M A N A G E D A C C O U N T P L AT F O R M S 2 0 1 4 - 2 0 1 5 SOLUTION-DRIVEN APPROACH PHILIPPE DE BEAUPUY, HEAD OF MANAGED ACCOUNT PLATFORM UK AT LYXOR, SPEAKS TO HFMWEEK ABOUT THE UNIQUE WAYS LYXOR IS USING ITS EXPERIENCE IN MANAGED ACCOUNTS TO BRING INNOVATIVE SOLUTIONS TO INVESTORS Philippe de Beaupuy has been head of managed account platform UK at Lyxor Asset Management since 2013. He joined Lyxor in November 2006 as a senior hedge fund analyst with a focus on long/short equity strategies, and was promoted to deputy head of hedge fund relationship in 2011. 1 2 H F M W E E K . CO M HFMWEEK (HFM): What is the background of managed accounts and how have you seen the industry develop? Philippe de Beaupuy (PB): Since the 2008 financial crisis the managed account landscape has changed dramatically. In essence, before the crisis it was fairly homogeneous. Most of the actors in the space were roughly doing the same thing, providing liquid access to hedge funds. If I had to name one positive aspect of the crisis it is that it has brought to light the benefits of managed accounts to a wide range of investors. Over the last years, the main driver of growth has come from large institutions, namely pension funds, because their needs are broader and more complex as they cannot compromise on risk management or transparency. They require tailor-made solutions. Managed accounts are the ideal solution to address such broad needs. On the other hand, regulators have strengthened the framework in which hedge fund managers can operate onshore. Regulated alternatives such as Ucits or ’40 Act have allowed both the return of private banks and opened the way to new investors in liquid alternatives. The main consequence of these somewhat barbell trends is that the competitive landscape has become more FOR US IT ALL STARTS WITH THE INVESTOR. OUR APPROACH IS TO UNDERSTAND WHAT OUR INVESTORS AIM TO ACHIEVE WHEN INVESTING IN HEDGE FUNDS fragmented, with new entrants focusing exclusively on specific aspects of what managed accounts can offer to investors, whether infrastructure or Ucits for instance. Very few actors can offer fully fledged investment solutions. Very few can claim the breadth of experience and innovation, or the track record of Lyxor. HFM: What is Lyxor’s approach to these new challenges and opportunities? PB: For us it all starts with the investor. Our approach is to understand what our investors aim to achieve when investing in hedge funds. This understanding allows us to make the most of the wide areas of expertise that we have developed over the years, to bring the most adequate solution to our different investors. We look to build investment solutions rather than push products. ” HFM: How important is transparency to your managed account platform? PB: Transparency is at the centre of everything that we do. It starts with understanding what managers do. Assessing the drivers of performance and of alpha generation of hedge fund managers based on the actual positions ASSET MANAGEMENT and trades, both historical and current. It is also at the core of our risk management framework where we agree with managers on detailed investment limits to which they have to abide. Over the 16 years we have been building our expertise in hedge fund strategies, we have had full transparency on more than 350 strategies. This is an amazing source of information at each individual fund level but also on a transversal basis. It helps us constantly improve our understanding of the key drivers of risks and return in the alternative space. This is the knowledge on which we want to leverage to the benefit of our investors. We enhance such transparency in both a quantitative and a qualitative manner. Our goal is to allow investors to make better informed investment decisions. Quantitatively, we have developed a stateof-the-art web portal where investors can have access to detailed risk and performance metrics at regular intervals on the strategies they are invested in. These metrics are obviously accessible at each fund level but also on an aggregated basis at the level of their portfolio. Take the example of a large pension fund looking to increase its exposure to hedge funds. Liquidity might not be the main driver in their decision to adopt the managed account route but segregation of assets, independent valuation, risk management and transparency most definitively will be. More importantly, such detailed transparency in a standardised manner allows them to stop treating their hedge fund allocation as an outlier in their overall allocation process. Qualitatively, investors have access to a team of 15 strong hedge fund specialists organised by strategies, who each have responsibility on a limited number of hedge OVER THE 16 YEARS WE HAVE BEEN BUILDING OUR EXPERTISE IN HEDGE FUND STRATEGIES, WE HAVE HAD FULL TRANSPARENCY ON MORE THAN 350 STRATEGIES ” fund relationships. They know the strategies insideout and understand the positioning of managers at all time. When it comes to the managed account set-up and specifically regarding transparency, we apply the same institutional standards in everything that we do whether we are advising a large pension fund on a dedicated basis or designing Ucits compliant mandates with hedge fund managers. HFM: What trends do you foresee for managed accounts in the future in which Lyxor will be specifically active? PB: I would like to mention two; the first one is the direct continuation of what we have been able to do for institutions in the hedge fund space, by allowing them not to treat their hedge fund exposure as an outlier in their overall allocation process. We are increasingly having discussions of hybrid nature with investors; hybrid in the sense that their thought process is breaking the historical border between alternative and traditional investments. The second trend is linked to the fact that managed accounts are a wonderful tool to negotiate the scope of the mandate with a hedge fund manager. It is obviously true when it comes to fees, cash management, liquidity or SRI requirements for instance. Going forward we are seeing the need from investor to go one step beyond and leverage on Lyxor’s experience to hire managers to help them participate to specific investment opportunities. Dedicated managed accounts to dedicated investment opportunities. The deep understanding we have developed on the industry is a great asset in helping our investors achieve this goal. Q H F M W E E K . C O M 13