markets prime finance monthly hedge fund trends...source: hedge fund intelligence (hfi), october...

Em

erg

ing

Mar

kets

Eq

uity

Eq

uity

L/S

Cre

dit

Dis

tres

sed

Eve

nt

Dri

ven

All

Fun

ds

Mac

ro

Fixe

d In

com

e

Mu

lti-S

trat

egy

Mar

ket

Neu

tral

CB

& V

ol A

rb

CTA

/ M

anag

ed F

utu

res

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

75th Median Average 25th MSCI World

For further information on any of the issues discussed in this newsletter, please contact the Markets Prime Finance team: email: [email protected]

October 2012 Executive summary*

Deutsche Bank Research Highlights: “Asset Allocation: Will Q3 earnings mark the inflection point?” and “Global Economic Perspectives: Saving the euro with the ECB’s balance sheet”Our Global Markets Strategy Research team argues that earnings have been bottoming and are set to rise.

In the second piece, our Macro Research team argues that the risk to inflation from the ECB balance sheet expansion is overestimated. While the monetization of government debt will lead to inflation, the threshold is higher than it seems at first glance.

Investor Sentiment In the US, two clear themes emerge from recent conversations with hedge fund allocators. Firstly, downward pressure on fees is continuing, with many endowments and foundations sharing that they would be willing to take longer locks or invest via a hybrid/drawdown structure in exchange for lower fees. Secondly, more investors are seeking smaller, less established managers, with the hopes that they will have superior alpha generation.

We provide detailed investor colour from Germany, Finland, Norway and the Netherlands. The outlook is positive, with allocators sharing that they are actively screening managers, and many are increasing allocations. Further, we continue to see the trend of European pension funds redeeming fund of funds allocations, and beginning to invest directly.

In Asia, we are seeing increased interest for China-only strategies. We have historically seen some reluctance towards investments in these managers, largely due to concerns about the macro outlook.

PerformanceThe median fund finished the month up 0.88%, with emerging markets equity strategies leading the pack (up 2.44% in September). CTAs continue to have a challenging year, with the median fund down 1.04% for the month. CTA is the only strategy in negative territory in the US and Europe this year.

Credit and distressed strategies continue to extend their gains for the year, up 9.04% and 8.23% respectively. The median hedge fund is up 4.15% for the year.

Leverage MSCI World 30 day volatility declined over 21% in September, ending the month at 11.29. There was no change in gross fundamental equity exposure, ending the month at 2.36, although net fundamental equity exposure was up 5.66% ending September at 0.47.

Securities Lending This month we highlight the increased short interest in US homebuilders and European luxury goods retailers. We also discuss the impact of Yen appreciation and anti-Japan sentiment in China, the launch of the iPhone 5, and some noteworthy capital raising and M&A activity from various regions.

Regulatory This month we highlight noteworthy developments in AIFMD, Short Selling Regulation and Certain Aspects of CDS, EMIR, MiFID 2, Market Abuse Directive and Regulation, UCITS, CSD Regulation, the Liikanen Group Report on Bank Structure, the Banking Union, and LIBOR Rate Setting.

We also discuss the latest developments in derivatives rulemakings under Dodd-Frank in the US, new legislative developments with regards to GAAR and KYC norms for FIIs in India, updated short selling rules in Korea and the short-selling ban review released by the Australian Securities and Investments Commission.

September 2012 Cumulative Median Performance by Strategy

Global performance

September 2012 Performance Dispersion

10.90%

9.04%

8.23%

5.33%

5.28%

4.91%

4.18%

4.15%

4.66%

2.08%

0.40%

-1.54%

-3.99%

-2.00%-4.00% 4.00% 6.00%0.00% 2.00% 8.00% 10.00% 12.00%

Market Neutral

Macro

Emerging Markets Equity

Multi-Strategy

CB & Vol Arb

Equity L/S

Fixed Income

Distressed

Credit

CTA / Managed Futures

Event Driven

MSCI World

All Funds

Source: Hedge Fund Intelligence (HFI), October 2012


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Markets Prime Finance Monthly Hedge Fund Trends

Deutsche Bank

Median

Emerging Markets Equity 2.44% Macro 0.71%

Equity L/S 1.31% Fixed Income 0.70%

Credit 1.20% Multi-Strategy 0.51%

Distressed 0.99% Market Neutral -0.01%

Event Driven 0.89% CB & Vol Arb -0.11%

All Funds 0.88% CTA / Managed Futures -1.04%

* This document contains extracts and opinions from various departments and business areas within Deutsche Bank, including extracts from Research Reports, as well as from external reports specifically referenced herein. It is not, however, a research piece and has been produced by a front office function. Also, please refer to the body of the document for a more detailed description of and proper references to the topics covered in the Executive Summary section.

mailto:MPF.Trends%40list.db.com?subject=

2


Monthly Hedge Fund Trends - Deutsche Bank Research Highlights


Asset Allocation: Will Q3 earnings mark the inflection point? 2

Earnings have been bottomingAfter the rally in equities despite what look to be flat to down earnings for some time now, the case for significant further upside hinges on a resumption of earnings growth. On an LTM basis, US EPS have been flat for six months and global EPS have fallen for a year. With the last few reporting seasons characterized by negative pre-announcements and weak results, investors have approached Q3 earnings with some trepidation. In our reading, there are signs that earnings have been bottoming and are set to rise:

− Fewer negative pre-announcements; downgrades abated early. Guidance has not been as bad as Q2, while downgrades abated two months ago in contrast to recent seasons when cuts continued right up until reporting began (Alcoa);

− On a sequential basis, global EPS have already risen well above the H2 2011trough. US earnings have been flat since Q3 2011. Ex-US EPS fell sharply in H2 2011, bounced significantly in Q1 2012 and held most of the gain in Q2;

− The rebound in financial markets is supportive of FEM earnings. We have noted that the decline and rebound in global EPS owed almost entirely to the market-sensitive FEM sectors (Financials, Energy, Materials) (Global Earnings Pause or Stall? Aug 3, 2012). FEM earnings are expected to rise slightly in Q3;

− Ex-FEM earnings are set to rise for the third consecutive quarter, back near peaks. Sales have maintained their solid recovery channel while a bottom in margins outside the US holds the key to a resumption of global EPS growth.

