News

FCA backs increased cost disclosure for Private Equity and Real Estate Managers

October 3, 2018

Last year, the FCA set up the Institutional Disclosure Working Group (“IDWG”), chaired by academic Dr. Chris Sier, to come up with ways to address a lack of uniformity in the disclosure of fund management charges. The group was formed in response to one of the main findings of the FCA’s asset management market study namely that institutional investors such as pension funds and insurers found it difficult to get the necessary cost information to make effective decisions.

The IDWG was established as a stakeholder working group comprising of a range of experts, including the BVCA, with an independent chair, Dr Chris Sier. Its objective to “gain agreement on (cost) disclosure templates for asset management services provided to institutional investors”. A range of experts were selected and invited to join the IDWG with support from several observers and a secretariat provided by the FCA. Approximately 40 per cent of the group comprised institutional investors and their advisers, 40 per cent asset managers and 20 per cent independent experts with a range of backgrounds.

Over the summer, IDWG published its initial recommendations, which included:

  • The use of five templates (including a private equity fund template) for collecting and disclosing data;
  • The arrangements that need to be in place to ensure the templates are maintained;
  • Proposals on how asset managers can be encouraged to offer information using the templates; and
  • Proposals on how more investors can be encouraged to request information in this format from their managers.

The FCA welcomed the IDWG recommendations “We believe that the group has made significant progress in tackling the issues we found in relation to institutional disclosure as part of the Asset Management Market Study”.

The full report and templates are due to be published in the autumn. As part of its proposals, the IDWG has encouraged the formation of a new body or group to maintain and update the framework to be formed over the summer also with a launch planned for autumn, when the full report will be released. The publication of the new templates was delayed in order to allow the new monitoring group to be established in order to act as a Helpdesk and Information Hub for Firms seeking information on how to incorporate the templates into their processes. Unlike the IDWG, the new group will not be overseen and facilitated by the FCA. The IDWG was chaired by Sier, but it is not yet clear whether he will be invited to sit on or chair the new body, although it is understood there is strong support for him holding a role within it.

The IDWG also recommended ways to encourage adoption of the templates voluntarily including urging investors to pressure managers to use them. “Typically, this would be by non-compliance resulting in de-selection from requests for proposal and the non-renewal of contracts,” the group said, adding that investment consultants and platforms should also take this approach. Members of the UK’s Local Government Pension Scheme (LGPS) already apply this approach, the group said. The schemes existing transparency code has succeeded in encouraging most of the biggest providers to public sector pension funds to report all costs, and the IDWG’s work built on the disclosure templates drawn up by the LGPS. “Industry representative organisations and trade bodies should be prepared to adopt the templates as their disclosure codes and to support the use of the templates by their members,” the group said.

Private equity managers that complete the Institutional Limited Partners Association (“ILPA”) fee template do not need to also complete the IDWG fee template following BVCA representations that its members should not have to complete multiple templates. The ILPA is a voluntary association funded by its members and published its fee template on 29 January 2016. The ILPA has grown its membership to more than 4,500 professionals today across 50+ countries, managing 50% of the global institutional private equity AUM. Members represent all investor categories of small and large institutions including public pensions, corporate pensions, endowments, foundations, family offices, insurance and investment companies, development financial institutions and sovereign wealth funds.

Although the working group stopped short of calling for regulation, it said the FCA should enforce regulations if managers fail to report voluntarily. The FCA responded by stating “We will reconsider the issue of disclosure to institutional investors in the future if we have any reason to be concerned about the effectiveness of how the IDWG recommendations have played out in the market.” The ILPA template published in early 2016 has been adopted partially by a significant number of UK private equity managers but full adoption of the template in its entirety is far from widespread. Therefore, many managers will face a difficult decision in the autumn whether to fully adopt the ILPA template or the new IDWG template in the knowledge that if a significant number of managers choose neither then the FCA could bring in mandatory disclosure requirements in the near future.

If you would like to discuss the practical implications of the IDWG recommendations or to arrange a free Regulatory Outlook consultation, please contact the Augentius Compliance Team here.


SGG GROUP ACQUIRES AUGENTIUS

July 12, 2018

SGG Group, a leading global investor services firm, backed by Astorg Partners, is pleased to announce the acquisition of Augentius, a leading global provider of alternative investment solutions to the Private Equity and Real Estate communities.

This acquisition propels SGG into the 4th leading investor services firm in the world with the deal growing its assets under administration (AuA) to over USD 400 billion.

