THe aSSeT SeRVICIng JOURnal

MArCh 2011 n o. 25 www.caceis.com

CACEIS publishes a new guide : Making the most of UCITS IV, a flexible approach by Management Company profile
p.2
philippe lebeau

Philippe Lebeau, head of Investor relations at Comgest, speaker at CACEISs breakfast seminar
p.3
bruno de pampelonne

Interview: Bruno de Pampelonne, CEO of Tikehau Investment Management

p.5

1,150bn
assets under administration

2,379bn
assets under custody

CACEIS, first Depositary Bank and Fund Administrator in Europe

Figures as at December 31, 2010

UCITS IV : what are the challenges and the opportunities for asset management companies?

A compliant and secure environment

on the structuring of their business and their products. Once our teams have a thorough understanding of clients business development objectives in terms of distribution, our fund structuring function is able to provide practical guidance on the best way to achieve these objectives. The advice given by our specialists covers areas such as the selection of the optimal domicile for investment products and the most appropriate structures within those domiciles for distributing investment products to clients target markets. The same regulatory watch function that enables us to provide structuring advice also keeps CaCeIS staff and our clients updated on the latest developments in national and international legislation. It ensures that all the groups internal procedures and clients and investment products remain fully compliant with legislation such as MiFID, aIFMD and the incoming UCITS IV directive. For example, with the UCITS IV directive, due in July 2011, all clients likely to be impacted have been kept updated with the latest information as and when the contents are agreed upon. This information also serves to help CaCeIS design a number of specific services, such as a Key Investor Information Document creation service, to ensure our clients transition to the new regime is as smooth as possible. Our compliance division, which covers CaCeISs worldwide operations, establishes and monitors the effectiveness of compliance controls throughout our organisation in order to provide a strong level of protection for our clients against unnecessary levels of financial and non-financial risk. By checking that new clients meet our risk criteria, implementing a host of automated controls in our secure systems and submitting our processes to in-depth third-party audits, we can guarantee financial security for our clients and uphold the best interests of the end-investor. Once a business case has been accepted and integrated into CaCeISs infrastructure, it is subject to permanent compliance controls which monitor that it remains in full compliance with the local and international regulations it is subject to. This includes tasks ranging from filing reports with financial authorities to verifying that statutory investment limits are respected. The groups dedicated fund structuring function demonstrates CaCeISs resolute commitment to assisting clients in meeting their business development objectives in the most efficient manner possible. and our specialised compliance division acts as CaCeISs principal focus for guaranteeing a secure environment for the group, our staff and our clients. These elements, together with the financial security derived from our strong results and high equity level, illustrate the robustness of our group. CaCeIS is delivering the quality of support and the financial security which add significant value to clients business, and make us a front ranking player in the global asset servicing industry

The UCITS IV Directive, which comes into effect on July 1st, 2011, is expected to make UCITS-compliant funds more competitive internationally and presents asset management companies with opportunities for growth. p.2

An offer in response to Solvency II requirements

With its Solvency II offer, CaCeIS is adapting to the needs of institutional investors, helping them to optimise their regulatory capital burden and risk analysis. p.4

Local expertise combined with global sales coverage

Our sales managers talk about their ongoing commitment to client satisfaction and the quality of CaCeISs international offering. p.5

Sylvie philippot, Deputy Chief Executive Officer

What impact will the Dodd-Frank and FATCA reforms have on European asset management companies?

s a leading asset servicing provider, CaCeIS has an important part to play in the legal life of its clients business and their products. Our regulatory watch teams work across our global network of offices to gather information on the latest regulatory developments at a local and international level. Much of the information is obtained through our active participation in the working groups tasked with defining the new legislation, so being at its source, CaCeIS is able to make service enhancements quickly and efficiently, while designing new services should new opportunities arise. Having a wealth of information on worldwide jurisdictions at our fingertips puts us in the perfect position to add value to our clients business by providing practical advice

In 2011, the european fund industry will be impacted not only by numerous european regulatory changes (aIFM, UCITS IV, eMIR, etc.), but also, with effect from July 2011, by the Dodd-Frank and FaTCa US reforms which could have a significant impact on management companies having direct or indirect business relations with the United States. p.6

16 - 17 March 2011
As Frances largest meeting of the community of asset managers and institutional investors, the Forum Gi 2011 aims to promote the exchange of ideas and sharing of best practices to enable institutions to improve their financial efficiency and risk control while reducing operational costs.

On March 17th, Carine ECHELARD, Deputy Managing Director, Bank and Fund Administration, CACEIS, France, spoke on the new roles and responsibilities within the context of Solvency II and new services designed for institutional investors.