The bar for Q3 is not low but a US beat would mean solid underlying growth; meets in Europe and even slight misses in EM would confirm a bottoming

− A US beat would mean more this time. Both because of the stability of estimates coming into earnings season and because it would imply solid underlying earnings growth. Consensus expects Q3 EPS to fall 2.3% qoq. Seasonally adjusted, however, growth would be +1.2%. An overall beat at the rate of the early reporters (3.5% vs avg 7.3% since 2009) would mean underlying earnings growth of 4.7% qoq (18.8% annualized);

− The bar is not low in Europe, a meet would confirm a bottoming. Q3 estimates see 5% qoq growth (31% yoy). Industrial and Discretionary EPS are expected to rise considerably, back to H1 2011 levels while Financial earnings would have rebounded from depressed H2 2011 levels, holding most of the gains. Margins are projected to be weak in Healthcare, Materials and particularly Tech. But overall, Europe sales growth of 8% yoy in a recession and margins holding onto gains would be a big positive;

− The bar is high for EM, even slight misses would imply stabilization. As we have noted, EM top line growth has remained strong but margin contraction meant weak EPS growth. A bottom in margins would thus be very positive. Consensus expects Q3 earnings to grow a robust 19% qoq (14% yoy). Sales are projected to be up 8% yoy (3% qoq) and fairly consistent across sectors. Tech margins are expected to rise notably while margins in most other sectors are expected to recoup much of the ground lost over the last year.

Key issues to watch and what to listen forOur constructive stance on equities over the last three years has been predicated on the thesis that corporates would spend their operating cash flows (capex, M&A, buybacks, dividends) to prevent their cash hoards from rising further. And firms would increase production/inventories to meet rising consumer demand. This thesis has been playing out. But the recent collapse in core durable goods orders and drop in IP raises the question of whether they are signaling a change in corporate behavior. In addition to corporate spending plans, comments on global and regional growth outlooks hold the key to assessing whether the economy has stopped deteriorating. But overall, confirmation that firms can grow profits in this lower growth environment will alleviate pressure to cut spending; and rising earnings typically portends increased capex/investment/payouts.

Global Economic Perspectives: Saving the euro with the ECB’s balance sheet 3

− Some politicians and academics in Germany are advocating Eurobonds in order to avoid ECB involvement in stabilizing EMU. Implicit in the call for eurobonds is the view that inflation risks from the extension of the ECB’s balance sheet due to bond purchases are higher than financial risks for the government from guaranteeing debt of its EMU partners.

− Our analysis in this note suggests that the proponents of this view overestimate the risks to inflation from ECB involvement in the management of the euro crisis (and underestimate the risks emanating from debt mutualisation). First, the ESCB seems to have a substantial financial cushion, allowing it to absorb considerable losses resulting from support operations before engaging in monetization of government debt. Second, even if losses accumulated to a level exceeding the ESCB’s capital and reserves, higher inflation is not inevitable. Both theoretical considerations and empirical observations suggest that central banks can operate for years with negative equity without inducing an acceleration of inflation.

− This does not mean that a central bank can fund government debt on a large scale and an open-ended basis. Eventually, monetization of government debt will lead to inflation, but the threshold is higher than it seems at first glance. Hence, whether the ECB’s OMT programme will eventually lead to inflation depends on EMU member countries’ use of it. Should they fail to undertake the necessary economic reforms and become addicted to ECB support of their debt markets EMU would eventually turn into a soft currency, high inflation monetary union.

2 Deutsche Bank – Markets Research: Strategy; “Asset Allocation: Will Q3 earnings mark the inflection point?” 4th October 2012. http://pull.db-gmresearch.com/p/3243-4B3F/39899501/Asset_Alocation.pdf

3 Deutsche Bank – Global Markets Research: Macro; “Global Economic Perspectives: Saving the euro with the ECB’s balance sheet” 4th October 2012. http://pull.db-gmresearch.com/p/3210-1F12/38594875/DB_GEP_2012-10-04_0900b8c085cac9ce.pdf

Equities tied to earnings

90

100

80

70

50

60

40

S&P 500

650

750

850

950

1050

1150

1250

1350

1450

1550�8%

Jan 03

Jan 04

Jan 05

Jan 06

Jan 07

Jan 08

Jan 09

Jan 10

Jan 11

Jan 12

Jan 13

LTM EPS (lhs) Price (rhs)

Source: Bloomberg Finance LP, Factset, Deutsche Bank

Size of the Eurosystem’s balance sheet

3,000,000

3,500,000

2,500,000

2,000,000

1,000,000

1,500,000

500,000

99 00 01 02 03 04 05 06 07 08 09 10 11 12

Mil € Euro Area: total assets

Source: ECB, Haver Analytics, DB Global Markets Research

mailto:MPF.Trends%40list.db.com?subject=http://pull.db-gmresearch.com/p/3243-4B3F/39899501/Asset_Alocation.pdfhttp://pull.db-gmresearch.com/p/3845-2AB8/15690738/Asset_Alocation.pdfhttp://pull.db-gmresearch.com/p/3210-1F12/38594875/DB_GEP_2012-10-04_0900b8c085cac9ce.pdfhttp://pull.db-gmresearch.com/p/3210-1F12/38594875/DB_GEP_2012-10-04_0900b8c085cac9ce.pdf

3


Monthly Hedge Fund Trends - Investor Sentiment 4


Upbeat about the US & EuropeAt a macro level, our discussions with some investors this month have revealed a more constructive view regarding European-focused strategies than they had at this time last year. Further, investors seem to be tentatively optimistic about the prospects of the US’ economic and investment environments going forward. Some, however, have expressed skepticism over Asia/China’s ability to sustain current levels of growth. Many of the family offices we spoke with expressed concern for the underperformance of their hedge fund portfolios but didn’t plan to make any material changes to their overall hedge fund allocations or even specific managers.

US investors exert fee pressure & increase their focus on smaller managersOur recent discussions with endowments and foundations have revealed two clear themes. Firstly, fee pressure on managers can be expected to continue, if not intensify, from these allocators. That said many are willing to take longer locks or invest via a hybrid/drawdown structure in exchange for lower fees. Despite the ongoing discussion around fees, investors have indicated a continued interest in the hedge fund space as long as manger and investor incentives are aligned.

A second theme we have seen is increased interest in smaller, less established managers. Whilst many endowments and foundations have historically focused on only the largest managers in the hedge fund space, some have grown much more willing to consider smaller managers ($250 million-$1 billion AUM) for investments. There are a number of reasons for this change in investment philosophy, but it is largely to do with the perception that newer managers are more nimble and better able to generate additional alpha.

Allocators in Tennessee look to reshape their portfoliosHedge fund allocators in Tennessee are a select group of tight knit investors, with family offices representing most of the investor space in Memphis. The investors in this region tend to have somewhat small allocations to hedge funds ($50-$100 million), with only a handful of exceptions. Our conversations have revealed that a number of investors are in the process of reshaping/broadening their portfolios. They are generally focused on equity l/s, commodities and macro strategies. Continuing with our ongoing theme in 2012, investors have also started to express interest in credit strategies. We have also seen a few investors starting to look at the emerging markets space (debt and equities), primarily in Brazil. Most choose to invest in managers with less than $5 billion AUM.

