Sutherland insights asset management news flash august 01, 2014

Fund Flow

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Report

Performance Reporting

16.14 -8.21

Technology

Strategy

ASSET MANAGEMENT NEWS FLASH August 01, 2014

Table of Contents Fund Flow ............................................................................................................................. 3 Performance Reporting ......................................................................................................... 4 Technology .......................................................................................................................... 22 Strategy .............................................................................................................................. 23

2|Sutherland Insights Asset Management News Flash Aug 01, 2014

Fund Flow Threadneedle unveils multi-asset income fund for pensions revolution July 31, 2014 | Citywire Wealth Manager http://citywire.co.uk/wealth-manager/threadneedle-unveils-multi-asset-income-fund-for-pensionsrevolution/a765121?ref=wealth-manager-latest-news-list Threadneedle investments has launched a multi-asset income fund for Toby Nangle as investors get set for major changes in the way they manage their pensions.

The Threadneedle Global Multi Asset Income fund invests across a range of asset classes, including equities, bonds, cash and property.

Nangle (pictured), who is head of multi-asset allocation at Threadneedle, believes this type of product is well placed to take advantage of the revolution in pensions, which will see the requirement to buy an annuity upon retirement scrapped in 2015.

Nangle said: ‘Individuals and the industry are still coming to terms with the long-term implications of the government’s pension reforms. Where people choose not to purchase an annuity, their pension savings will need to generate a significant investment return in order to see them through retirement.

He added: ‘Companies like Threadneedle will be entrusted with ensuring retirement assets are appropriately preserved and growth in excess of inflation is achieved, while also ensuring enough income is available to live on.

‘This fund offers investors the opportunity to diversify their investment pot by delivering income and returns from an appropriately balanced range of assets.’

The product combines Threadneedle’s core investment capabilities of multi-asset and income, with head of EMEA sale, wholesale, Gary Collins pointing out around 40% of the group’s assets under management are in some form of asset allocation mandate.

3|Sutherland Insights Asset Management News Flash Aug 01, 2014

Performance Reporting Oklahoma Teachers reports 22% fiscal year return July 25, 2014 | PIOnline http://www.pionline.com/article/20140725/ONLINE/140729875/oklahoma-teachers-reports-22fiscal-year-return Oklahoma Teachers’ Retirement System, Oklahoma City, returned 22% net of fees for the fiscal year ended June 30, surpassing the 18.1% custom benchmark return, Tom Spencer, interim director of the $14.1 billion pension fund, said in an e-mail.

The top performer was master limited partnerships, which returned approximately 42%, followed by total domestic equity, 27.6%; international equity, 21.1%; high-yield bonds, 12.5%; and core fixed income, 7.9%. Real estate and private equity returns were not provided.

Longer term, the pension returned a compound annualized 13.6% for the three years ended June 30, 16.1% for five years and 9% for 10 years.

As of June 30, the pension fund’s actual asset allocation was 45.7% domestic equity; 22.2% total “noncore” assets, which consists of 8.8% MLPs, 5.5% high-yield bonds, 4.1% real estate, 2.6% private equity and 1.2% opportunistic assets;, 16.6% international equity, 14.9% core fixed income and the rest in cash.

The pension fund’s target allocations are 40% domestic equity, 25% total “non-core” assets and 17.5% each international equity and core fixed income.

Separately, Geneva Capital Management was put “on alert” as a result of being acquired by Henderson Global Investors. Geneva Capital Management runs a $186 million domestic small-cap growth equity strategy for Oklahoma Teachers.

Lord Abbett was put also put on alert for personnel changes. Lord Abbett currently manages $603 million in a core fixed-income strategy and $262 million in a high-yield fixed-income strategy for the pension fund.

Being put on alert is a step below being placed “on notice,” which is the last step before termination.

4|Sutherland Insights Asset Management News Flash Aug 01, 2014

Aberdeen posts £9bn net outflow for Q3 after large client withdrawal July 28, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2357401/aberdeen-posts-gbp9bn-netoutflow-for-q3-after-large-client-withdrawal Aberdeen Asset Management has seen double the outflows it expected from its funds following completion of the SWIP takeover.

In its third quarter interim management statement covering the three months to 30 June, the group reported a total net outflow of £8.8bn, comprising £5.5bn from Aberdeen and £3.3bn from SWIP funds.

This was more than double the group’s expected figure of £4.2bn.

Aberdeen said net flows were severely impacted by a single client withdrawal of £4bn from its Asia Pacific and global equities strategy.

Net outflows from global emerging market equities reduced to £200m over the quarter, Asia Pacific took a £100m net inflow, and global equities saw net outflows of £300m. Emerging market debt funds took £700m of net inflows in the quarter, and SWIP’s property funds saw £200m of net inflows.

Assets under management came in slightly below estimates at £323bn, compared to the £325bn expected. This was the result of the larger than expected net outflows, which the group said was somewhat offset by positive market performance.

Martin Gilbert (pictured), Aberdeen’s chief executive, said: “Encouragingly, investor sentiment towards Asia and emerging markets recovered somewhat during the quarter.

“While the improvement in our underlying equity new business flows has been masked by a significant withdrawal by a single client, it is rewarding to see growing interest in our broader product range.

“We completed the acquisition of SWIP at the beginning of the quarter and we are pleased with the progress of the integration so far.”

At the start of last year, Aberdeen moved to stem flows into its giant global emerging markets strategies by raising its charges. In May this year it completed its £550m acquisition of Scottish Widows Investment Partners.

5|Sutherland Insights Asset Management News Flash Aug 01, 2014

KKR AUM down 4.3% in quarter, up 17.4% for year July 24, 2014 | PIOnline http://www.pionline.com/article/20140724/ONLINE/140729905/kkr-aum-down-43-in-quarter-up174-for-year KKR & Co.’s assets under management totaled $98 billion as of June 30, a 4.3% drop from three months earlier, but a 17.4% increase from a year earlier, the company said in its earnings report released on Thursday.

Committed capital yet to be invested, or dry powder, totaled $977 million as of June 30.

The firm’s private markets AUM totaled $59.4 billion as of June 30, a drop of 1.8% from the previous quarter, but up 9% from the previous year, while public markets AUM totaled $38.5 billion, down 7.7% from the previous quarter but up 32.7% from the previous year.

New capital raised in the second quarter totaled $1.1 billion, compared to distributions to limited partners of $4.4 billion. The fair value of funds increased a total of $2.2 billion in the quarter.

Net income under generally accepted accounting principles for the first quarter was $178.2 million, down 15.1% from the previous quarter but more than 10 times higher than the second quarter of 2013 when the company reported GAAP net income of $15.1 million.

T. Rowe Price’s AUM climbs 3.8% in quarter; up 20.3% for year July 24, 2014 | PIOnline http://www.pionline.com/article/20140724/ONLINE/140729906/t-rowe-prices-aum-climbs-38-inquarter-up-203-for-year T. Rowe Price Group on Thursday reported $738.4 billion in assets under management as of June 30, up 3.8% from the end of the first quarter and up 20.3% from a year earlier.