caceis news - No. 25 - March 2011

PrOduCTS ANd SErvICES

UCITS IV: What are the challenges and the opportunities for asset management companies?
The UCITS IV Directive, which comes into effect on July 1st, 2011, is expected to make UCITS-compliant funds more competitive internationally and presents asset management companies with opportunities for growth.
tion in the deadline from two months to 10 days, the management company passport and cross-border master-feeder structures. Rationalisation of products and services due to cross-border mergers, master-feeder structures and the management company passport. Five key Factors to consider The strength of UCITS IV resides principally in the different possible combinations of the resources made available rather than the various tools, viewed independently. Management companies will probably use a combination of the optional solutions on offer, either to achieve growth or rationalisation. They will however have to take five key factors into consideration before taking a position: The management companys existing organisation, depending on its local or international profile, its range of funds and investors; The marketing aspects (risk of losing existing investors, investors appetite for locallybased or foreign funds, depending on the countries of distribution, etc.); The tax issues relating to the lack of harmonisation of tax rules between different Member States, which will probably hamper cross-border mergers. It will be necessary to assess the tax implications of each transaction, both for the fund and for investors; The regulatory and legal aspects, depending on the country in which the management company is based and where the funds are domiciled; The costs linked to sales development and rationalisation of the products distributed throughout the options opened by UCITS IV. Ucits iv is expected to strengthen cross-border distribUtion The european investment fund industry benefits from the excellent reputation of the UCITS brand which has been exported beyond its borders. For many asset management companies, international growth represents a genuine springboard for growth and UCITS IV is expected to encourage this trend. More than ever, UCITS funds enjoy an internationally recognised brand image, which has been exported far beyond europe, to asia and latin america in particular. They offer all the guarantees that investors seek: security and transparency, liquidity in terms of being able to sell units or shares in the funds held, and well-organised distribution. The latest figures available indicate that in 2010, worldwide, almost 8,000 funds were marketed across international borders (i.e. distributed in at least three countries, including the funds countries of domicile). This represents growth of more than 30% over five years and 140% over ten years. another significant indicator is the number of funds registering outside their country of domicile: more than 60,000 at the end of 2010, as compared to just over 20,000 ten years earlier (Source: PwC luxembourg, October 2010, Benchmark your global fund distribution). luxembourg is number one when it comes to cross-border distribution, accounting for 75%, followed by Ireland with 14%. However, funds originally distributed nationally are increasingly being distributed internationally, as we have seen in the UK. In France, players such as Carmignac, Rothschild gestion, UFg-lFP and Mandarine gestion are successfully leading the way

nathalie collot, Product manager

lthough UCITS IV is essentially only an improvement of the existing directive as management companies can already distribute their funds throughThe 5 tools introduced by UCITS IV out europe, it will inevitably have an impact on the european investment fund industry: Compulsory switch to the KIID, in place Key Investor Information Document of the simplified prospectus. This is a docu(KIID) ment that must be produced for each unit UCITS IV class and will have to be translated into the language(s) of every country in which the fund is distributed. as it is a live document UCITS IV UCITS IV Notification it will have to be updated regularly. Its proUCITS Procedure UCITS IV duction will tie up significant human and Mergers technical resources, and will represent a cost for asset management companies. Making the switch to IV KIID successfully and inIV the UCITS UCITS Management accordance with the regulation presents our Master-Feeder Company Structures clients with a major challenge. Passport Probable increase in cross-border distribution through the simplification of the funds notification procedure, with a reduc-

Number of true cross-border funds registered

70,000
7,366 7,441 7,804

8,000 7,000 6,000 5,000 4,000 3,000

60,000 50,000 40,000

3,750 4,529 4,875 5,907 5,170

6,525

Number of registrations

30,000 20,000 10,000 0

3,260

2,000 1,000 2001 2002 Ireland 2003 UK 2004 France 2005 2006 2007 Other 2008 2009 Q32010 0

Luxembourg

Germany

Number of funds

Source : Lipper Hindsight and PwC, 31 December 2010

CACEIS publishes a new guide entitled Making the most of UCITS IV A flexible approach by Management Company profile
In its new publication, CaCeIS sets out the business development and restructuring opportunities for asset management companies under the forthcoming UCITS IV regime as of July 1st, 2011.
In this brochure, we have segmented fund sponsors into five main profiles according to their current situation and their business development strategies. Some of these fund sponsors are already intensive UCITS users, others are new entrants to the UCITS world. Therefore, some considerations are not directly linked to new UCITS IV topics, but are simply UCITS-related. However, we have judged it appropriate to cover these points since they are at the forefront of fund distribution strategies today. Furthermore, each asset management group has its own story and the reader may find it useful to adopt certain parts of other profiles. For each defined profile, this brochure examines the Management Companys objectives and the possible strategies to reach them. We have analysed the many different schemes possible and have chosen to only present the most credible or most common scenarios. However, we are obviously more than willing to discuss any other scenario that interests you. The brochure also highlights some major implementation considerations and points of attention. Taking advantage of its historical presence in the major domestic and international fund centers in europe and more recently of its strategic establishment in Hong Kong, CaCeIS has developed an expertise in fund distribution throughout the years and already provides many clients with a broad range of fund distribution support services, such as registration and post-registration services, order gateway and mirroring servicing, distribution networks, holdings and trailer fee management through an integrated package registered under the name of Prime Ta. Moreover, CaCeIS can offer a complete oversight and risk management infrastructure, which includes a fully-fledged UCITS compliant Management Company. In anticipation of the new UCITS IV requirements and expected trends in the fund industry, our offer has been enriched with additional services to Management Companies. We have notably developed a modular offer with regard to the Key Investor Information Document (KIID). We have also enlarged the scope of our existing fund structuring, project management, reporting and risk management modules, taking into account the new challenges introduced by UCITS IV. More particularly, CaCeIS is the partner of choice in UCITS IV (re-) structuring projects, from designing solutions to implementing best-suited operations, in order to allow clients to take full advantage of this new regulation. We are convinced that no one-size-fitsall solution exists and have designed an offer made up of flexible servicing blocks that may be combined in order to perfectly fit with each clients specific situation, needs and objectives. Our Business Development Managers & engineers, Product Managers, legal and Fund Structuring experts remain at your disposal for further information and assistance The Making the most of UCITS IV A flexible approach by Management Company profile guide is available on www.caceis.com.