Texas pensions looking for higher returnsThe public pension plans in Texas who we spoke with were very focused on increasing the expected return of their hedge fund portfolio. To achieve this, they are willing to accept more volatility in their portfolio, longer lock-ups, and higher-fees. They also stressed that headline risk was a big concern because many of the plans are in the middle of passing legislation and negotiating with beneficiaries to reduce/control their pension liabilities. Two of the pensions said they put investments into funds with high headline risk on hold for this reason.

Fund of funds moving towards an advisory relationshipThe sub-$5 billion funds of funds are clearly under stress, as clients make the move to direct hedge fund investing. One fund-of-fund manager said that they were pro-actively reaching out to their large clients to suggest converting the relationship from discretionary to advisory. Another fund-of-fund manager revealed that they are responding to RFPs for building customized portfolios and expect most of their future growth to come from that area.

Canadian pensions maintain their commitment to alternativesOur team was in Canada this month and met with several institutional investors in Toronto and Montreal, including pensions, endowments, funds of funds, and private banks. Investors displayed interest across a wide variety of strategies, including credit, equity l/s, multi-strategy and quantitative. While the focus was varied across asset classes, most of the investors we spoke to indicated they are maintaining or increasing their alternatives portfolio. Some of the investors we spoke to shared with us that they are willing to pay a full level of fees for more complex strategies when the manager can clearly demonstrate that they can generate alpha.

German investors warm up to hedge fundsInvestor sentiment was positive on our recent trip to Germany. Some of the traditionally guarded German family offices have shared with us that they are actively allocating over the next 18 months. German pension funds are also growing allocations, with some historically more conservative names planning to move into the asset class.

Strategy-wise, discussions tended to focus on CTA, credit and relative-value strategies. Investors were wary of equity strategies that do not deliver “true alpha”. Of those who are actively seeking equity-related strategies, they expressed that they are seeking very fundamental strategies, niche to specific sectors or regions.

Managers can differentiate themselves by discussing German tax transparency with their tax advisors and fund administrators before meeting with German investors.

Finnish & Dutch pension funds focus on credit, distressed and macro managersFinnish pension funds continue to stay active in the credit space, a trend that started early 2009, with many increasingly focused on longer-dated, distressed vehicles. With longer-term investment horizons, these institutions appear to be among the few hedge fund investors who are willing to accept longer term lock-ups. Macro is another strong area of interest, principally because the alternatives bracket tends to act as a diversifier to the larger equity and fixed income portfolios. If investors show appetite for equity strategies, they are generally biased towards market neutral or low net profiles, with little to no interest in equity l/s.

In terms of geographic preference, the market is very oriented towards the US, with many investors investing up to 90% of their portfolios with US-based managers. Finnish pension funds continue to show preference for blue-chip managers, specifically those with a 3 to 5 year track record and a minimum AUM of $500 million.

A recent trip to the Netherlands has revealed that there are some large Dutch pension funds making the initial move away from funds of funds, and into direct hedge fund investing. This should result in continued flows from the region.

Strategy-wise, there was again a large focus on credit strategies. Of those who are looking for equity hedge fund strategies, it is the market neutral strategies that are of the most interest. Once again, allocators are not seeking to increase their beta, as they see their hedge fund portfolio as a diversifier against their other investments. Norwegian allocators stay positive on equity strategiesIn Norway, hedge fund allocators tend to be more positive on equities than their Finnish peers, with several seeking equity long/short managers both in Europe and in the US. Investors prefer well-established managers, with 3 to 5 year track records. Some investors are increasingly interested in looking at emerging managers and new funds but will admit that, to date, they have not been early-movers. Solvency II requirements remain a concern for insurance companies, and as such these investors are increasingly looking at managed accounts and UCITS III compliant products, amongst other alternative solutions.

Investor appetite for Chinese strategies, and feedback from the Deutsche Bank Japan Hedge Fund ForumDeutsche Bank’s Hedge Fund Capital Group hosted a very successful third annual Japan Hedge Fund Forum in Tokyo on September 11th. Six hedge fund managers from the US, Europe and Asia presented their strategies to a variety of local hedge fund allocators, including banks, insurance companies and pension fiduciaries.

The forum revealed that Japanese investors continue to focus on multi-billion dollar hedge fund managers, particularly in the equity space. However, we are starting to see increased interest towards other strategies. These have tended to be those that have performed well this year, such as credit and loan strategies.

Many investors in Asia have intrinsic Chinese exposure through their pan-Asian managers, but this month we wanted to know more about sentiment regarding niche Chinese credit and equity strategies. Our conversations have illustrated that many perceive China-only strategies to be particularly challenging, largely due to an uncertain political outlook for the Chinese economy as the 18th National Congress of the Communist Party of China (CPC), which will formalize the nation’s once-a-decade leadership change, kicks off this month. Despite this, Japanese investors are beginning to show increased interest. Interestingly, much of this has come from the funds of funds and asset managers, who are mainly managing pension fund money.