Net outflows during the second quarter were $200 million, compared with net inflows of $8.8 billion in the first quarter. Market appreciation and income totaled $27.2 billion in the second quarter.

Mutual fund assets totaled $470.9 billion at the end of the second quarter, up 4.6% from March 31 and up 24% from a year earlier.

Net income for the quarter came to $305.8 million, up 0.5% from the previous quarter and 23.4% higher than the second quarter of 2013. Net revenue, meanwhile, totaled $984.3 million, up 3.1% from three months earlier and up 15.2% from the year-earlier quarter.

6|Sutherland Insights Asset Management News Flash Aug 01, 2014

As of June 30, $140.6 billion was in T. Rowe Price’s target-date portfolios — $120.9 billion in target-date funds and $19.7 billion in target-date trusts. The total target-date AUM was up 8.5% from the first quarter and 38.7% higher than the second quarter of 2013.

“Target-date funds continued to exhibit strong net flow momentum, with T. Rowe gathering an estimated $4.6 billion of target-date net flows in the quarter,” wrote Christopher Shutler, equity research analyst at William Blair & Co. in a note to clients. “This was the third consecutive quarter in which target-date flows exceeded $4 billion, bringing the three-quarter total to about $15 billion.”

Federated Investors’ AUM drops 4% July 24, 2014 | PIOnline http://www.pionline.com/article/20140724/ONLINE/140729890/federated-investors-aum-drops-4 Federated Investors (FII) on Thursday reported assets under management of $351.6 billion as of June 30, down 4% from the previous quarter and down 3% from a year earlier.

Federated’s total equity assets as of June 30 were a record $49.9 billion, a 9% increase from the previous quarter and up 29% from the previous year. Equity market gains and reinvestments totaled $2.48 billion, while net inflows accounted for $1.52 billion.

Fixed-income assets were $51.1 billion at June 30, relatively unchanged from the previous quarter and up 2% from the same period the year prior. Fixed-income market gains and reinvestments totaled $630 million, while net outflows totaled $775 million.

Money market assets in both mutual funds and separate accounts were $245.2 billion at the end of the second quarter, down 7% from the first quarter and down 9% from the second quarter of 2013.

Liquidation portfolio assets totaled $5.41 billion as of June 30, down 5% from a quarter earlier and down 18% from the previous year.

Revenue for the second quarter totaled $212.98 million for the company, up 1% from the first quarter but down 5% from the same period the year before. Net income, meanwhile, reached $36.87 million for the quarter ended June 30, a 5% increase from the previous quarter but a 9% decrease from the second quarter of 2013.

7|Sutherland Insights Asset Management News Flash Aug 01, 2014

SSgA records 4.2% hike in AUM for quarter July 22, 2014 | PIOnline http://www.pionline.com/article/20140722/ONLINE/140729975/ssga-records-42-hike-in-aum-forquarter State Street Global Advisors had $2.48 trillion in assets under management as of June 30, up 4.2% from three months earlier and 15.6% higher than a year ago, said parent company State Street Corp. (STT)’s earnings announcement Tuesday.

The biggest gains for the three months were in multiasset strategies, up 12.8% from March 31 and up 26% from a year earlier, to $150 billion; equities, up 5% in the quarter and 19.7% for the 12 months, to $1.432 trillion; and fixed income, at $352 billion, up 4.8% from three months prior and up 8.6% from 12 months ago. Total assets under custody and administration were $28.4 trillion, up 3.4% from March 31 and up 10.3% from June 30, 2013.

SSgA’s investment management fees totaled $300 million for the quarter ended June 30, up 2.7% from the previous quarter and up 8.3% from the year-earlier quarter.

State Street Corp. reported net income for the latest quarter of $602 million, compared to $356 million in the previous quarter and $571 million in the year-ago quarter.

State Street’s revenue, meanwhile, reached $2.6 billion in the second quarter, up 4.4% from the first quarter and up 1.6% from the second quarter of 2013.

Altisource Asset Management Corporation Reports Second Quarter 2014 Results July 22, 2014 | Nasdaq http://www.nasdaq.com/press-release/altisource-asset-management-corporation-reports-secondquarter-2014-results-20140722-00295 Altisource Asset Management Corporation (“AAMC” or the “Company”) (NYSE MKT:AAMC) announced today financial and operating results for the second quarter of 2014. Net income attributable to stockholders for the second quarter of 2014 totaled $13.2 million, or $4.60 per diluted share,compared to a net loss attributable to stockholders of $1.5 million, or $0.64 per share,for the second quarter of 2013.

Net income attributable to stockholders for the six months ended June 30, 2014 totaled $20.1 million, or $7.00 per diluted share, compared to a net loss attributable to stockholders of $2.3 million, or $1.00 per diluted share, for the six months ended June 30, 2013.

8|Sutherland Insights Asset Management News Flash Aug 01, 2014

Second quarter 2014 highlights: Generated management incentive fees of $13.7 million, as a result of the $0.45 per share quarterly dividend declared and paid by Altisource Residential Corporation (“Residential”) to its shareholders.

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Facilitated Residential’s agreement to acquire an aggregate of 4,374 non-performing and reperforming mortgage loans having an aggregate market value of underlying properties of $1.23 billion.

•

Managed Residential’s resolution of 1,156 loans, up from 822 loans in the first quarter of 2014.

•

Facilitated an increase in Residential’s rental portfolio to 142 properties, well in excess of its targeted 100 rental properties by June 30, 2014.

•

In advanced stages of launching NewSource as a second managed client for AAMC that focuses on housing related reinsurance products with limited catastrophe risk and high operational intensity, such as title insurance and home warranty.

Chief Executive Officer Ashish Pandey stated, “We are very pleased with our execution of Residential’s strategic plan and the operating results we have been able to achieve for Residential.”

“We are happy with the continued growth of Residential under AAMC’s management, and we are excited with the progress AAMC is making toward developing NewSource as its second managed client,” said Chairman William Erbey.

About AAMC AAMC is an asset management company that provides portfolio management and corporate governance services to investment vehicles. Additional information is available at www.altisourceamc.com.