Number of funds

PrOduCTS ANd SErvICES

No. 25 - March 2011 - caceis news

Closer geographical access to asset managers and distributors

Within the context of UCITS IV and the continued development of cross-border distribution, CaCeIS has a structure that is particularly suited to providing support to its international clients.
UCITS IV is expected to increase management companies expectations in terms of consistent fund administration services, regardless of where their funds are domiciled. Managers will therefore probably want to receive the same fund administration services irrespective of the funds country of domicile, as part of the development of cross-border fund distribution. This will also facilitate processes relating to master-feeder structures (having the same valuation rules for a luxembourg master fund and its French feeder fund, for example) and cross-border fund mergers (having the same rules so as to ensure equal treatment of unitholders). a eUropean FUnd administration platForm CaCeIS meets these requirements through its european fund administration platform, which offers management companies a single point of entry for a global view of the activity managed together with consistent services, control mechanisms and reporting, wherever the funds are domiciled. This model relies on centralised receipt of transactions and a single central price database as well as harmonised pricing policy, business processes and reporting. also, to support clients in their sales development and global organisation, CaCeIS favours local contact with both managers and distributors through its european, asian and US offices. This approach allows management companies and promoters to circumvent time differences and overcome cultural differences and language barriers. For example, our Hong Kong branch is the point of contact for managers and distributors based in asia. earliest possible processing oF inFormation CaCeIS also uses its presence in asia, europe and the USa to exploit the differences between time zones by processing
Iceland

information as soon as possible and providing its clients with the best possible service. So, when our european offices are closed at night, our Hong Kong office performs certain tasks (such as obtaining and monitoring transactions, obtaining, selecting and monitoring prices, and drafting a golden copy of the data), which will be used for calculating net asset values in europe the following morning. This setup aims to cut the time between the collection cut-off time and the scheduled time for publication of net asset values, in order to assist CaCeIS clients in their business in asia. We are thus able to supply net asset values as soon as possible (during opening hours in asia) and to fulfil the requirements of certain distribution platforms in asia. lastly, it reduces operational risks. prime ta, sUpport at all stages oF cross-border distribUtion With the development of cross-border distribution, asset management companies are confronted with new requirements: Regulatory and tax requirements to be complied with in the different countries of distribution; Identification of distributors and consolidation of assets under management on an international scale; More complex management of distribution networks and trailer fee calculation. CaCeISs cross-border fund distribution support offering, packaged under the Prime Ta brand, fulfils these requirements. This service also helps asset management companies to overcome obstacles such as administrative and operational problems. For CaCeIS, this offering constitutes a key development designed to help its clients to grow their businesses in europe, latin america, the Middle east and, of course, asia
nathalie collot, Product manager

philippe lebeau, head of inveStor relationS at comgeSt, SpeaKer at caceiSS breaKfaSt Seminar

Philippe Lebeau, head of Investor relations, Comgest, speaker at CACEISs breakfast seminar of March 22nd, 2011 New challenges and opportunities for cross-border fund distribution. he highlighted the new challenges and opportunities for the asset management companies in the context of the cross-border distribution and the regulatory changes: uCITS Iv but also the advent of MiFId II and particularly the bonuses structure. comgest is enlarging its international coverage, philippe lebeau, and the ucitS iv directive renders it possible to head of Investor relations, carry out cross-border fund mergers. does this COMGEST possibility interest you? In early February 2011, Comgest opened an office in Singapore, which will be the Groups fifth asset management company after Paris, hong Kong, dublin and Tokyo. Company research is performed in Paris and Asia, with dublin implementing the different management strategies via an umbrella fund. We currently market three progressively-built fund ranges: French, Luxembourgish and Irish. The uCITS Iv directive makes cross-border fund mergers possible. Three years ago, this possibility seemed attractive to us but in view of the Madoff case, institutional investors appreciate the regulatory aspects of French funds, notably those governing custodians responsibilities. Another change is the support provided by players such as CACEIS in enabling orders to be easily tracked, thereby compensating for the lack of register keeping in France, previously the main obstacle to crossborder distribution. The third reason for which we find cross-border mergers less attractive is the protectionist tax legislation in certain jurisdictions. In practice, COMGEST is considering only one possibility of a cross-border merger, out of a range of 20 funds. Nonetheless, we may review our position if the MiFId directive prevents us from providing information on our five-year track record. the Key investor information document (Kiid) is replacing the simplified prospectus on July 1st, 2011. how will comgest be managing this change? In theory, there is a one-year time limit for existing funds to become compliant. however, if we take the case of Germany where this measure applies immediately for German funds, any foreign funds that do not publish their KIId by July 1st, 2011, will suffer the effects of a distortion of competition. COMGEST has therefore decided to start working on this large-scale project in advance in order to be ready on July 1st, 2011. This involves a lot of work and therefore requires the support of a partner such as CACEIS although we are relatively in favour of this clear and synthetic 2-page document. One wonders though if the risk assessment scale based solely on historical volatility will be sufficiently clear for investors. This calculation method may cause some fairly different equity funds to be classed in the same risk category. For example, emerging markets sometimes demonstrate volatility that is comparable to if not lower than that of developed countries despite the fact that they are more risky in structural terms

Belgium France Germany Ireland Luxembourg Netherlands Switzerland

FUND ADMINISTRATION PLATFORM - CACEIS

CLIENTS

ABOUT COmgesT Founded in 1985, Comgest is an independent, international asset management group with assets under management of over 16bn. In 2010, inflows reached 2.6bn of which 1.7bn is in French domiciled funds ranking Comgest fourth in recognition of its competitive offering. Even if France is growing, Comgest has opened a new office in Singapore to develop international distribution. CACEIS has been providing cross-border fund distribution support services to Comgest for the past two years.

orDerS rePorTING NAV FAST DATA FAST NAV FAST REPORT FAST AUDIT

caceis news - No. 25 - March 2011

PrOduCTS ANd SErvICES

What are the main challenges of the directive?
Pillar 1 Quantitative requirements Pillar 2 Qualitative requirements Pillar 3 Reportinq to supervisors and market information

An offer in response to Solvency II requirements

With its Solvency II offer, CaCeIS is adapting to the needs of institutional investors, helping them to optimise their regulatory capital burden and risk analysis.