4 From Deutsche Bank’s Hedge Fund Capital Group


4


Monthly Hedge Fund Trends - Performance


Americas

2012 Year to date median performance

Europe

2012 year to date median performance

Asia

2012 year to date median performance

Americas

September 2012 Performance dispersion of returns

Europe

September 2012 performance dispersion of returns

Asia

September 2012 performance dispersion of returns

Glo

bal

L/S

US

L/S

Eve

nt

Dri

ven

Dis

tres

sed

Cre

dit

Fixe

d In

com

e

All

Fun

ds

Mac

ro

Mu

lti-S

trat

egy

CTA

/ M

anag

ed F

utu

res

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

75th Median Average 25th S&P 500


Em

erg

ing

Mar

kets

Eq

uity

Glo

bal

L/S

Cre

dit

Eu

rop

ean

L/S

All

Fun

ds

Mac

ro

Fixe

d In

com

e

Mu

lti-S

trat

egy

Eve

nt

Dri

ven

Mar

ket

Neu

tral

CTA

/ M

anag

ed F

utu

res

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

75th Median Average 25th Stoxx 600


Asi

a ex

-Jap

an L

/S

Ch

ina

L/S

Pan

-Asi

a L/

S

All

Fun

ds

Mac

ro

Jap

an L

/S

Mu

lti-S

trat

egy

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

75th Median Average 25th MSCI AsiaPac incl Japan


9.15%

14.56%

6.86%

6.24%

5.81%

5.95%

5.05%

4.98%

3.32%

-0.53%

8.00% 12.00% 14.00% 16.00%6.00%4.00% 10.00%2.00%0.00%-2.00%

Distressed

9.09% Credit

Fixed Income

CTA / ManagedFutures

Global L/S

All Funds

Multi-Strategy

Event Driven

S&P 500

US L/S

Macro


9.79%

8.76%

4.63%

4.14%

3.83%

3.71%

3.50%

2.99%

1.81%

1.12%

0.79%

-4.18%

2.00% 4.00%-2.00%-4.00%-6.00% 6.00% 8.00% 10.00%0.00%

CTA / Managed Futures

Market Neutral

Emerging Markets Equity

All Funds

Fixed Income

Event Driven

Stoxx 600

Multi-Strategy

Macro

Credit

Global L/S

European L/S


0.00%-2.00% 4.00% 8.00% 10.00% 12.00%2.00% 6.00%

11.30%

7.56%

3.36%

3.08%

2.01%

1.92%

1.90%

0.11%

-1.54%

China L/S

MSCI AsiaPac incl Japan

Pan-Asia L/S

Multi-Strategy

Macro

Japan L/S

All Funds

Event Driven

Asia ex-Japan L/S



5


Monthly Hedge Fund Trends - Leverage 5


Global − MSCI World 30 day volatility declined over 21% in September, ending the month at 11.29. There was no change in gross fundamental equity exposure, ending the month at 2.36, although net fundamental equity exposure was up 5.66% ending September at 0.47.

− The percentage of funds in the lower net equity leverage bands (0 – 0.25) have decreased since the beginning of July. Managers have increased exposure over the past three months though, leading to an increase in the percentage of funds across the 0.25 – 1.25 net equity leverage bands.

Global Net & Gross Equity Leverage vs. Volatility

Global – September 2012 Quarterly change in net equity leverage distribution across funds

2.42.5

2.32.22.12.01.91.81.71.61.51.41.31.21.11.00.90.80.70.60.5

0.30.4

40

30

35

25

20

10

15

5

31 Ma

y 12

31 Jul

12

31Aug

12

30 Sep

t 12

30 Jun

12

30 Sep

t 1131

Oct 11

30 Nov

11

31 Dec

11

31 Jan

12

29 Feb

12

31 Ma

r 12

30 Apr

12

MSCI World 30d Vol

MC

SI W

orld

30

day

His

tori

cal V

ol

Leve

rag

e

Gross Leverage Net Leverage

Source: Deutsche Bank Global Prime Finance Risk, October 2012

16%

8%

0%

20%

12%

4%

14%

6%

18%

10%

2%

-1 - -0.

75

-.75 - -0

.5

-0.5 - -0

.25-0.2

5 - 0

0 - 0.2

5

0.25 -

0.5

0.5 - 0

.750.7

5 - 1

1 - 1.2

5

1.25 -

1.5

1.5 - 1

.751.7

5 - 2

01 Oct12

% o

f fu

nd

s (D

euts

che

Ban

k)

01 July12

Source: Deutsche Bank Global Prime Finance Risk, October 2012

5 Deutsche Bank Global Prime Finance Risk, October 2012


6


Monthly Hedge Fund Trends - Securities Lending


Global 6

US % short interest sector change - September 2012

US homebuilders under pressure from shorts in light of surging valuationsDuring the month of September the nation’s homebuilders surged as we saw the SPDR S&P Homebuilders ETF gain more than 7.5% while hitting a 52 week high on September 21st. Two stocks performing extremely well include Lennar whose stock is up roughly 175% from a year ago and Pulte Group which is up more than 300% in the same time period. These stocks benefitted from the Fed’s commitment to buy $40 billion in mortgage-backed bonds per month on an open ended basis in QE3.7

From the short interest perspective both stocks mentioned above continue to remain crowded shorts given their surging valuations. Lennar short interest remains near all time highs, with almost 34 million shares in short interest. This represents approximately 23% of the existing float. Pulte Group still remains a popular short with just less than 33 million shares in current short interest or approximately 10% of the float. Other significant shorts in the homebuilders sector include KB Home and DR Horton Inc whose short interest as a percentage of float are 43% and 13% respectively.

South African miners and European luxury goods manufacturers under pressure From a directional perspective Lonmin continues to be in focus, with stock down over 50% this year amidst continued worker unrest stemming from their demand for increased wages.8 Levels on new stock continue to trade in excess of 12% with limited availability. From a sector perspective we continued to see increased short activity in the luxury goods sector with Swatch, Burberry and Tods S.p.A all in focus.

Yen appreciation hurts Japanese exporters The USD/JPY closed the month at 77.88, down 0.52% month-over-month. The Yen has benefitted from the depth of its bond market and an ongoing demand for safe haven assets. Over the last two-weeks of September, US-Japanese two-year bond yield spreads rose from their lows as the surprise ¥10 trillion expansion of the Bank of Japan’s asset purchase program served to counteract previous Fed easing.9 The appreciated yen has created an unfavorable situation for Japanese exporters. Electronic giants like Sony Corp and carmakers like Nissan Motor Corp, which derive a substantial position of their revenue from international markets, took a hit on their earning last quarter.

Anti-Japan sentiment drives shorts in Japanese firms with China exposure Japan Foreign Trade Council (JFTC) indicated that there are signs that China has slowed down its customs clearance of imports from Japan as a result of rising tension over the Japanese government’s nationalization of the Senkaku Islands.10 Firms in sectors such as wholesale, transport equipment and electric machinery are among those expecting the worst from the dispute between Japan and China. Unicharm, Hitachi Construction, Nissan and Fast Retailing are amongst the firms that have faced disruptions as a result of these tensions.

11 http://dealbook.nytimes.com/2012/04/30/energy-transfer-to-buy-sunoco-for-5-3-billion/12 http://in.reuters.com/article/2012/09/06/us-americanrealtycapital-offer-idINBRE8850KK2012090613 http://www.businessweek.com/news/2012-09-13/vestas-said-to-weigh-share-offer-if-mitsubishi-plan-

fails14 http://www.reuters.com/finance/stocks/GEPH.PA/key-developments/article/261281615 http://www.sbrf.ru/moscow/en/presscenter/all/index.php?id114=1102128916 http://in.finance.yahoo.com/news/sony-invest-50-billion-yen-094413172.html17 http://online.wsj.com/article/SB10000872396390444358404577609810658082898.html

6 This material has been produced by the Deutsche Bank Securities Lending Group and must not be regarded as research or investment advice.

7 http://www.bloomberg.com/news/2012-09-13/fed-plans-to-buy-40-billion-in-mortgage-securities-each-month.html

8 http://www.telegraph.co.uk/finance/newsbysector/industry/mining/9542793/South-African-miners-vow-to-bring-platinum-belt-to-standstill.html

9 http://www.bbc.co.uk/news/business-1964534910 http://www.japantimes.co.jp/text/nn20120912a1.html

European % short interest sector change - September 2012

No rush to cover in Asia Despite the resemblance of stability in Greece twined with QE3 and positive US data, by and large, structural shorts have remained highly disciplined with additional shorts added as and when borrow availability appeared in our most crowded names. Short balances in HK, Korea and Taiwan are at 2012 highs.

