The Standards Board is delighted to welcome new additions to the SBAI family.
- Aviva Singlife Holdings Pte Ltd (Singapore)
- Carnegie Corporation of New York (USA)
- Mingshi Investment Management Limited (China)
SBAI Responds to the SEC Request for Public Input on Climate Disclosures
The SEC released a public consultation on the implementation of climate disclosures
for listed issuers. We view these disclosures as the first important building block in responsible investment regulation which often leads to disclosure requirements for asset managers. As such, we responded to this request for input highlighting the importance of adequate risk disclosure (including climate risk) to investors to enable well informed investment decisions.
In our response
, we highlighted five high level principles that should inform the SEC’s approach to developing regulatory guidance or rules on this topic:
- Consistency with Existing Frameworks: Making use of existing ESG disclosure frameworks.
- Consistency with Global Regulators: Ensuring global consistency in ESG disclosure requirements to avoid market fragmentation.
- Expansion beyond Climate: Consideration of other ESG risk factors and not solely climate.
- Proportionality: Accounting for potentially limited resources of smaller companies that may raise barriers to entry.
- Sequencing and Implementation: We positively note that issuer disclosure is the first step in advance of imposing downstream reporting on managers.
We will continue to work on the broader topic of Responsible Investment through our working groups and events, providing guidance to managers and investors and sharing our insights with the regulatory community. This response follows on from our response earlier this year to the consultation published by the Hong Kong Securities and Futures Commission (SFC) on “Management and Disclosure of Climate-related Risks by Fund Managers
”, which can be found here
Event Summary: SPARK: Seed Deals and GP Stakes – An Investor Perspective
Finding a seed investor and the right seed deal is a challenge for small and emerging managers. At the second in our series of events for the SBAI SPARK Programme for Small and Emerging Managers, leading seed deal allocators provided their insights and advice on what managers can do to stand out, the due diligence process, and the negotiation of seed deals. Key highlights from this discussion are detailed below::
- Standing out from the Crowd: Make sure to do your research on the seed investor. Ensure that any approaches are well researched and targeted. More successful approaches tend to be through a referral from trusted contacts, internal teams and prime brokers amongst others.
- Due Diligence:
- Investment Due Diligence: Typically, there is a lack of audited track records when assessing managers for seed deals. Seeders make use of other sources such as informal P&L attribution, compensation statements, reference checks, and paper portfolios.
- Operational Due Diligence: Whilst all operational questions need to be resolved in advance of launch, seed investors are willing to spend time working with managers to bring operations up to an institutional standard. One key element that should be in place early on is the presence of a strong COO and clear segregation of duties. The Alternative Investment Standards provide a blueprint for developing an institutional platform and emerging managers are encouraged to sign up.
- Negotiations: Over time seed deals have become more likely to be bespoke and have a degree of flexibility in some areas
- Non-Negotiable: Items such as devotion of time by the portfolio manager, personal investment from the investment team, and protective covenants such as transparency and investment guidelines
- Negotiable: Items such as fees, working capital, lock-up periods, and exit strategies.
- Other Advice: Our panellists gave a range of other advice to managers considering seed deals such as ensuring not to give preferential liquidity to seed investors, not hindering the ability to run the business, and being wary of overly aggressive terms.
We would like to thank our panellists Mark de Klerk (Investcorp-Tages), Yan Kvitko (CPP Investments) and Michael Pierog (Blackstone Alternative Asset Management) for their informative insights.
To find out more about this event or the SBAI SPARK Programme for Small and Emerging Managers please contact us at email@example.com.
Standards Corner: Conflicts of Interest in Parallel Funds
Asset managers often run parallel funds or managed accounts for genuine reasons such as ESG requirements, individual investor investment restrictions, or the use of different fund structures for different target investors. These parallel accounts can raise conflicts of interest that need to be carefully managed and mitigated by investment managers. Our Research and Content Director was recently interviewed by Fund Operator Magazine discussing this topic and how the Alternative Investment Standards
and SBAI Toolbox Memo on the topic can help managers put in place a framework for managing these conflicts:
- Standard 2.4 requires the disclosure of any parallel accounts, any adverse material effects these accounts could cause, the aggregate AUM managed within the same strategy, the size of employee investment within the strategy, and the details of any employee only accounts.
- Standard 17i requires that managers put in place a trade allocation and, upon request, disclose this to investors in a confidential manner.
The SBAI Toolbox Memo on Conflicts of Interest in Parallel Funds
sets out a case study of the conflicts of interest that can arise and provides examples of additional measures that managers can take to strengthen their approach to managing and mitigating these conflicts.
The Fund Operator article published in June 2021 discussing this can be found here
- 13 Jul 2021: Does ESG add Alpha? – A Systematic Strategy Perspective
- 19 Jul 2021: Assessing and Evidencing Culture Investor Roundtable
- 8 Sep 2021: APAC Forum
- Oct 2021: London, Annual General Assembly
- 2 Dec 2021: Montreal, Annual Institutional Investor Roundtable
More events will be confirmed in due course.