Enjeux transverses Transverse issues

Assess gaps between current management practices risk and capital allocation and the requirements of Solvency II To implement Solvency II in a coordinated manner within a given time and in a non-stabilized regulatory universe Construct a device risk management consistent and appropriate to the size of the company (proportionality principle) Ensure consistency of the inputs and outputs

n January 1st, 2013, the prudential regime defined under Solvency II will apply to insurance companies, mutual insurance companies and provident institutions in europe. The aim of the directive is to develop internal organisation and assessment models to manage risks and guarantee solvency. In preparation for its implementation, the companies concerned took part in the fifth and last Quantitative Impact Study (QIS 5) on equity capital requirements. The results have just been published in March 2011 by the new european Insurance and Occupational Pensions authority (eIOPa) created on January 1st, 2011. The european Commission will define the parameters of the standard formula for calculating equity capital requirements on the basis of these results. These measures will be submitted to the european Parliament in June 2011. maJor regUlatory change Prudential insurance regulations are undergoing major changes due to the new su-

pervisory requirements, based on financial assessment of all the risks involved. The directive is based on three pillars. The first sets out the quantitative financial requirements. each european insurance company is now required to respect regulatory capital requirements, determined according to a 99.5% confidence level for one year. Solvency Capital Required (SCR) and Minimum Capital Required (MCR) are calculated according to a standard formula or a full or partial internal model, which has to be approved by the supervisory authority. The directive provides for the use of the fair value assessment of all balance sheet items. In the second pillar, qualitative measures are introduced, making the setting up of a risk management body compulsory. The third pillar states the obligations in terms of the information that needs to be provided to the supervisory authorities and the public for better transparency. an oFFering that stands oUt dUe to the qUality oF data Very early on, CaCeIS assessed the full extent of the issues facing institutional investors as a result of the regulatory reform. In 2010, the group carried out a market survey involving some 15 clients, enabling three service levels (adapted to their different profiles) to be rolled out to help them meet the Solvency II requirements: Provision of the financial and accounting data necessary for insurers, notably fully transparent inventories and parts of the Quantitative Reporting Template (QRT). Clients benefit from the expertise of the leading european fund administrator in the area of valuation, as well as the quality and size of its database of financial instruments. Quality

Issues of du pilier 11 Enjeux the pillar

Develop models and tools for the required calculations Put in place the tools of allocation of capital in sync with the requirements in terms of risk management Understand the high sensitivity factors for the results of the calculations of SCR Contribute to the calculations of risk appetite and ORSA

Issues of the pillar 2

Rethink the management of risks in terms of the key features (risk, actuarial science/finance, compliance, audit) Rely on a strong governance Put in place the ORSA Be able to capture the effects of diversification of risk Extend the depth of control Develop a risk management strategy (up to the notion of risk appetite)

Issues of the pillar 3

Understand reporting requirements, and appeal to the appropriate contributors Develop the process and systems required to produce reporting both internal as external: implement and automate reporting Develop and maintain a management system of the data to produce the reporting according to the calendar imposed by the regulator

of data the major challenge of the directive must be permanently guaranteed. To meet this objective, CaCeIS relies on its internal governance procedures focused on accuracy, exhaustiveness and relevance. Its expertise in this area is recognised (ISO 9001 and SaS 70 certifications). The considerable size of its database as well as its capacity to integrate multisource inventories (namely, from other service providers) and transmit fully transparent data are the main functional and technical qualities of its Solvency II offering. Calculation of sub-aggregates for market SCR and counterparty SCR: teams with experience in calculating risk indicators (VaR,

stress testing) will produce customised reports for clients. A global outsourcing solution, which includes transfer of data, SCR calculation and Solvency II (pillar 3) reporting. This service is subject to the receipt of liabilities data. This new offering has been developed by experts who have knowledge of the markets, acquired via numerous institutional clients, and technical experience of regulatory reporting such as that required under Basel II. They will provide clients with tailored procedures enabling them to better manage risk and comply with the directive

muriel attia, Product manager

intervieW With abdallah el malaKi, aSSociate partner,cSc

Agenda
15/03/2011 Publication of the final QIS 5 report by the EIOPA 19/05/2011 ACP conference regarding QIS 5 results for the French market June 2011 EC proposal for level 2 measures 31/12/2011 EIOPA drafts binding technical standards 01/01/2013 Implementation

What do companies faced with the new Solvency ii prudential regulations require? Compliance with regulations and more efficient risk management are the main issues facing insurance companies and mutual insurance companies. In order to meet these objectives, they require information on the market risks borne by their assets. All of these clients therefore seek accurate, good-quality investment data from their service providers. On top of this, and depending on their individual profiles, companies also have requirements in terms of fair value and market risk indicator calculations (var, stress testing). In addition to these technical and functional qualities, clients want more in-depth reporting on their assets in order to precisely understand and assess the risks involved for assets comprising underlying or hybrid instruments. What are the various solutions available? Solutions must be adapted to individual client profiles. For large entities, provision of the data required to produce regulatory reports should suffice as they have already developed internal equity capital calculation models. Certain clients ask their principal service provider to amalgamate financial information received from various asset holders. Smaller players are also interested in this service. These clients may also request information for

SCr (Solvency Capital required) calculation or a global outsourced Solvency II solution, which presupposes that information on liabilities is transmitted. In this case, CACEIS can contribute to compiling the regulatory reports. What are the major advantages of the caceiS offering? In response to the considerable need for good-quality, sound data for clients, CACEIS, as leading European fund administrator, is able to offer a considerably large database. An industrial process, certified SAS 70 and ISO 9001, guarantees that secure, consistent reports are produced. This economic model, based on sharing and experience in customised reporting (Basel II in particular), var calculation, stress testing, and in-depth reporting, means that CACEISs clients do not have to make any significant investments