Capital raising and M&AThis month we saw merger arbitrage funds trading the Sunoco/Energy Transfer Partners LP deal as the anticipated closing date of October 4th, 2012 quickly approached.11 With the spread trading wider in the middle of the month, arbitrageurs saw an opportunity to add to their profits in what has been a slow year for M&A. Given the limited availability of Energy Transfer in lending programs, rates pushed significantly higher as an additional 2 million shares were added in short interest since the end of August. In the last week alone spot rates jumped from 3% to 99% as the massive demand into the closing had primes scrambling for stock.

As we move forward into the 4th quarter, we are beginning to see arbitrage funds increase their stake in the proposed merger of American Realty Capital Trust and Realty Income Corp.12 With the deal announced during the first week of September, we have seen almost 5 million shares added in short interest throughout the month, bringing the short interest to roughly 10% of the float.

Vestas Wind announced potential plans to raise up to EUR 500 million via a rights issue,13 stock loan rates around 16%; Geophysique announced a EUR 414 million rights offering to help fund a purchase of Fugro’s seismic division,14 levels in excess of 2.5%; the Russian central bank arranged a placement of 7.5% of Sberbank,15 GDRs trading at 1.5%; Sony announced plans to invest 50 billion yen for an 11.46% stake in Olympus and a seat on the board,16 funds locating with active flow.

iPhone 5 launch and its impact on short balances in AsiaApple’s highly anticipated iphone 5 launch dominated much of our flow this month. Pre-launch, negative sentiments on regional smartphone plays drove borrow demand to 2012 highs. HTC was the hottest demand name, as Samsung and Apple’s dominance highlighted HTC’s inability to compete. Short interest in HTC spiked significantly, with borrow fees in double digits. Negative sentiment extended to the likes of Korea’s LG Electronics and China’s ZTE, both highly crowded shorts. Meanwhile, Apple’s major patent win against their main rival Samsung lead to a wave of short activity on Samsung Electronics17. Mixed reception for the iPhone5 led to a divergence of views on Apple’s supply chain. While most of the iPhone suppliers have outperformed, we have seen 2 way flow in the likes of Largan, Hon Hai and Simplo.

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Utilities

Energy

Info Tech

Financials

Industrials

Materials

Cons Disc.

Telecom

Cons. Stap

Healthcare

-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

Financials

Energy

Cons Disc.

Info Tech

Healthcare

Industrials

Telecom

Utilities

Materials

Cons. Stap

Source: Data Explorers & Deutsche Bank, October 2012 Source: Data Explorers & Deutsche Bank, October 2012

mailto:MPF.Trends%40list.db.com?subject=http://dealbook.nytimes.com/2012/04/30/energy-transfer-to-buy-sunoco-for-5-3-billion/http://in.reuters.com/article/2012/09/06/us-americanrealtycapital-offer-idINBRE8850KK20120906http://www.businessweek.com/news/2012-09-13/vestas-said-to-weigh-share-offer-if-mitsubishi-plan-failshttp://www.businessweek.com/news/2012-09-13/vestas-said-to-weigh-share-offer-if-mitsubishi-plan-failshttp://www.reuters.com/finance/stocks/GEPH.PA/key-developments/article/2612816http://www.sbrf.ru/moscow/en/presscenter/all/index.php?id114=11021289http://in.finance.yahoo.com/news/sony-invest-50-billion-yen-094413172.htmlhttp://online.wsj.com/article/SB10000872396390444358404577609810658082898.htmlhttp://www.bloomberg.com/news/2012-09-13/fed-plans-to-buy-40-billion-in-mortgage-securities-each-month.htmlhttp://www.bloomberg.com/news/2012-09-13/fed-plans-to-buy-40-billion-in-mortgage-securities-each-month.htmlhttp://www.telegraph.co.uk/finance/newsbysector/industry/mining/9542793/South-African-miners-vow-to-bring-platinum-belt-to-standstill.htmlhttp://www.telegraph.co.uk/finance/newsbysector/industry/mining/9542793/South-African-miners-vow-to-bring-platinum-belt-to-standstill.htmlhttp://www.bbc.co.uk/news/business-19645349http://www.japantimes.co.jp/text/nn20120912a1.html

7


Monthly Hedge Fund Trends - Regulatory 18


There have been a number of key developments across regulatory dossiers in September, including EMIR, the Short Selling Regulation and MiFID. Major announcements were made on structural issues including the Liikanen Group on bank structure and the European Commission proposal for a Banking Union in Europe.

Looking forward, further progress is expected on negotiations to finalise MiFID, implementation of the Short Selling Regulation and the publication of the implementing measures for the AIFMD.

Alternative Investment Fund Managers Directive (AIFMD) - DelaysThe European Commission was expected to publish the delegated acts (implementing measures) for the AIFMD by the end of September - although there has been some delay - based on the advice it received from the European Securities and Markets Authority (ESMA) earlier this year.

On 27th September, ESMA finished consulting on guidelines covering remuneration requirements under the AIFMD. The guidelines were broadly based on global principles for sound compensation practices and aligned to remuneration guidelines for banks that were introduced in January 2011 under the EU Capital Requirements Directive (CRD III). The extent to which AIFs would have to comply with these requirements can be adjusted based on the size and complexity of their activities, in line with the proportionality principle. ESMA will finalise the Guidelines at the end of 2012, after which Member States will have six months to incorporate them into national regimes.

Regulation on Short Selling and Certain Aspects of CDS (SSR)The Regulation is due to enter into force on 1st November 2012. In advance of this, ESMA published a consultation paper on the application of the market making exemption for comments by 5th October. While in some areas the consultation paper provides useful clarity, in other areas, it generates further uncertainty as to how the exemption should be applied, such as the instrument based approach and the trading venue membership requirements. ESMA will likely publish its final guidelines in December, after which Member States will have six months to incorporate them into national regimes. In the interim, various national competent authorities have also published their notification procedures for firms seeking the market making exemption.

European Market Infrastructure Regulation (EMIR)EMIR is the regulation which sets standards for mandatory clearing, risk mitigation techniques for derivatives not cleared by a CCP, requirements for central counterparties and trade reporting requirements for all derivatives. EMIR entered into force in mid-August apart from those obligations that are subject to technical standards by ESMA, which will only take effect once the technical standards become law. On 27th September, ESMA published the first tranche of technical standards covering certain aspects of the regulation including details of how the clearing thresholds will operate for centrally cleared derivatives and how counterparty risk should be reduced for non cleared derivatives.