Consolidated Statements of Operations (In thousands, except share and per share amounts) (Unaudited) Three months ended June 30, 2014

Three months ended June 30, 2013

Six months ended June 30, 2014

Six months ended June 30, 2013

Rental revenues and net gain on mortgage loans: Rental revenues Net unrealized gain on mortgage loans Net realized gain on mortgage loans

$ 181

$—

$ 250

$—

105,042

7,165

170,172

8,293

10,819

1,719

20,140

2,106

9|Sutherland Insights Asset Management News Flash Aug 01, 2014

Three months ended June 30, 2014 Total rental revenues and net gain on mortgage loans

Three months ended June 30, 2013

Six months ended June 30, 2014

Six months ended June 30, 2013

116,042

8,884

190,562

10,399

3,253

84

4,303

84

103

—

151

—

16,925

1,242

28,362

1,634

Interest expense

6,945

654

12,653

696

General and administrative

7,421

3,369

13,376

6,067

Related party general and administrative

2,675

—

3,598

207

Total expenses

37,322

5,349

62,443

8,688

Other income

2,101

193

2,209

193

80,821

3,728

130,328

1,904

(191)

—

575

—

81,012

3,728

129,753

1,904

(67,782)

(5,227)

(109,695)

(4,243)

$ 13,230

$ (1,499)

$ 20,058

$ (2,339)

$ 5.87

$ (0.64)

$ 8.68

$ (1.00)

2,255,278

2,343,462

2,310,931

2,343,338

$ 4.60

$ (0.64)

$ 7.00

$ (1.00)

Expenses: Residential property operating expenses Real estate depreciation and amortization Mortgage loan servicing costs

Income before income taxes Income tax (benefit) expense Net income Net income attributable to noncontrolling interest in consolidated affiliate Net income (loss) attributable to common stockholders Earnings (loss) per share of common stock - basic: Earnings (loss) per basic share Weighted average common stock outstanding - basic Earnings (loss) per share of common stock - diluted: Earnings (loss) per diluted share

10 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

Three months ended June 30, 2014 Weighted average common stock outstanding - diluted

Three months ended June 30, 2013

2,874,906

Six months ended June 30, 2014

2,343,462

2,865,185

Six months ended June 30, 2013 2,343,338

Altisource Asset Management Corporation Consolidated Balance Sheets (In thousands, except share and per share amounts) (Unaudited) June 30, 2014

December 31, 2013

Assets: Real estate held for use: Land (from consolidated VIE)

$ 3,875

$ 478

Rental residential properties (net of accumulated depreciation of $172 and $24, respectively - from consolidated VIE)

14,917

3,092

Real estate owned (from consolidated VIE)

231,013

32,332

Total real estate held for use, net

249,805

35,902

27,572

1,186

2,024,028

1,207,163

Mortgage loans held for investment (from consolidated VIE)

144,009

—

Cash and cash equivalents (including from consolidated VIE $130,758 and $115,988, respectively)

204,642

140,000

10,269

5,878

955

1,428

12,608

9,260

Deferred leasing and financing costs, net (from consolidated VIE)

3,457

2,293

Prepaid expenses and other assets (including from consolidated VIE $260 and $1,542, respectively)

1,678

1,994

$ 2,679,023

$ 1,405,104

$ 1,271,483

$ 602,382

Real estate assets held for sale (from consolidated VIE) Mortgage loans (from consolidated VIE)

Restricted cash Accounts receivable (including from consolidated VIE $631 and $1,428, respectively) Related party receivables (from consolidated VIE)

Total assets Liabilities: Repurchase agreements (from consolidated VIE)

11 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

June 30, 2014

December 31, 2013

Accounts payable and accrued liabilities (including from consolidated VIE $7,459 and $4,952, respectively)

10,679

6,872

Related party payables (including from consolidated VIE $4,078 and $1,409, respectively)

4,911

2,883

1,287,073

612,137

—

—

248,824

—

24

24

15,610

12,855

14,657

(5,339)

Treasury stock, at cost, 194,198 shares as of June 30, 2014 and none as of December 31, 2013

(197,673)

—

Total stockholders’ equity

(167,382)

7,540

Noncontrolling interest in consolidated affiliate

1,310,508

785,427

Total equity

1,143,126

792,967

$ 2,679,023

$ 1,405,104

Total liabilities Commitments and contingencies Mezzanine Equity Preferred stock, $0.01 par value, 250,000 shares issued and outstanding as of June 30, 2014 and none issued or outstanding as of December 31, 2013; redemption value $250,000 Equity: Common stock, $.01 par value, 5,000,000 authorized shares; 2,436,870 and 2,242,594 shares issued and outstanding, respectively as of June 30, 2014 and 2,354,774 shares issued Additional paid-in capital and outstanding as of December 31, 2013 Retained earnings

Total liabilities and equity

The following tables set forth consolidating financial information which should be considered in addition to, and not as a substitute for, our consolidated financial statements presented in accordance with U.S. GAAP:

12 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

Altisource Asset Management Corporation Consolidating Statement of Operations Three months ended June 30, 2014 (In Thousands, Unaudited) NewSource AAMC Stand-alone StandAAMC Residential (Nonalone (Non- Consolidating Consolidated (GAAP) GAAP) GAAP) Entries (GAAP) Rental revenues and net gain on mortgage loans: Rental revenues

$ 181

$—

$—

$—

$ 181

105,042

—

—

—

105,042

10,819

—

—

—

10,819

Incentive management fee

—

—

13,715

(13,715)

—

Expense reimbursements

—

—

1,999

(1,999)

—

116,042

—

15,714

(15,714)

116,042

3,253

—

—

—

3,253

103

—

—

—

103

16,925

—

—

—

16,925

Interest expense

6,945

—

—

—

6,945

General and administrative

5,687

65

1,669

—

7,421

Related party general and administrative

17,467

210

712

(15,714)

2,675

Total expenses

50,380

275

2,381

(15,714)

37,322

Other income

1,698

399

4

—

2,101

67,360

124

13,337

—

80,821

(422)

—

231

—

(191)

67,782

124

13,106

—

81,012

—

—

—

(67,782)

(67,782)

Net unrealized gain on mortgage loans Net realized gain on mortgage loans

Total rental revenues and net gain on mortgage loans Expenses: Residential property operating expenses Real estate depreciation and amortization Mortgage loan servicing costs

Income before income taxes Income tax (benefit) expense Net income Net income attributable to noncontrolling interest in consolidated affiliate

13 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

NewSource AAMC Stand-alone StandAAMC Residential (Nonalone (Non- Consolidating Consolidated (GAAP) GAAP) GAAP) Entries (GAAP) Net income attributable to common stockholders

$ 67,782

$ 124

$ 13,106

$ (67,782)

$ 13,230

Altisource Asset Management Corporation Consolidating Statement of Operation Six months ended June 30, 2014 (In thousands, unaudited) AAMC NewSource StandAAMC Residential Stand-alone alone (Non- Consolidating Consolidated (GAAP) (Non-GAAP) GAAP) Entries (GAAP) Rental revenues and net gain on mortgage loans: Rental revenues Net unrealized gain on mortgage loans Net realized gain on mortgage loans Incentive management fee Expense reimbursements Total rental revenues and net gain on mortgage loans

$ 250

$—

$—

$—

$ 250

170,172

—

—

—

170,172

20,140

—

—

—

20,140

— —

— —

24,626 3,779

(24,626) (3,779)

— —

190,562

—

28,405

(28,405)

190,562

4,303

—

—

—

4,303

151

—

—

—

151

28,362 12,653 7,079

— — 95

— — 6,202

— — —

28,362 12,653 13,376

30,099

521

1,383

(28,405)

