Lately what we have been seeing is a few trends. Clients have been requiring liquidity due to cash redemptions, and hence liquidations of portfolios have been on the agenda. Additionally some clients have been looking at moving back to passive mandates. They’re not satisfied with the active mandates that they have employed over the last five years, and as such a cost reduction mechanism has been put in place, hence the move back into more index-like mandates. In terms of other motivations, clients have typically, over the last year, been putting many of their new contributions into cash pools.

Those cash buffers are now being slightly breached and clients will have to start investing that cash and getting the appropriate exposure, as per their PDS and mandate requirements. Michael Bailey: In terms of the funds and multimanager representatives we have here today, I would be interested to hear how the way you look at counterparty risk has changed in recent times. Fenella Gray: I think it’s a bit different for us because we now manage most of ours inhouse, and we actively manage our external managers.

We have five external managers which are formally reviewed every 12 months anyway, and every month they have to provide us with stuff. So our risk has been more looking at the smaller counterparty risk rather than actually at our fund managers – banks; exposure to brokers. You know, people aren’t settling trades – before you might have thought, ‘ah well, we’ll do that tomorrow’, now you’re definitely looking into it that day. Michael Bailey: What about you, Rose? Rose Challita: We have several external fund managers, and we have regular meetings with them and updates et cetera.

But once again, we’re looking at their exposure to the counterparties – we have a lot of long/ short funds, market neutral et cetera, so we’re looking at their exposure to their prime brokers. We have also revisited, with our consultant Mercer, how we approach our reviews with our external funds managers. We’re looking at any significant mandate losses, because that threatens their funds under management and operations spend. We’re looking at their investment style, their key man risk. Michael Bailey: Is that FUM risk an issue you’re seeing,

Troy? Funds managers live and die by asset-based fees, which were was great for a long time, but is there more of a concern when revenues are slashed 50 per cent?

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