The standards list a set of organisational, conduct of business and prudential requirements for CCPs including margin requirements, default fund, liquidity risk management, and investment policy of CCPs, as well as stress and back tests. Details covering the authorisation and supervision of trade repositories are also included. In its initial proposal, ESMA required CCP members to offer indirect clearing, however this requirement has now been removed as a result of industry feedback.

The European Banking Authority (EBA) has also published regulatory technical standards on capital requirements for CCPs. The Commission has three months to decide whether to adopt the ESMA and EBA standards. Member states also have three months to decide whether to object to the texts. Under EMIR, ESMA is still to produce guidelines or recommendations on interoperability between CCPs by 31st December 2012, rules on contracts that are considered to have a direct, substantial and foreseeable effect in the EU or cases where it is necessary or appropriate to prevent the evasion of any provision of EMIR.

ESMA will also be required to produce rules on margin requirements for OTC derivatives that are not cleared by a CCP. The European Commission

is still due to set a deadline for this latter set of standards. This work has been delayed in order to incorporate the work of the Basel Committee on Banking Supervision (BCBS) and IOSCO who have just finished consulting on a set of framework principles for margin requirements for non centrally cleared derivatives.

Markets in Financial Instruments Directive (MiFID 2) A key hurdle in the lawmaking process was passed on Wednesday 26th September when the relevant committee in the European Parliament (the Economic and Monetary Affairs Committee) voted to agree its position on the text.

The agreement significantly changes the initial position of the Commission as regards the pre and post trade transparency requirements for non-equity markets, and sets more criteria for ESMA to determine that a class of derivatives should be multilaterally traded. However, it limits the scope of the proposed new Organised Trading Facility (OTF) regime to non-equity instruments only and maintains the prohibition on the use of own capital by an OTF operator.

In relation to algorithmic and high frequency trading the text attempts to impose formal requirements on market makers, includes a minimum resting time of 500 milliseconds, an apparent ban on sponsored and naked sponsored access and a restriction on an investment firm receiving any rebate for routing orders to a particular trading venue. Trading venues are also required to set position limits for trading in commodity derivatives.

Once the European Council has finalised its approach (likely to be by November at the earliest) the two institutions, together with the European Commission will enter trilogue negotiations to agree a final text. The trilogue is likely to complete by Q1/Q2 2013 and the regulation will begin applying in 2015 at the earliest.

Market Abuse Directive and RegulationThe European Council and Parliament are continuing to debate the update to the Market Abuse Directive. The European Parliament’s Economic and Monetary Affairs Committee (ECON) held a debate to discuss amendments to the directive and are due to vote on a compromise position in the ECON committee on 9th October.

The Cypriot Presidency of the EU Council published its latest draft position of EU Member States. Most notably, the general prohibition against market manipulation is complemented by one against the manipulation of a benchmark and any transmission of false or misleading information, provision of false or misleading inputs, or any other action that manipulates the calculation of a benchmark, including the benchmark’s methodology.

Undertakings for Collective Investment in Transferable Securities (UCITS)The European Council and Parliament are continuing to debate the update to the UCITS Directive (UCITS 5) which will include new rules on tasks and liability of depositaries and introduce a new sanctioning regime and requirements for the remuneration of fund managers. An initial debate between MEPs took place on Thursday 20th September where they largely endorsed the Commission’s proposal to clarify the scope of the depositary’s liability, in particular its obligations to provide replacement assets to investors in the case of lost assets where depository duties were delegated to a third party. The Parliament is aiming to agree its general approach on the directive by 21st January 2013. The forward timeline in the Council is currently unclear.

Central Securities Depository Regulation (CSDR)The CSD Regulation continues to be debated in the European Parliament. Rapporteur Kay Swinburne presented her draft report on the regulation to the Parliament on Wednesday 19th September which removed a controversial “derogation” clause, which would allow CSDs to provide banking services ancillary to settlement from a single legal entity.

The Swinburne report will be amended by MEPs before the Economic and Monetary Affairs Committee vote on 18th December. Once the European Council have agreed their position, the trilogue negotiation will commence. Adoption is not expected until late 2013.

18 Deutsche Bank Government & Regulatory Affairs Group This is a summary of some of the themes underlying recent regulatory developments affecting hedge

funds and their managers. It does not purport to be legal or regulatory advice and must not be relied on for that purpose. Deutsche Bank is not acting and does not purport to act in any way as your advisor. We therefore strongly suggest that you seek your own independent advice in relation to any legal, tax, accounting and regulatory issues relating to the merits or otherwise of the products and services discussed.


8


Monthly Hedge Fund Trends - Regulatory


Liikanen Group Report on Bank StructureOn 1st October, the EU group on bank structure chaired by Bank of Finland Governor Erkki Liikanen published its final report, with a recommendation that under certain circumstances, banks with a significant amount of trading assets may be required to establish separate legal entities for deposit-taking and trading activities.

The report states that, while universal banking is a model with many benefits, the growth of trading activities has made banks too complex and opaque. Liikanen recommends that banks with trading assets of more than EUR 100 billion or 15% of their total assets should be required to establish separately capitalised legal entities for deposit-taking and other commercial and corporate banking activities (‘deposit bank’) and for proprietary trading and market making activities (‘trading entity’). The ‘trading entity’ would exclude client-facing derivative transactions and securities underwriting. In relation to hedge funds, the report requires that ‘Any loans, loan commitments or unsecured credit exposures to hedge funds (including prime brokerage for hedge funds), SIVs and other such entities of comparable nature, as well as private equity investments’ should sit within the trading entity. The two entities would have to meet all regulatory and capital requirements on a standalone basis within a holding company structure and any transfer of funds between the two entities would be subject to large exposure limits.

Commissioner Barnier welcomed the report, but underlined that the potential impact of the reforms will need to be fully considered before any decisions are made to implement the recommendations. The EU Commission is currently consulting until 13th November and is expected to give its view by the end of the year.

Banking UnionOn 12th September the European Commission published two legislative proposals designed to deliver a Single Supervisory Mechanism (SSM) for Eurozone banks.

The creation of an SSM is the first step in the delivery of a broader ‘banking union’ in Europe which will also include a common system for deposit guarantees and a ‘single resolution mechanism’. Whilst there is significant political momentum behind the creation of an SSM, agreement on the other two elements of banking union may be harder to achieve.

Under the proposals, the ‘most significant credit institutions’ in the Eurozone would be subject to direct prudential supervision by the European Central Bank (ECB) from 1st July 2013. All other Eurozone banks would be covered from 1st January 2014. Amongst other tasks, under the new regime the ECB would be responsible for carrying out authorisation, imposition of capital and liquidity requirements, other capital buffers and execution of stress tests. The ECB would also be responsible for working with relevant resolution authorities around early intervention for failing banks. Whilst the proposals provide significant powers to the ECB, they are clear that national supervisors will continue to play an important role in the new regime, both by providing practical support to the ECB in the completion of its supervisory tasks, and by lending expertise through secondments.