PrOduCTS ANd SErvICES

No. 25 - March 2011 - caceis news

Local expertise combined with global sales coverage

Our sales managers talk about their ongoing commitment to client satisfaction and the quality of CaCeISs international offering.
company specialising in european debt, selected CaCeIS as custodian and depositary for its securitised funds Te FaRe and TSS2, as it appreciated the fact that CaCeIS understands its original approach in terms of investments and positioning. Patrick Lemuet Union Bancaire Prive (UBP), a major Swiss asset management bank, decided to place its luxembourg (E7bn) and French (E550m) funds with CaCeIS last October. UBPs medium-term objective is to develop a partnership with CaCeIS throughout Continental europe. During the RFP process in which more than ten candidates competed UBP concentrated on five essential qualities: flexibility, reactivity, global coverage, technology, and team expertise. We believe that CaCeIS particularly stood out with regard to the last point, team expertise. More than twenty people were involved in this RFP, right from the start, meeting their potential future client regularly and demonstrating the availability and expertise that finally convinced UBP to work with CaCeIS. France Colas another example: CaCeIS Fastnet Suisse recently signed a contract with private bank edmond de Rothschild, which entrusted it with the management of its property SICaV (CHF200m). CaCeIS stood out from its german competitors for the quality of its property fund management expertise and the flexibility of its model, easily adaptable to the specific characteristics of each client. This commercial success, a benchmark for all private banks in Switzerland and across the world, paves the way to a bright future for CaCeIS. Philippe Bens

intervieW
bruno de pampelonne, ceo of tikehau investment management
Bruno de Pampelonne started his career at Credit lyonnais in 1983 in the US. In 1985, he joined goldman Sachs International Corp in london, where he was an executive Director at the Proprietary european trading desk in the mid 80s. He then joined Crdit Suisse First Boston in order to start their Paris operation, of which he became Managing Director in charge of equity and Debt sales and trading from 1990 to 1993. In april 1993, he joined Merrill lynch Finance in Paris as Managing Director in charge of the fixed income activity. He was also Country Head for the group in France since 2003. He is also President of eDHeC alumni, member of eDHeCs Board of Directors, and member of the International advisory Board of the eDHeC Risk Institute. Can you tell us a little bit about Tikehau Investment Management (TIM)? We created Tikehau Investment Management (TIM) in 2007 with the aim of specialising in european debt in all its forms (bonds, bank loans, receivables, structured products) at a time when other independent management companies were mainly focused on equity management. Today, TIM manages assets of 400 million for a diversified client base located in France and in europe. You manage securitised debt funds: what strategy do you use for this type of product? For us, this is an active management instrument with excellent potential. Securitised debt funds complement our area of expertise. In March 2009, we became the first general management company to receive aMF approval to manage this type of product. nonetheless, we do not use securitised debt funds as true securitisation instruments. Our aim is to trade in the bank loan segment (bank loans to businesses) and this vehicle allows us to invest in these markets without being a credit institution. Such investments are only possible via securitised debt funds. Why do securitised debt funds attract both issuers and investors? For banks, they are an alternative source of financing in a context of increasingly strict equity requirements under Basel III. For investors, this asset class often provides a more attractive risk profile than bonds, notably when interest rates rise, since loans are generally granted at variable rates. Securitised debt funds provide access to assets that are not always easily available to the traditional investor. Moreover, TIM provides asset-by-asset analysis. Why did you choose CACEIS? We like their open-mindedness and creativity, and the resourcefulness of their teams. Our contacts there are always prepared to consider the possibility of developing services that correspond precisely to our requirements

patricK lemuet, Head of Regional Coverage, France

france colaS, Head of Regional Coverage, Benelux and Nordic Countries

he aPICIl group, one of Frances leading providers of supplementary insurance and pension plans, recently selected CaCeIS as custodian for its dedicated funds. This client therefore recognises both the quality of our responses to its RFP and that of our custodian services that it already uses. another example of the rewarding partnerships we build with our clients is groupama asset Management, which has appointed CaCeIS Bank luxembourg as custodian bank, central administration and transfer agent for its new luxembourg umbrella SICaV g Fund. Our clients thereby testify to the relevance of our flexible product offering in all markets. Our combined understanding of financial industry developments and our clients strategies makes us very familiar with their needs. as an example, Tikehau Investment Management (TIM), an independent asset management

philippe benS, Head of Regional Coverage, Switzerland

PRIME TA

PRIME Mo

Enhance your cross-border distribution capabilities

Through our strategically located offices in Luxembourg, Ireland, hong Kong and North America, we deliver comprehensive cross-border distribution support via our Prime TA service. From planning and launch to monitoring and expansion, CACEIS is there to support your business worldwide. CACEIS, your comprehensive securities servicing partner.

Is it time to outsource your middle-office?

If you want to focus on investment management, avoid the uncertainty of variable costs and raise your operational efficiency, then you should consider an outsourcing solution. CACEISs comprehensive Prime MO service can help you achieve these goals, and give your business a significant competitive advantage. CACEIS, your comprehensive securities servicing partner.