3,598

82,647 1,806

616 399

7,585 4

(28,405) —

62,443 2,209

109,721

(217)

20,824

—

130,328

26 109,695 —

— (217) —

549 20,275 —

— — (109,695)

575 129,753 (109,695)

Expenses: Residential property operating expenses Real estate depreciation and amortization Mortgage loan servicing costs Interest expense General and administrative Related party general and administrative Total expenses Other income Income (loss) before income taxes Income tax expense Net income (loss) Net income attributable to

14 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

AAMC NewSource StandAAMC Residential Stand-alone alone (Non- Consolidating Consolidated (GAAP) (Non-GAAP) GAAP) Entries (GAAP) noncontrolling interest in consolidated affiliate Net income (loss) attributable to common stockholders

$ 109,695

$ (217)

$ 20,275

$ (109,695)

$ 20,058

Altisource Asset Management Corporation Consolidating Statement of Operations Three months ended June 30, 2013 (In thousands, unaudited) AAMC Standalone (NonGAAP)

Residential (GAAP) Rental revenues and net gain on mortgage loans: Net unrealized gain on mortgage loans Net realized gain on mortgage loans Expense reimbursements Total rental revenues and net gain on mortgage loans Expenses: Residential property operating expenses Mortgage loan servicing costs Interest expense General and administrative Related party general and administrative Total expenses Other income Net income (loss) Net income attributable to noncontrolling interest in consolidated affiliate Net income (loss) attributable to common stockholders

Consolidating Entries

AAMC Consolidated (GAAP)

$ 7,165

$—

$—

$ 7,165

1,719

—

—

1,719

—

1,156

(1,156)

—

8,884

1,156

(1,156)

8,884

84

—

—

84

1,242 654 714

— — 2,655

— — —

1,242 654 3,369

1,156

—

(1,156)

—

3,850 193 5,227

2,655 — (1,499)

(1,156) — —

5,349 193 3,728

—

—

(5,227)

(5,227)

$ 5,227

$ (1,499)

$ (5,227)

$ (1,499)

15 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

Altisource Asset Management Corporation Consolidating Statement of Operations Six months ended June 30, 2013 (In thousands, unaudited) AAMC Standalone (NonGAAP)

Residential (GAAP) Rental revenues and net gain on mortgage loans: Net unrealized gain on mortgage loans Net realized gain on mortgage loans Expense reimbursements Total rental revenues and net gain on mortgage loans

Consolidating Entries

AAMC Consolidated (GAAP)

$ 8,293

$—

$ —

$ 8,293

2,106

—

—

2,106

—

2,057

(2,057)

—

10,399

2,057

(2,057)

10,399

Expenses: Residential property operating expenses Mortgage loan servicing costs Interest expense General and administrative Related party general and administrative Total expenses Other income Net income (loss) Net income attributable to noncontrolling interest in consolidated affiliate Net income (loss) attributable to common stockholders

84

84

1,634 696 1,701

— — 4,366

— — —

1,634 696 6,067

2,234

30

(2,057)

207

6,349 193 4,243

4,396

(2,057)

(2,339)

—

8,688 193 1,904

—

—

(4,243)

(4,243)

$ 4,243

$ (2,339)

$ (4,243)

$ (2,339)

Altisource Asset Management Corporation Consolidating Balance Sheet June 30, 2014 (In thousands, unaudited)

Residential (GAAP)

NewSource stand-alone (Non-GAAP)

AAMC StandAAMC alone (Non- Consolidating Consolidated GAAP) Entries (GAAP)

Assets: Real estate held for use: Land

$ 3,875

$—

$—

$—

$ 3,875

16 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

Residential (GAAP) Rental residential properties, net Real estate owned Total real estate held for use, net Real estate assets held for sale Mortgage loans Mortgage loans held for investment Cash and cash equivalents Restricted cash Accounts receivable Related party receivables Investment in affiliate Deferred leasing and financing costs, net Prepaid expenses and other assets Total assets

NewSource stand-alone (Non-GAAP)

AAMC StandAAMC alone (Non- Consolidating Consolidated GAAP) Entries (GAAP)

14,917

—

—

—

14,917

231,013

—

—

—

231,013

249,805

—

—

—

249,805

27,572

—

—

—

27,572

2,024,028

—

—

—

2,024,028

144,009

—

—

—

144,009

130,758 10,269 631 12,608 18,000

19,872 — 284 — —

54,012 — 40 28,034 2,000

— — — (28,034) (20,000)

204,642 10,269 955 12,608 —

3,457

—

—

—

3,457

260

70

1,348

—

1,678

$ 2,621,397

$ 20,226

$ 85,434

$ (48,034)

$ 2,679,023

$ 1,271,483

$—

$—

$—

$ 1,271,483

7,459

—

3,220

—

10,679

31,947 1,310,889

522 522

476 3,696

(28,034) (28,034)

4,911 1,287,073

—

—

—

—

—

—

—

248,824

—

248,824

572 1,226,939

— 20,000

24 15,610

(572) (1,246,939)

24 15,610

82,997

(296)

14,953

(82,997)

14,657

— 1,310,508

— 19,704

(197,673) (167,086)

— (1,330,508)

(197,673) (167,382)

—

—

—

1,310,508

1,310,508

Liabilities: Repurchase agreements Accounts payable and accrued liabilities Related party payables Total liabilities Commitments and contingencies Preferred stock Equity: Common stock Additional paid-in capital Retained earnings (accumulated deficit) Treasury stock Total stockholders’ equity Noncontrolling interest in consolidated affiliate

17 | S u t h e r l a n d I n s i g h t s A s s e t M a n a g e m e n t N e w s F l a s h A u g 0 1 , 2 0 1 4

Residential (GAAP) Total equity Total liabilities and equity

NewSource stand-alone (Non-GAAP)

AAMC StandAAMC alone (Non- Consolidating Consolidated GAAP) Entries (GAAP)

1,310,508

19,704

(167,086)

(20,000)

1,143,126

$ 2,621,397

$ 20,226

$ 85,434

$ (48,034)

$ 2,679,023

Altisource Asset Management Corporation Consolidating Balance Sheet December 31, 2013 (In thousands, unaudited) NewSource stand-alone (Non-GAAP)

AAMC Stand-alone (Non-GAAP)

$ 478

$—

$—

$—

$ 478

3,092

—

—

—

3,092

32,332

—

—

—

32,332

35,902

—

—

—

35,902

1,186

—

—

—

1,186

1,207,163 115,988 5,878 1,428 9,260 18,000

— 19,923 — — — —

— 4,089 — — 4,486 2,000

— — — — (4,486) (20,000)

1,207,163 140,000 5,878 1,428 9,260 —

2,293

—

—

—

2,293

1,542

—

452

—

1,994

$ 1,398,640

$ 19,923

$ 11,027

$ (24,486)