It is expected that there will be strong political appetite for quick agreement on these proposals, however given Member State unanimity is required, some changes may need to be incorporated to achieve that agreement. The European Parliament may also raise objections over the limited oversight role provided to them under the proposals.

LIBOR Rate SettingOn 28th September, Martin Wheatley, the future Chief Executive of the UK financial sector conduct regulator, published his review of the rate-setting process and oversight of LIBOR. Wheatley was commissioned to carry out a review of the governance of LIBOR by the UK Treasury.

The report rejects the replacement of LIBOR with an alternative benchmark but instead sets out a ten-point plan to reform the regulation of LIBOR, to ensure criminal sanctions can be imposed for those manipulating it and to improve the rate-setting process itself.

Specific recommendations include transfer of responsibility for compilation of LIBOR from the British Bankers Association to a new, independent administrator chosen by competitive tender. Individual LIBOR submissions would not be published for three months in order to reduce any incentive to manipulate the rate with a view to enhancing their own perceived creditworthiness. Individual staff members responsible for LIBOR submissions would be subject to regulatory approval for taking up their role.

The report also said that the BBA should immediately commence planning for the phased withdrawal of LIBOR currencies and tenors which have insufficient trade data. These would include LIBOR for Australian, Canadian and New Zealand Dollars, Danish and Swedish Kronor. Overall Wheatley’s proposals would reduce the daily LIBOR publications from 150 to around 20. In addition, he said that a wider range of banks should submit to LIBOR and, if this is not achieved, then regulators should be able to compel market participants to do so.

The EU Commission is also currently consulting on issues around regulation, transparency and governance for a wide range of benchmarks and indices. An International Organisation of Securities Commissions (IOSCO) task force is also due to consult on proposals at the end of this year. IOSCO will also consider principles for transitioning from one benchmark to another where this is needed.

US UpdateRoughly one half of the required derivatives-related rulemakings under Dodd-Frank have been finalized as of the beginning of October, and implementation of various requirements will begin shortly. One third of Title VII rulemakings are still in the proposal stage, and regulators have indicated their intention of finalizing these by year end. This timeline will likely slip given the upcoming US political election in November, coordination with international counterparts, and the recent court decision against the CFTC’s position limit rule, detailed below.

The Commodity Futures Trading Commission (CFTC) approved in September the application of DTCC Data Repository, LLC for provisional registration as a swap data repository for the interest rate, credit, foreign exchange, and equity asset classes. DTCC Data Repository, LLC is now the second entity that the CFTC has approved as a swap data repository, following the CFTC’s approval of ICE Trade Vault, LLC in June. In line with the first deadline for swap dealers to register with the CFTC, real-time public reporting and reporting to the regulator will begin being phased-in by December 31st 2012.

In terms of other Title VII requirements, the CFTC has indicated they hope to finalize transparency requirements (including block sizes and trade execution facilities – or SEFs) by this fall. Once the CFTC finalizes the first classes of derivatives to be subject to clearing requirements, which could happen as early as this month, central clearing will be phased-in by entity type, with swap dealers and major swap participants making up the first group and having 90 days to comply.

With respect to margin, on September 26th, five US federal agencies reopened the comment period for their proposed rule on margin requirements for un-cleared swaps. The proposal was originally issued in May 2011 with a comment deadline of July 11th 2011, and regulators reopened the comment period until November 26th 2012 following the recent consultation by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions on margin requirements for non-centrally cleared derivatives. The CFTC similarly recently reopened the comment period on their margin proposal given the international discussions on the topic. US regulators are expected to issue final rules on margin requirements for un-cleared swaps in early 2013.

Lastly, on September 28th, a US district court enjoined the CFTC’s position limit rulemaking which was scheduled to go into effect on October 12th. The rule, finalized in October 2011, limits the size of positions held by any trader in 28 physical commodity contracts and their economically equivalent futures, options and swaps. The US court’s ruling upheld a challenge filed in December 2011 by two industry groups, the Securities Industry and Financial Markets Association (SIFMA) and the International Swaps and Derivatives Association (ISDA). The judge agreed with their arguments that the CFTC failed to follow instructions from the US Congress in the Dodd-Frank Act which required the agency to determine that position limits were “necessary to diminish, eliminate or prevent” excessive speculation. In terms of next steps, the CFTC can appeal the Court’s decision or issue new position limit proposals after conducting a cost/benefit analysis demonstrating the rules are necessary.

India

Shome panel submits final report on GAAR, final guidelines expected by month-endThe expert panel headed by Dr. Shome to make recommendations on the GAAR proposals has submitted its final report to the Ministry of Finance. The final report is believed to be in line with the proposals made in the second draft asking for dilution of some rules and deferring


9


Monthly Hedge Fund Trends - Regulatory


implementation by 3 years. The Finance Ministry will be studying the recommendations and finalising the guidelines by end of October 2012.

The panel also submitted its report on the retrospective tax amendment which is under review by the Ministry of Finance. The report will be released for public comments once the ministry has completed their review. Mr. P Chidambram also said that the Income-tax code will be amended if deemed necessary but it could take more time as it will need to be passed by the cabinet.

Indian KYC norms for FIIs relaxed; collateral norms under discussionSEBI released a circular clarifying relaxed “Know Your Clients (KYC) norms” for various overseas entities including foreign institutional investors, sub-accounts and Qualified Foreign Investors (QFIs). SEBI is also looking at relaxing the collateral rules for FIIs who have to maintain full collateral in cash for both derivatives and the cash segment. Discussions are underway for allowing FIIs to provide domestic instruments, such as approved securities, bank guarantees, fixed deposits, government bonds and mutual funds as collateral.

The SEBI circular can be found here: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1346912729430.pdf

Korean short selling rules to be updated on 30th October The current rules for short selling in Korea have been amended to allow the regulator to implement a ban if they deem it necessary. The change in the rules is not in itself a ban on short selling. From 30th October, if either the 20 day short average volume or the total short position exceeds 5% (or 3% KOSDAQ), the KRX will report and request for approval for a short ban on that stock to the FSC. The KRX will post on their website stocks that are under review by the FSC for short ban approval, and even though the short volume or position exceeds 5% (3%), it doesn’t mean that the issue will automatically be banned.

Regulators are still in discussion on whether they should publish aggregate short balances in line with the publication of data in other markets such as Hong Kong who started publishing data on 7th September.