Find out how your funds can benefit from our global asset servicing www.caceis.com

Find out how your funds can benefit from our global asset servicing www.caceis.com

caceis news - No. 25 - March 2011

rEGuLATION

What impact will the Dodd-Frank and FATCA reforms have on European asset management companies?
In 2011, the european fund industry will be impacted not only by numerous european regulatory changes (aIFM, UCITS IV, eMIR, etc.), but also, with effect from July 2011, by the Dodd-Frank and FaTCa US reforms which could have a significant impact on management companies having direct or indirect business relations with the United States.
(SeC) compulsory registration rules. as a result, certain investment advisors (including asset management companies), which are currently registration exempted, will be required to register with the SeC in order to continue to do business in the United States. It could thus make registration compulsory for all companies that have more than $25 million of assets under management attributable to US investors, or whose clients include more than 15 US investors, or that have any US-based operations. This constraint is likely to apply to both direct and delegated mandates of asset management companies. One of the major changes introduced by the act concerns the status of UCIs, which are currently considered as single investors. However, in the future, for reasons of transparency, it will be necessary to identify the number of US investors in all funds considered as Private Funds. as a result, numerous asset management companies which are currently registration exempted could be required to register with the SeC. SeC registration entails in particular an obligation to comply with specific governance rules, the mandatory appointment of a Compliance Officer and the right for the SeC to carry out on-site inspections. Such inspections could contravene european rules, notably social legislation provisions. Volcker rule This regulation consists of various parts, one of which concerns in particular asset management companies of Hedge Funds and Private equity Funds, which are affiliated with entities carrying on banking business in the United States. In extreme cases, such entities could be prevented from carrying on all or part of their US-related Hedge Fund or Private equity management activities. Implementation rules to be issued by the SeC should provide the necessary clarifications as to the exact scope of available exemptions. Similarly, asset management companies that are affiliated with US banks would be prevented from engaging in repurchase agreements or security lending transactions on behalf of client accounts managed by them with other entities of their group. OTC derivatives The reform concerns OTC derivative transactions which are either concluded with a US counterparty or which are traded on US exchanges and cleared in the United States. In practice, the reform requires such contracts to be cleared through a clearing house and makes it compulsory for them to be collateralised and reported to central trade repositories. These rules converge with the provisions of the european eMIR directive, which is currently under discussion and which is intended to make OTC derivative transactions more reliable. as the reform is currently worded, the scope of application is still uncertain: the status of eligible US counterparties, the type of instruments concerned, the eligibility criteria of clearing houses and where the reporting responsibility lies are just some of the many points on which we are still waiting for SeC clarification. However, it seems increasingly doubtful that the announced implementation schedule will be respected, in particular because of the absence of rules of cooperation with the european Union. Fatca - JanUary 2013 FaTCa (Foreign account Tax Compliance act) refers to the new generation of US Qualified Intermediary (QI) regulations. These regulations are intended to combat tax evasion by US tax-payers. They require Foreign Financial Intermediaries (FFIs) to identify their US accounts in accordance with new standards and impose specific reporting obligations vis--vis the US tax authorities (IRS). The regulations include numerous toughening measures, in particular: The extension of the scope of US-source income which must be reported; The application of transparency to investment funds: to date investment funds have generally been considered as the end beneficiary of income paid to them; however, the new rules will make it compulsory for them to identify accounts by underlying investor. Furthermore, investment funds will also become FFIs, directly responsible for disclosing financial information on their investors to the IRS. In the event of failure to comply with these obligations, US-source income will be subject to a 30% withholding tax. It is difficult to assess the exact impact of these reforms until the relevant implementing measures have been unveiled by the SeC (DoddFrank) and the IRS (FaTCa). French and european authorities are currently doing lobbying in order to ensure the proportionality of the effects of these reforms and the operability of the new rules. For Dodd-Frank in particular, discussions are ongoing in order to obtain agreement from the SeC on the exclusion of UCITS from the scope of Private Funds, on the grounds that the distribution methods of UCITS do generally not enable them to control the status of investors effectively. However, we fear that any clarifying measures will be adopted at the last minute. The FaTCa includes a transitional period up to 2012 to enable the various parties concerned to comply with the rules. although, given the scope of the reform, it is advisable to start making the necessary preparations now, insofar as possible. To that end, CaCeISs teams are currently endeavouring to anticipate the consequences of these reforms, by participating in local working groups and lobbying actions. Moreover, they are readily available to provide guidance to clients in this area

Sandrine leclercq Group General Counsel

the dodd-Frank act The Dodd-Frank act has been enacted in response to the objectives determined at the g20 in 2008. Its aim in particular is to put in place the necessary means to monitor systemic risk more closely, limit conflicts of interest in the financial sector and make markets more transparent. Three pillars of the act are likely to have an impact on the fund industry: Investment Advisor Act With effect from July 2011 the act changes the Securities and exchange Commission

Regulation Timeline
uCITS IV MiFID II uCITS V

MAY
MARCH 2011 APRIl 2011 MAY 2011 junE 2011

01/07/2011 junE

julY
julY 2011

APRIl

uCITS IV

SolVEnCY II

EvENTS

No. 25 - March 2011 - caceis news

New challenges and opportunities for cross-border fund distribution

CACEIS at the International Transfer Agency Summit (ITAS) in Luxembourg

The 10th edition of the ITaS luxembourg took place on February 16-17, 2011, at the abbaye de neumunster in luxembourg. This Conference allows asset management companies, distributors and banks to exchange ideas on the challenges of cross-border fund distribution.
ore than 220 people attended this event to reflect on strategic and technical issues from regulatory changes, new post-trade infrastructures and the development of the distribution of funds beyond the borders of europe. Yveline Herfeld, Head of Business assistance, CaCeIS, participated in the panel T2S - how should the funds industry react to latest developments? The objective was to present the opportunities offered by T2S for the settlement of the shares in UCITS and exchanges of views on the contribution of the implementation of the lUXCSD in luxembourg. The participants raised various points currently under discussion in working groups (alFI, eFaMa), relayed to the european Central Bank, including on costs, the transparency of information and the treatment of distribution restrictions in some countries. Laurent Majchrzak, global Head of Distribution Services, CaCeIS, in his presentation entitled Inside global Transfer agency: Just how big is the Ta business & exploring different business models, described the different expectations of asset management companies and distributors, according to their profiles and to their transfer agent. all of the customers require an effective processing of subscription/redemption of UCITS and reporting consolidated levels of distribution at a competitive cost. In recent years, they are demanding new services to foster growth and facilitate the international distribution of the funds for them. To meet these needs, CaCeIS thanks to its locations in asia, europe and america offers local expertise and provides registration, post-registration and distribution support

