Spotlight turns to regulatory issues as capital flows in

Welcome to the spring edition of Citco’s Industry Spotlight. In this issue, we bring you our perspective on the ever-evolving regulatory landscape, and, given our role as an asset service provider, we focus on meeting operational challenges as they relate to new products and regions and asset classes, such as private equity and real estate.

Based on what we saw in 2013, the alternative sector appears for the most part to be in rude health. Returns didn’t soar to stock market levels but they weren’t expected to: for Citco-administered funds, average returns of 12% across all strategies marks 2013 as a good year.

Furthermore, a combination of strong performance and ongoing institutionalisation has led to significant new capital flows, with 2013 the first year since the financial crisis when inflows exceeded outflows. This has helped Citco to reach a peak net assets under administration of $740 billion.

Looking forward, with AIFMD now upon us, compliant functions, such as risk management, cash monitoring and external valuation, are setting new standards for the industry (see page 2).

On the product side, we are intrigued by developments in the liquid alternatives space, with many fund groups dipping their toe in as they seek new sources of distribution. Regionally, we also see greater activity in the Far East, including China (with its recently launched QDLP programme) and the Middle East, which is largely led by sovereign wealth and family office programmes. 2014 could be a breakthrough year.

Needless to say, we are standing side-by-side with our clients as all these developments unfold.

27th February 2014