice, for example, the way leverage is calculated and the way diversification requirement is measured.

12.00 - 12.45 Lunch

12.45 - 14.00 How Regulation Impact the Structuring of New Products

In this section, we will discuss how regulation will impact the whole structure of an investment product. Structure of ETFs, Newcits, formula funds and structured funds highly depend on investment restrictions within the UCITS framework. Index strategy, Smart Beta index (which are often sold through UCITS structure) are shaped by those regulatory constraints.

Fund structuring will also depend on tax consideration which will determine the type of instruments that needs to be used.

14.15 - 15.45 Determination of the Optimal Legal Wrapper

Finally, the choice of the legal wrapper is another important part of product management. Sophisticated Fund Managers have usually different options (Lux Funds (UCITS or not), Irish funds (UCITS or not), contractual funds, Cayman funds, Jersey funds, Mauritius funds etc.). In this chapter, we will study the parameters that need to be taken into account when deciding which wrapper must be used. Clients profile and their restrictions must be taken into account as well as the global pricing of the structure. We will elaborate on what makes the pricing of the different wrappers and provide some estimates about their levels.

Evaluation and Termination of the Seminar

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