M
Breakfast seminar on March, 22nd, 2011, organised by CaCeIS at the Bristol hotel, Paris
Introduction Jean-Pierre Michalowski, Deputy CEO, CACEIS Between UCITS IV and MiFID II, an asset manager view Philippe Lebeau, Head of Investor Relations, COMGEST CACEISs solutions to support your development Laurent Majchrzak, Global Head of Distribution Services, CACEIS and Nathalie Collot, Product Manager, CACEIS

CONFErENCES Q2 2011
28 March -1 April Fund Forum Asia Hong Kong Sandrine Leclercq, general Counsel, CaCeIS UCITS IV and AIFM rethinking your functional set up to improve efficiency 5 - 6 April BAI Alternative Investor Conference Frankfurt Heike Findeisen, Business Development Director, CaCeIS : Private Equity investments for institutional investors, facts, experience and outlook 11 - 13 May Skybridge Alternative Conference Las Vegas 12 May AFTI Paris Eric Derobert, Head of Public affairs, CaCeIS OPCVM 23 May Effiziente Fonds Services Wiesbaden Heike Findeisen, Business Development Director, CaCeIS : Best Practice in Fund Operations and administration : Rethinking your functional set-up to improve efficiency in the framework of UCITS IV & AIFM 21 - 23 June Global Alternative Investment Management Monaco Barry McGloin, Business Development Manager, CaCeIS The Newcits decision tree and trading strategies 28 - 30 June Fund Forum International Monaco Franois Marion, CeO, CaCeIS : Plenary session on June, 28th How to facilitate distribution model in the current fragmented regulatory environment. Strengths, weaknesses, opportunities & threats of different scenarios: New thinking in creating competitive advantage in distribution

IN ThE PrESS
January 2011 Portfolio Platform Custody & administration - Welche auswirkung werden die neuen Regularien haben ? Holger Sepp, Co-Head CaCeIS, germany January 2011 HFMweek neWCITS uncovered Barry McGloin, Business Development Manager, CaCeIS January 2011 Funds Europe alternative Investment in luxembourg Pierre Cimino, Responsible for CaCeIS entities in luxembourg and affiliates, and in north america luxembourg asset Servicing roundtable Barry McGloin, Business Development Manager, CaCeIS February 2011 Funds Europe eDHeC / CaCeIS research chair Jean-Marc Eyssautier, Chief Risk and Compliance Officer, CaCeIS

... and climbing.

A global player in asset servicing...

Offering leading value in investor services demands constant evolution. At CACEIS, our strategy of sustained growth is helping customers meet competitive challenges on a global scale. Find out how our highly adapted investor services can keep you a leap ahead. CACEIS, your comprehensive asset servicing partner.
www.munier-bbn.com

Custody-Depositary/Trustee Fund Administration Corporate Trust S&P AA- rating

www.caceis.com

publishing director: Rgine Besnier-Docet - editor: Philippe naud + 33 1 57 78 10 68 philippe.naude@caceis.com - design: Sylvie Revest, CaCeIS photos credit: Yves Maisonneuve, Yves Collinet, CaCeIS; Dominique amphonesinh - printer: gRaPHIMPRIM certified Imprimvert. This document is printed on Cyclus paper, 100% recycled fiber, certified Blaue engel, nordic ecolabel and ecolabel europen - number iSSn: 1952-6695 For further information on our products and services, please contact your Business Development Manager/This newsletter has been produced by CaCeIS. CaCeIS cannot be held responsible for any inaccuracies or errors of interpretation, which this document may contain. www.caceis.com

caceis news - No. 25 - March 2011

INduSTry OvErvIEW
europe
Source : EFAMA - February 2011

Worldwide Source : EFAMA - January 2011

Worldwide Investment Fund Assets ( trillion)
Investment fund assets worldwide stood at 17.36 trillion at the end September 2010, slightly lower than the 17.5 trillion recorded at end June 2010. However, in U.S. dollar terms, worldwide investment fund assets increased 10.5 percent during the quarter. The appreciation of the euro vis--vis the U.S. dollar explains this result.
17.76 17.47 17.36 15.93 16.96

country focus - france

Luxembourg focus in the next caceis news

Net assets of the European industry

The combined assets of the investment fund market in Europe, i.e. the market for UCITS and non-UCITS, grew by 3.9 percent in the fourth quarter to reach 8,025 billion at end December 2010. Between end 2009 and end 2010, the asset growth reached 13.7 percent With 5,990 billion invested in UCITS, this segment of the business accounted for almost 75 percent of the fund market at end December 2010.

Total assets under management (AuM) in France ( billion)

AuM in France recovered its pre-crisis level Total assets under management (AuM) in investment funds and discretionary mandates rose by 1.7% in 2010. Discretionary mandates are continuing to grow by 6%, whereas French-domiciled funds (-2.6%) were affected by a drop in AuM in money market funds which suffered from very low short-term interest rates.