$ 1,405,104

$ 602,382

$—

$—

$—

$ 602,382

4,952

—

1,920

—

6,872

5,879 613,213

— —

1,490 3,410

(4,486) (4,486)

2,883 612,137

Residential (GAAP)

AAMC Consolidatin Consolidated g Entries (GAAP)

Assets: Real estate held for use: Land Rental residential properties, net Real estate owned Total real estate held for use, net Real estate assets held for sale Mortgage loans Cash and cash equivalents Restricted cash Accounts receivable Related party receivables Investment in affiliate Deferred leasing and financing costs, net Prepaid expenses and other assets Total assets Liabilities: Repurchase agreement Accounts payable and accrued liabilities Related party payables Total liabilities

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Commitments and contingencies Equity: Common stock Additional paid-in capital Retained earnings (accumulated deficit) Total stockholders’ equity Noncontrolling interest in consolidated affiliate Total equity Total liabilities and equity

Residential (GAAP)

NewSource stand-alone (Non-GAAP)

AAMC Stand-alone (Non-GAAP)

AAMC Consolidatin Consolidated g Entries (GAAP)

—

—

—

—

—

423 758,584

— 20,000

24 12,855

(423) (778,584)

24 12,855

26,420

(77)

(5,262)

(26,420)

(5,339)

785,427

19,923

7,617

(805,427)

7,540

—

—

—

785,427

785,427

785,427

19,923

7,617

(20,000)

792,967

$ 1,398,640

$ 19,923

$ 11,027

$ (24,486)

$ 1,405,104

Read more: http://www.nasdaq.com/press-release/altisource-asset-management-corporation-reportssecond-quarter-2014-results-20140722-00295#ixzz3991jZRMu

Morgan Stanley AUM up 3.7% in second quarter July 17, 2014 | PIOnline http://www.pionline.com/article/20140717/ONLINE/140719887/morgan-stanley-aum-up-37-insecond-quarter Morgan Stanley (MS) Investment Management reported $396 billion in assets under management as of June 30, up 3.7% from March 31 and up 14.1% from a year earlier, parent company Morgan Stanley’s earnings release Thursday showed.

Net inflows totaled $7.6 billion for the quarter ended June 30, compared with net inflows of $6 billion for the previous quarter and net inflows of $9.8 billion in the second quarter of 2013.

By asset class, net inflows of $6.9 billion went into liquidity strategies, $1.1 billion into equities, $1 billion into merchant banking and $800 million into alternatives. Real estate saw net outflows of $2.2 billion. Fixed-income net flows were flat during the quarter ended June 30.

The earnings release also reported that $150 billion of AUM was in equities at the end of the second quarter, up 3% from the end of the first quarter. Liquidity strategies had $121 billion in assets, up 6%; fixed income, $62 billion, up 2%; alternatives, $35 billion, up 3%; real estate, $20 billion, down 5%; and merchant banking, $8 billion, up 14%.

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Net revenue for MSIM totaled $692 million in the second quarter, down 6.5% from the previous quarter but up 3% the year-earlier quarter.

Investment management net income totaled $138 million in the second quarter, up 16% from the first quarter and up 37% from the year-earlier quarter.

BlackRock assets rise 4% for second quarter July 16, 2014 | PIOnline http://www.pionline.com/article/20140716/ONLINE/140719902/blackrock-assets-rise-4-for-secondquarter BlackRock’s assets under management totaled $4.594 trillion as of June 30, up 4% from three months earlier and up 19% from a year ago, said an earnings statement released Wednesday.

“Among institutional clients, we continued to see strong interest in our multiasset class offerings, such as our LifePath target-date suite and fiduciary mandates, as well as illiquid alternatives, where we raised more than $1 billion in commitments,” said Laurence D. Fink, BlackRock (BLK) chairman and CEO, in a news release.

Net inflows to BlackRock’s long-term strategies were about $38 billion for the latest quarter, reflecting net inflows of $21.3 billion in fixed income, $9.7 billion to equities, $6.8 billion in multiasset strategies and $267 million into core alternatives.

Assets in BlackRock’s institutional business as of June 30 were $2.766 trillion, up 4% from March 31, while assets in its iShares ETF business totaled $993.83 billion, up 7% from three months earlier. Retail assets in the quarter were $534.5 billion, a 5% increase from March 31.

The firm reported revenue of $2.78 billion in the second quarter, up 4% from the previous quarter and up 12% from the second quarter of 2013. Net income was $808 million, up 7% from the prior quarter and up 11% from the year-earlier period.

Schwab profit lifted by asset management fees July 16, 2014 | MarketWatch http://www.marketwatch.com/story/schwab-profit-lifted-by-asset-management-fees-2014-07-16 Charles Schwab Corp. said its second-quarter earnings rose 27% as stronger asset management and administration fees more than offset a decline in trading revenues.

The company reported a profit of $324 million, or 23 cents a share, up from $256 million, or 18 cents a share, a year earlier. Revenue increased 11% to $1.48 billion.

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Analysts polled by Thomson Reuters expected per-share profit of 22 cents and revenue of $1.47 billion.

Shares were barely changed in midmorning trading.

The company, which has increasingly focused on providing wealth management rather than just trading services to clients, said it gathered $11.5 billion in net new assets in June and $22.7 billion during the second quarter, the strongest second quarter in six years.

Total client assets reached a record $2.402 trillion, an increase from $2.051 trillion a year earlier and $2.308 trillion in the first quarter.

Asset-management and administration fees and net interest revenue rose 10% and 19%, respectively.

Asset management and administration fees include the money Schwab makes from managing client assets in mutual funds, for example.

Net interest revenue measures the difference between the interest earned on assets such as securities and loans to bank clients, and the interest Schwab has to pay out on deposits, among other things. “Many of our clients...are increasingly looking for professional help,� Schwab Chief Executive Walt Bettinger said in a statement.

On the self-directed trading side, Schwab and other firms with online brokerage units had seen individual investors return to the market this year amid a recent stock market rally. Ahead of the earnings report, however, analysts predicted that trading volume would pull back from a year earlier as well as from the highs hit during the first quarter. Trading volumes are typically weak in the summer, so it is unclear whether the trend will last.

The company executed an average of 483,000 client trades a day in the latest quarter, down 2.8% from a year earlier and down 13% from the first quarter.

TD Ameritrade Holding Corp. and E*Trade Financial Corp., whose brokerage units compete with Schwab’s, are scheduled to report their second-quarter results next week.

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Technology Eze Software introduces AIFMD reporting too July 24, 2014 | Banking Business Review http://bankingtechnology.banking-business-review.com/news/eze-software-introduces-aifmdreporting-tool-240714-4326028 Eze Software Group, a premier provider of global investment technology, announced the expansion of Regulatory Filings Manager to support Alternative Investment Fund Managers Directive (AIFMD) Annex IV filings.