Australia: ‘Short selling: Post-implementation review’ released by ASICSeptember 2008 saw Lehman Brothers file for Chapter 11 bankruptcy and global markets fall into crisis. Many regulators reacted by introducing a temporary ban on short selling with a view to reducing the downward slide of the stock markets. ASIC have reviewed the data from September 2008 – November 2008 (when the Australian ban on covered short selling was in place for non financial stocks) and May 2009 (when the restrictions were lifted for financial stocks) to consider whether this ban in fact had the intended result.

It was concluded that there was reduced liquidity and a widening of spreads at the time of the ban on covered short selling, both in Australia and in other markets that pursued a similar course. Although the ban may have been a contributing factor, it should be taken in the context of the general macro conditions – the report notes that there was extreme uncertainty and volatility. ASIC also found that short selling tends to lag a fall in stock price rather than leading or causing a stock price decline.

Settlement failures were found to have reduced during the ban period although there were also increased penalties imposed for failures. Compliance costs for implementing the short selling measures are summarised to the right:

Costs of complying with the short selling measures (in AUD) — AFMA members (from page 19) 19

Small organisation

Mid-sized organisation

Large organisation

IT or system build costs

$390,000 $500,000 $687,000

Compliance and legal costs

$135,000 $229,000 $438,000

Non-capital operating costs

$81,000 $125,000 $292,000

Opportunity costs

$1.5million $6million $15million

However, ASIC also stated that in exceptional circumstances, such a move may be justified in order to reduce the risk of greater market disorder, to bolster investor confidence and limit the potential for international regulatory arbitrage.

19 http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep302-published-24-September-2012.pdf/$file/rep302-published-24-September-2012.pdf For further information on market structure developments, refer to the following report: http://globalmarkets.db.com/new/docs/Deutsche_Bank_APAC_Market_Structure_Newsletter_Issue_21.pdf

mailto:MPF.Trends%40list.db.com?subject=http://www.sebi.gov.in/cms/sebi_data/attachdocs/1346912729430.pdfhttp://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep302-published-24-September-2012.pdf/$file/rep302-published-24-September-2012.pdfhttp://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep302-published-24-September-2012.pdf/$file/rep302-published-24-September-2012.pdfhttp://globalmarkets.db.com/new/docs/Deutsche_Bank_APAC_Market_Structure_Newsletter_Issue_21.pdfhttp://globalmarkets.db.com/new/docs/Deutsche_Bank_APAC_Market_Structure_Newsletter_Issue_21.pdf

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1/13

)

EM

IR: D

raft

im

ple

men

ting

m

easu

res

du

e fr

om E

SM

A

(09/

12)

EM

IR:

Com

men

t d

ead

line

on m

arg

in

req

uir

emen

ts

for

non

-cle

ared

d

eriv

ativ

es

(28/

09/1

2)

Sol

ven

cy II

: R

egu

latio

n o

f in

sura

nce

acr

oss

Eu

rop

e ta

kes

effe

ct (0

1/01/

14)

FSB

: Nat

ion

al S

IFI,

secu

ritie

s le

nd

ing

an

d

rep

o re

com

men

dat

ion

s ex

pec

ted

(en

d 2

012

)E

C/E

P/E

uro

pea

n C

oun

cil:

Pote

ntia

l ag

reem

ent

on

CS

Ds

(Q2

2013

)

UC

ITS

V: P

len

ary

vote

(12/

03/1

3)

EP

: EC

ON

com

mitt

ee v

ote

on C

SD

s (1

2/12

)

FATC

A

with

hol

din

g

effe

ctiv

e (0

1/15

)

MA

R c

omes

in

to e

ffec

t (a

pp

rox

m

id-2

014

)

MA

R:

Ple

nar

y vo

te

(16/

01/

13)

AIF

MD

: Im

ple

men

tatio

n

dea

dlin

e fo

r le

vel

1 D

irec

tive

and

le

vel 2

tec

hn

ical

st

and

ard

s (2

2/07

/13)

FATC

A: D

ead

line

to e

nte

r in

to F

FI

agre

emen

ts w

ith

IRS

(30/

06/1

3)

FATC

A

with

hol

din

g

beg

ins

on

non

-com

plia

nt

FFIs

an

d

reca

lcitr

ants

(0

1/01/

14)

AIF

MD

: Dea

dlin

e fo

r A

IFM

s to

ap

ply

fo

r au

thor

isat

ion

(2

2/07

/14)

AIF

MD

: EC

du

e to

p

ub

lish

del

egat

ed

acts

(10/

12)

AIF

MD

: Mar

ketin

g

pas

spor

t fo

r n

on-

EU

Alte

rnat

ive

Inve

stm

ent

Fun

ds

(at

earl

iest

).

(22/

07/2

015

)

MiF

ID 2

& M

AR

: P

len

ary

vote

(2

2/10

/12)

Dea

dlin

e fo

r b

anks

to

con

form

to

th

e V

olck

er R

ule

(2

1/07

/14)

Fed

/FD

IC/O

CC

/SE

C/

CFT

C: A

im t

o fin

alis

e V

olck

er r

ule

(en

d 2

012

)

Dod

d F

ran

k: G

20

dea

dlin

e to

imp

lem

ent

OTC

der

ivat

ive

refo

rms

(en

d 2

012

)

Dod

d-F

ran

k: C

FTC

fin

al

rule

s on

blo

ck r

ule

; ca

pita

l an

d m

arg

in;

imp

lem

enta

tion

of

clea

rin

g a

nd

tra

de

exec

utio

n; S

EFs

; g

over

nan

ce; a

nd

ex

tra-

terr

itori

ality

. (Q

2-Q

4)

CFT

C:

Exp

ecte

d

dea

dlin

e fo

r sw

ap d

eale

rs

to c

lear

CD

S/

IRS

(02/

13)

CFT

C: R

epor

ts

du

e fo

r m

id-s

ize

and

sm

all C

PO

s (0

1/04

/13)

CFT

C: L

arg

e C

PO

’s w

ith A

UM

≥

$5b

n m

ust

file

Fo

rm C

PO

-PQ

R

(29/

11/1

2)

CFT

C: L

arg

e C

PO

’s w

ith A

UM

b

etw

een

$1.

5bn

an

d $

5bn

mu

st

file

Form

CP

O-P

QR

(01/

03/1

3)

MiF

ID: P

len

ary

vote

on

MiF

ID 2

(1

1/09

/12)

MiF

ID t

akes

eff

ect

(exp

ecte

d 3

/14)

EM

IR:

reg

ula

tion

ef

fect

ive

(01/

13)

2012

2013

2014

2015


11


Monthly Hedge Fund Trends


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markets prime finance monthly hedge fund trends...source: hedge fund intelligence (hfi), october...

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