French funds Mandates (incl. foreign fund)

2,566 2,655
+3.5% +13% +16% 1,242

+13.2% 2,362 2,267 1,452 1,470 -11% 1,380 1,339

+10.8% +1.7%

2,617 2,656

1,999 1,725

1,247

15.69 15.63 15.14

13.59 13.65 14.39

15.28

1,242 +12% +4% 1,017 +22% 830 863 813 +25% +59% 573
485 328 444 538 566 585 704

1,076 1,532 +13% 1,396 1,447 +6% 977 862 1,025 1,237 1,114 1,185 1,115 1,318

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009

Q1 Q2 Q3 2010

Split by region of distribution - Q3 2010

Brasil 5.4% Australia 5.2% USA 47.5% Europe 30.9% Other 3.0%

China 1.3%

Canada 2.8%

Japan 3.8%

Asset Type Split - Q3 2010

Equity Money Market Bond Balanced Other 14% 5% 18% 23% 40%

Country Austria Belgium Bulgaria Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Liechtenstein Luxembourg Netherlands Norway Poland Portugal Romania Slovaquia Slovenia Spain Sweden Switzerland Turkey United Kingdom Total UCITS Non-UCITS

billion 148 94 2 5 135 61 1,402 1,126 9 13 963 232 31 2,199 78 63 29 26 3 4 2 170 166 253 18 794 8,025 5,990 2,035

Share 1.8% 1.2% 0.0% 0.1% 1.7% 0,8% 17,5% 14.0% 0.1% 0.2% 12.0% 2.9% 0.4% 27.4% 1.0% 0.8% 0.4% 0.3% 0.0% 0.0% 0.0% 2.1% 2.1% 3.2% 0.2% 9.9% 100.0% 74.6% 25.4%

923 670 748

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source : Autorit des Marchs Financiers (AMF)/Association Franaise de Gestion financire (AFG) - January 2011

AuM by fund category AuM trillion

31/12/09 31/12/10

Variation 2010
bn

% 9.3% 1.6% -6.0% -8.0% 12.6% -18.0% 5.6% -2.6%

Equity Balanced Funds of Hedge Funds Structured Funds Bonds Money Market Others ToTAl
Source : AMF and estimates AFG

255.5 256.3 16.6 67.2 176.5 481.2 121.7

279.2 260.3 15.6 61.8 198.8 394.5 128.5 1338.7

23,7 4,0 -1,0 -5,4 22,3 -86,7 6,8 -36,3

AuM by fund category The positive trend in the net assets of bond- and equityoriented funds (equity funds, balanced funds and others), was offset by the drop in AuM for money market funds (down 86.7 billion). Low short-term interest rates and banks substantial liquidity requirements prompted a shift towards either bank deposits or other fund categories, such as bond funds and, to a lesser extent, balanced funds.

Fund Management Industry in Europe

France remains the leading European financial management centre for investment funds. In terms of financial management centres, i.e. where the financial management of investment funds is actually performed, France remains the leader with a 20.6% market share, followed by Germany (19.4%) and the UK (16.9%).

France 20.6% Ireland 0.5% Luxembourg 0.4% Netherlands 1.6% Spain 2.3% Belgium 2.7% Italy 5.5% Switzerland United 7.3% States11.9% Germany 19.4%

Worldwide trends in assets by investment type ( trillion)

Net inflows to long-term funds (all funds excluding money market funds) increased to 190 billion in the third quarter, slightly up compared to the 180 billion of inflows recorded in the previous quarter. Net outflows from money market funds reduced drastically from 194 billion in the second quarter to 34 billion in the third quarter.
Equity Money Market Bonds
8 7 6 5

United Kingdom 16.9% Other 10.9%

European trends in assets by UCITS type ( billion)

Total net assets of UCITS rose by 3.8 percent in the fourth quarter to reach 5,990 billion at end December 2010. Net assets of equity funds rose by 10.4 percent (180 billion) and balanced funds increased by 3.2 percent (28 billion) during the quarter. However, net assets of bond funds slightly decreased in the fourth quarter falling 0.8 percent (10 billion). Money market funds experienced a decline in net assets of 45 billion or 5.2 percent.
Equity Money market Bond

Source : AFG

Fund domicilation: market share trends in Europe

27% 18.2% 14.3% 11.5% 9.6% 3.1%
Fra nce Ge rm any Ire lan Un d ite dK ing do m rg ly Ita ou
In terms of fund domiciliation, France ranks second in Europe, behind Luxembourg, which specialises in fund domiciliation and administration. Ireland is continuing to gain market share. These two centres now account for 40% of all funds domiciled in Europe, indexes 24% 10 years ago.

Balanced Other (incl.FoF)

2,400 2,000

2.3%
Spa in

4 3 2 1 0 Q2 Q3 2009 Q4 Q1 Q2 2010 Q3
1,600 1,200 800 400 0

Balanced Other (incl.FoF)

Source : AFG/EFAMA/ICI

Net Sales of Investment Funds ( billion)

Total inflows into investment funds amounted to 156 billion during the third quarter of 2010, the highest level recorded since the first quarter of 2008. Reduced net withdrawals from money market funds and continued large inflows into bond funds were the driving factors behind these inflows.
156 84 46

Q1

Q2 2009

Q3

Q4

Q1

Q2 2010

Q3

Q4

Growing number of asset management companies (units)

80 600 500 400 300 200 100 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0

Lux em b

Net Sales of UCITS ( billion)

220

70 60 50

70
73 82

74 1 -19

85 26

40 30 20

22
-14
Q2 2010 Q3

30

new firms still being created The number of asset management companies continued to grow in 2010. A total of 44 new firms were formed, for a net increase of 25. Regulators are currently examining around 20 additional licence applications.

-40
Q1 Q2 Q3 2009 Q4 Q1

Q1
-200

Q2

Q3 2009

Q4

Q1

Q2

2010

Q3

Q4

Number of companies Number of new companies

Source : AMF