Clients can now leverage the robust functionality of this enterprise reporting solution to generate necessary reports in accordance with the compliance deadlines of AIFMD. Proposed by European Securities and Markets Authority (ESMA) last year, AIFMD requires that alternative investment funds meet specific risk management standards for better monitoring, measuring, and reporting. Funds need to provide supervisory authorities with detailed investment data on a quarterly or bi-annual basis for increased transparency into funds’ activity.

“AIFMD represents another large, complex filing that requires our clients to pull relevant data from multiple data sources across historical time periods. Contrary to previous filings, AIFMD requires clients to reevaluate, recalculate, and reformat that data to correspond with ESMA reporting guidelines,” said Phil Christianson, associate director of product management at Eze Software Group. “The flexibility and extensibility of our technology framework allowed us to react quickly to these new regulations. We have enhanced the capabilities of Regulatory Filings Manager to help our clients meet these new reporting requirements, while also benefiting from flexible and intuitive workflow management tools that ensure efficient compliance, risk management, and data governance.”

Eze Software’s Regulatory Filings Manager streamlines and automates complex filing processes with a centralized and scalable data management solution that provides a repository for storing multiple filings with version control. The solution automates and organizes the AIFMD filing process for investment advisors with a flexible user interface and prebuilt templates based on the Annex IV reporting template of AIFMD. Users can leverage an advanced toolset to intuitively map and define data, create golden copies of positions, and render accurate calculations.

“Our AIFMD solution is a natural extension of all that we have learned in helping our clients file Form PF and CPO-PQR,” said Michael Hutner, senior managing director and co-head of global sales for Eze Software Group. “Regulatory Filing Manager is able to efficiently aggregate, consolidate, and map key data points from the clients’ systems to help them effectively draft filings. This is just one example of our dedication as a company to the continued development of our front-to-back platform to meet the unique needs of our clients.”

Eze Software Group has successfully completed over 100 filings with Eze OMS’s Regulatory Filings Manager.

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Strategy Neuberger Berman to expand multiasset offerings July 24, 2014 | PIOnline http://www.pionline.com/article/20140724/ONLINE/140729918/neuberger-berman-to-expandmultiasset-offerings Erik Knutzen, the new multiasset-class chief investment officer at Neuberger Berman Group LLC, is looking to expand the reach of the New York-based money manager’s multiasset capabilities.

Neuberger Berman has been providing multiasset-class solutions to a few of its clients for years, most notably, to the $124 billion Teacher Retirement System of Texas, Austin, and China’s $180 billion National Council for Social Security Fund. But now, the New York-based firm is looking to develop these offerings with the help of investment consultant NEPC LLC’s former investment chief for more of its clients.

“We’re looking to take these capabilities that we’re delivering to a relatively small number of clients and deliver them to a broader set of clients,” said Mr. Knutzen in an interview.

Mr. Knutzen, who joined Neuberger Berman on May 4, said his job is not to pick stocks and bonds, but rather to find ways to add value and seek potential opportunities.

“Job one is to work closely with our large multiasset-class clients,” he said about the position. “The second aspect of the role is to enhance our asset allocation capabilities across the firm.”

Mr. Knutzen said that he and the 11-person team he oversees are looking to enhance Neuberger Berman’s multiasset-class models by adding strategic and tactical asset allocation services and making them available in to a wider array of institutional investors — including smaller defined benefit plans.

Joseph Amato, president and CIO of Neuberger Berman, said in an e-mailed response to questions that the firm hired Mr. Knutzen because it was “the right time to have a dedicated professional focusing on” the relationships with its institutional clients engaged in multiasset strategies “as well as driving the asset allocation process on a firmwide level.”

“As institutional investors are focused more on outcomes as opposed to style boxes and managers to fit them, we see a tremendous opportunity to grow our multiasset-class group to meet this client need,” Mr. Amato added. “Our firm is well positioned to be a strong player as multiasset-class solutions become more prevalent.”

Neuberger Berman had $247 billion in total assets under management at March 31; the firm doesn’t break out its multiasset class assets.

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By hiring Mr. Knutzen to oversee its multiasset class capabilities, Neuberger Berman joins a number of money managers adding similar roles to their executive staff to accommodate asset owners’ growing demand for multiasset class solutions.

In July, former Wilshire Associates Inc. senior consultant and managing director Michael Schlachter joined Newark, N.J.-based Prudential Investment Management Inc. in the new position of managing director, multiasset-class solutions. In May, Queensland Investment Corp., Brisbane, Australia, tapped Neil Williams as managing director, multiasset and investment solutions; and in March, Paris-based BNP Paribas Investment Partners named Colin Graham CIO of the multiasset team and head of tactical asset allocation and research.

“The demand for multiasset products is rising,” said Yariv Itah, managing partner at management consulting firm Casey, Quirk & Associates LLC, Darien, Conn. “We think this is a long-term trend; it’s not cyclical.”

Mr. Itah added that because many institutional investors are now looking at multiasset class solutions as the core of their portfolios, he believes the investment management industry will see more money managers continuing to hire multiasset CIOs or similar roles.

“I think it’s a good hire,” said Charles A. Skorina, founder of the eponymous San Francisco-based executive search firm of Mr. Knutzen’s position. He noted Mr. Knutzen “has advised on investing institutional assets for years. He knows how to advise on a highly diversified portfolio.”

Mr. Skorina speculated that Neuberger Berman also brought Mr. Knutzen on board because the firm “may be tired of competing with 8,000 long-only managers and are trying to expand and deepen their business and improve their margins, because margins are brutal in institutional equity long-only.”

“Clients are driving this growing demand for multiasset solutions,” said Jane M. Mancini, senior vice president and asset manager sector head at State Street Corp. (STT), Boston, in an interview. “A bigger percentage of institutional investors now have the attitude of, ‘keep me safe, help me grow.’”

“This is a classic example of clients leading the industry. It’s where the puck is going,” said Peter R. Simon, a partner and co-head of the global asset management practice at executive search consulting firm Spencer Stuart Asset Management, Toronto, about multiasset class solutions.

Describing the growing demand for multiasset class solutions “an extension of the outsourced CIO movement,” Mr. Simon added that because midlevel asset owners now want to be as nimble as the large-scale pension plans in Canada and the U.S., they are now managing their portfolios on a multiasset basis. And in turn, money managers have been hiring either multiasset class CIOs or investment strategists.

“Plan sponsors are moving beyond style-box thinking and looking to their managers to add as much value as possible,” said Mr. Knutzen, adding that asset owners are seeking multiasset class solutions because “they’re grappling with an environment where return expectations are low and the risk environment seems more complex.”

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Legg Mason to acquire Martin Currie in Q4 July 24, 2014 | Investment Week http://www.investmentweek.co.uk/investment-week/news/2357097/legg-mason-to-acquire-martincurrie-in-q4 Legg Mason has announced it intends to buy Martin Currie in the last quarter of the year for an undisclosed sum.

The group said in an announcement it has agreed a deal to buy the Asian equities specialist later this year.