Augentius offers a complete suite of fund administration, depositary, AIFMD reporting, regulatory compliance, FATCA/CRS and investor solutions to institutional investors across 13 jurisdictions including the US, the Philippines, Cayman, BVI, the UK, Guernsey, Jersey, Luxembourg, Amsterdam, Cyprus, Hong Kong, Singapore and Mauritius. The transaction, which is subject to regulatory approval, is expected to be completed by Q4 2018.

The services offered by Augentius will reinforce and complement SGG’s current funds offering, including a state-of-the-art technological platform and experienced team with the reputation of providing high quality service. Augentius employs over 650 professionals.

SGG has made a number of acquisitions in recent months to extend its lead in the investor services industry through a complete offering across a number of jurisdictions, technologically advanced services and expert teams, and has an ambitious strategy for continued growth. Following the completion of the various acquisitions that the firm has recently announced together with Augentius, SGG will employ over 2350 professionals across 23 jurisdictions.

Serge Krancenblum, SGG Group’s CEO, said,

“This acquisition is in line with SGG’s ongoing commitment to developing our product offering and geographical reach to become the leading global partner for the alternative investment industry. I am very excited by the acquisition of Augentius as it represents a transformational milestone for our business. Upon completion, SGG will have a comprehensive global offering to the alternative investment community. I am certain that there is an excellent cultural alignment between our two firms as both businesses put clients and its people at the core of what they do. Together we will take our combined group to new heights.’

Ian Kelly, CEO and Executive Director of Augentius, commented:

“I believe that this is a hugely exciting opportunity as this deal will bring a wealth of new opportunities for our newly combined businesses, everyone within it and especially for our clients. SGG Group is  one of the main consolidators of the industry and we are pleased to join forces with a global investor services firm which has the ambition to build a sustainable firm for this generation and the next.’’

About SGG

SGG Group is a leading global investor services firm providing a comprehensive range of compliance, administration, asset and advisory services to alternative investment funds, international companies, international families and entrepreneurs.

SGG has over 300 funds with Assets under Administration exceeding USD 250bn.

SGG Group is among the most flexible providers in the sector and our entrepreneurial spirit drives us to find the best solutions for our clients.

We help our clients realise their ambitions as they seek to keep pace with a changing environment. SGG Group attracts and retains the most experienced experts and invests in the industry’s leading technology platforms to deliver the highest quality service to our clients.

For more information on SGG Group, please visit: www.sgggroup.com


Half of private equity and real estate fund managers not satisfied with cybersecurity arrangements

July 4, 2018

Over half of private equity and real estate fund managers are less than satisfied with their firm’s current level of cybersecurity arrangements, according to a new survey carried out by fund administrator Augentius.

Some 54 per cent of managers also identified cybersecurity as one of their top two priorities for technology investment this year, with the other leading priority being data management and cloud.

The survey, which polled the views of firms across the globe, shows the extent to which managers prioritise investing in their businesses’ technology, in a sector that was once regarded as relatively low-tech.

Ian Kelly, Group CEO of Augentius, commented: “It’s fair to say the old stereotype of the industry lagging behind when it comes to seeing the importance of technology is now firmly outdated. The results underline how attitudes have shifted.”

“There are positive signs that regulator warnings about the rising threat of cybercrime are getting through to the industry and having the desired effect on investment in this area. However, with half of the industry less than satisfied with their arrangements there is clearly still some road left to travel – regulators have been clear that there isn’t any room for half-measures on this front.”

Looking over a longer timeframe, the research also asked managers which areas of innovation they felt were most likely to transform the way they do business. Data management and cloud services emerged as the most popular answers. Interestingly, while not a spending priority at present, over half of the managers highlighted the nascent field of AI and machine learning as an area that could have a large impact on how private equity operates in the coming years.

However, managers also identified what they perceive to be the main barriers standing in the way of technology innovation within the sector, with difficult-to-replace legacy IT systems and an internal lack of technology leadership, talent and skill being the most common concerns.

Kelly says: “While the industry is shifting to embrace technology in culture and attitude, a gap in the necessary expertise presents a challenge. This internal lack of technology leadership and skill is understandably a problem for many smaller firms, given the prohibitive cost of building up in-house expertise from scratch. For many managers, partnering with a trusted third party is the optimal route, so they can focus on the core job at hand.”

Press release originally published in Private Equity Wire