Legg Mason said in a statement: “The transaction is expected to be slightly accretive to Legg Mason’s earnings in the first year and is scheduled to close during the fourth quarter of 2014.

“Terms of the transaction were not disclosed. The firm will become a core independent investment affiliate of Legg Mason, along with Brandywine Global, ClearBridge Investments, The Permal Group, QS Investors, Royce & Associates and Western Asset Management.”

Following the acquisition, Martin Currie will become a core independent investment affiliate of Legg Mason, sitting alongside Brandywine Global, ClearBridge, Permal Group, QS Investors, Royce & Associates and Western Asset Management.

Joe Sullivan, president and chief executive of Legg Mason, said: “Martin Currie’s active international equity capabilities fill our largest product gap and are a perfect complement to our existing investment capabilities.

Martin Currie is a perfect strategic fit for our growing equity business in Australia, where we see meaningful opportunity. We believe that, over time, our global retail distribution platform will be able to meaningfully leverage Martin Currie’s broad based investment capabilities.”

How is regulation feeding the outsourcing trend?

July 24, 2014 | Citywire Wealth http://citywire.co.uk/wealth-manager/how-is-regulation-feeding-the-outsourcing-trend/a763722 New research from Knadel shows that wealth management firms are outsourcing in a way they haven’t before.

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The past five years have been marked by a significant trend towards outsourcing among wealth management firms, as the industry grapples with pressures to modernise and comply with new regulations.

The findings come from a study conducted by consultants Knadel, which found that a significant portion of a sample of 50 wealth managers would now consider outsourcing trade execution, back office alongside a raft of other functions.

Attitudes have changed on the back of new regulatory requirements post-the introduction of the retail distribution review (RDR) and the Foreign Account Tax Compliance Act (Fatca).

Here we highlight some of Knadel’s key findings.

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The wealth manager participants The sample of wealth management firms surveyed was 50-strong, responsible for ÂŁ135 billion on behalf of 500,000 clients. Over 90% of the sample provides discretionary service, 57.7% advisory services, 46.2% provided family office services, while 42.3% held client money.

Knadel found 75% of a sample of 50 wealth managers would now consider outsourcing trade execution.

It is an interesting finding, given that all full service stockbrokers (equating to 23% of the sample of wealth managers used) who are currently members of the London Stock Exchange still retain the bulk of this activity in-house.

The consultancy firm questions the future of keeping this in-house, arguing that the value-add for advisory or discretionary propositions is limited.

The study found that 50% of the sample were interested in outsourcing their back office. Knadel attributes this interest to changing regulation, particularly RDR and Fatca. ‘This regulatory pressure has led managers to reform their front office processes, segment their client base and more significantly it has given rise to a need for more efficient business operations to support

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different levels of client service and to implement better controls,’ Knadel noted.

The research showed that small and medium companies have moved much quicker towards the outsourcing trend, with 40% already outsourcing their back office. It doesn’t stop there, however. The research found that firms are increasingly looking to outsource other functions besides back office, particularly client service activities.

Higher up the scale, all private banks retained client reporting in-house, while 87% of all firms currently keep back office processes and client reporting together

In Knadel’s view wealth management business operating models are now becoming less driven by their so-called ‘historical tribe’. By this they mean distinctions between private client investment managers, brokers, private banks and advisers still exist but are blurring.

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‘Business models are more likely to be determined by product and service propositions, size/age of firm and underlying investor size,’ Knadel concluded

Here Knadel outlines the current insourcing/outsourcing activities of the wealth management firms from their sample. Three quarters keep front-office functions in-house, with only 7% currently outsourcing to an external third party. Around 49% outsource middle and back office services to external third parties versus 32% which prefer to keep it in-house.

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Knadel believes the trend is supported by the growth of providers in the space and a broadening of their service offerings in response to client demand. While the consultancy firm views the services on offer as relatively immature in comparison to the institutional sector, they point out that the majority of respondents were happy with their services across all activities

How Knadel views the outsourcing world In Knadel’s view, the table above charts all of the activities that are involved in wealth management from front to back office – which could theoretically be outsourced.

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Different business model, different attitude Further analysis by the type of business model among the wealth managers showed different attitudes towards outsourcing.

Advisers are more likely to outsource back office through to custody, while full service stockbrokers, private client investment managers and family offices were found to be comfortable outsourcing back office functions generally although a significant proportion keep investment operations in-house.

Private banks, meanwhile, are less likely to outsource back office functions. Only 12% of these businesses use a third-party for investment operations and settlement, and 22% outsourced custody.

Henderson Global Investors looks to grow again July 24, 2014 | Financial News http://www.efinancialnews.com/story/2014-07-24/henderson-global-investors-looks-to-grow-againandrew-formica?ea9c8a2de0ee111045601ab04d673622 Strong returns in Europe, surging profits and inflows of £2.5 billion last year have encouraged the Australian to expand his footprint in North America and Asia.

But Formica, chief executive since 2008, has learnt to be cautious following his brave swoops on UKbased New Star Asset Management and Gartmore, which he bought to bulk up the group in 2009 and 2011 respectively. Although both were snapped up at prices that reflected their distressed state, their reliance on Europe as the eurozone crisis was raging lowered Henderson’s returns.

Henderson is an unusual beast. One of the half-dozen big listed asset managers in London, it grew out of the office that administered the estate of Alexander Henderson, a City financier whose investments ranged from railways to the Manchester Ship Canal to that newfangled device, the telephone.

As of March 31, some 54% of the almost £80 billion of assets under management were from retail investors. Its biggest sector was global equities, at 26% of assets, then alternatives at 25% and fixed income at 22%.

Finding his niche Following his two big purchases, with an eye on balance sheet and regulatory constraints, Formica has restricted himself to niche acquisitions and team hires to diversify his business. He has also developed products, covering global equities and bonds, to build on low institutional inflows in equities.

He has raised cash by forming a jointly owned real estate venture with US-based pensions giant TIAACref, which netted him £114 million. Formica said investors have become keen on managers investing in property alongside them. He reckons he has better uses for his capital.

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Formica has phased out private equity fund launches: its residual funds were worth £890 million at the start of the year and the disposal of their main asset, contractor John Laing, could be imminent. In an unusually brave move for the asset management sector, Formica cut 9% of his staff, including managers, in early 2013.

He has rationalised his socially responsible team: “They took up a lot of time and it was a great dinner party conversation. But we didn’t see a lot of fund growth.”

He says his revamped team, operating under the Global Care banner, has become a top-quartile performer by using bets from Henderson’s global growth team, with a socially responsible screen.

Formica’s purchase of US-based Geneva Capital Management at the end of June illustrates his cautious return to a growth tack. The deal is costing $130 million up front, or $200 million if targets are hit.

Geneva invests $6.3 billion in quality US small and mid-cap growth stocks, which failed to participate in the latest phase of the market rally. But the deal put Henderson on the institutional map. “Geneva’s sales have remained strong. Institutions are still buying the story,” says Formica.

Equally important, Geneva has bought into Henderson’s plans for a global small cap product: “They will also take over US business development, and help us hire a US value team.”

Separately, Henderson has been developing a range of income funds, believing investors will increasingly turn to them in their retirement.

Formica is also bullish on institutional prospects for 30-stock World Select growth products managed by Matthew Beesley, hired from Trinity Street Asset Management in 2012, although returns since then have been just behind their benchmark.

Formica also has big plans for his credit team in Philadelphia, hired in February 2013. Since launch in April 2013, its high yield fund has been a Morningstar top percentile performer.

Henderson has hired Steve Drew from F&C Investments to run emerging markets debt and plans two further hires in the sector. He also wants to diversify into US investment grade credit: “We want to let our credit managers go anywhere for returns.” He wants to tap into this theme through a strategic bond fund, to be led by head of credit Stephen Thariyan, in the fourth quarter.

Stronger bonds Bonds are a strong area for Henderson, capable of winning much more institutional business, with 89% of funds ahead of benchmark over the three years to 2013, against average outperformance from the group of 82%.

Last year, Formica poached Andrew Gillan from Aberdeen Asset Management to head a new teambased approach in Singapore. Formica says he is interested in adding emerging market equity expertise in Asia: “It’s probably our biggest product gap.” Asian credit will later be part of the mix.

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Formica has also bought small boutiques in the US and Australia, arguing affiliates across the world can work together once they know how Henderson ticks: “You need to let investment teams have autonomy. Then, you can put information, communication and distribution around them.”

To glue his teams together Formica hired Rob Gambi from UBS Global Asset Management as his chief investment officer this year. Gambi survived cancer 10 years ago to climb the seven highest summits in the world and ski to the Poles.

Formica says: “He’s a tough guy, a smart guy. He’s like the manager of a football team.”

Phil Wagstaff, global head of distribution, is Gambi’s opposite number in marketing. He agreed to sign up in 2012 after stints at New Star, then Gartmore, before Henderson took them over.

Formica likes to praise strong performers and reward loyalty. Stephen Peak lost his European hedge fund in 2013 when clients withdrew funds during the credit crisis but, following a decent stint running a cross-border mutual fund, Formica intends to put Peak in charge of a new international hedge fund in the fourth quarter.

Formica has worked at Henderson for the best part of two decades, an unusually long period for a chief executive.

After qualifying as an actuary at Macquarie University, Australia, he joined AMP Investments in 1993, becoming a specialist equity director following its merger with Henderson in 1998.

The two firms were demerged again in 2003 and Formica succeeded Roger Yates as chief executive in 2008.

Formica says: “We are 60% owned by Australian investors. We have become their proxy for Europe.” He thinks others ought to follow Henderson to boost their share rating, given the large size of the local savings pool.

The financial crisis presented several challenges for Henderson, which Formica complicated by buying New Star and Gartmore, both European managers. The two deals cost around £450 million and brought assets of around £25 billion. He also considered buying US-based RidgeWorth Capital for $400 million in 2010.

Formica knew Henderson needed firmer foundations but the deals became a gamble, as the eurozone threatened to implode.

Worse, Henderson faced legal action by 22 institutions over hefty losses incurred by a private equity fund as the result of a deficit in a pension scheme sponsored by John Laing.

Henderson settled the case last year as Laing saw its profits surge. Analysts reckon its fund will sell Laing soon. Formica declined to comment.

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Events in Europe started to turn in Formica’s favour in July 2012 when John Bennett, Henderson’s director of European equities, told investors to pile in.

Formica said: “John was out there, banging the table. Then [Mario] Draghi promised to save the euro…”

The stars aligned, performance improved and investors used Henderson to rebuild their European weightings. Net outflows of £3.9 billion in 2012 turned into inflows of £2.5 billion in 2013, although analysts say fund sales in Europe ebbed in the second quarter.

Straight bat Following a 24% rise in group profits to £190 million last year, Formica was paid a £1.65 million bonus, pushing up his overall pay to £4.5 million. The bonus produced a 27% shareholder revolt. But Formica plays a straight bat: “I haven’t had a pay rise for five years and I don’t set the policy decision, which was wrapped up with a combination of things.”

Formica also defends his acquisition record: “Three quarters of our new business growth is from Gartmore and New Star. Gartmore provided us with manager expertise. New Star gave us distribution.

We’re really happy with what we’ve got in Europe.”

Henderson’s hedge funds have also been performing. Its new Volantis Catalyst hedge fund produced 30% in its first year since launch in May 2013.

In a research note, published in April, Citi Research noted Henderson had a greater proportion of its funds in the top quartile over one and three years than Schroders. Formica says: “Top half performance matters, but top quartile matters a lot. We are in a winner-takes-all market.”

Analysts at Morgan Stanley say Henderson’s focus on Europe has masked its developing strength in global distribution.

Formica also promises not to upset people with an acquisition spree: “It’s off the radar, although I can’t look beyond the next three years.”

Multistrategy focus fuels 15% growth in subadvisory relationships July 21, 2014 | PIOnline http://www.pionline.com/article/20140721/PRINT/307219995/multistrategy-focus-fuels-15-growthin-subadvisory-relationships The move by institutional investors toward multistrategy investment solutions is helping propel growth in money managers’ subadvisory business.

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“There’s been a strong shift in outcome-oriented portfolio construction and that drives a need to look at who’s the right manager to manage the different components of the portfolio,” said Jeffrey Stakel, a partner at Casey, Quirk & Associates LLC, Darien, Conn.

This, he noted, has helped drive an increased demand for subadvisory partnerships between money managers.

“The manager hiring the subadviser could be doing it to fill a product gap or strategy gap that they don’t have internally,” Mr. Stakel added. “They could also be doing it to provide best-in-breed managers to their underlying clients.”

The assets managed by the top 50 subadvisers totaled $3.64 trillion at the end of 2013, up 15% from a year earlier.

Overall, 356 managers looked after a combined $4.32 trillion in worldwide assets on behalf of other money managers and distributors as of Dec. 31, also up 15% from the prior year when 351 firms responded to a survey by Pensions & Investments.

“Continues to be positive’

“The trend continues to be positive,” said Scott Ebner, a senior managing director at State Street Global Advisors, Boston, about the overall subadvisory business. “The growth in this segment has been large.”

Mr. Ebner is also global head of product development and research in the global product and marketing group.

SSgA, with just shy of $178 billion in subadvisory assets, a gain of 20%, ranked sixth in P&I’s survey.

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The field also is becoming more collaborative between the subadvisers and the managers that hire them.

“It’s an important space, and the collaboration we have with (money manager) clients now has increased significantly because it’s no longer just a search for an asset class,” said Jim Kwok, a managing director at J.P. Morgan Asset Management (JPM) in Chicago and head of its subadvisory business for the U.S. and Canada. “Clients are now seeking someone to provide a total solution. You need to be able to solve the problems that they’re looking at.”

Mr. Ebner agreed. “We’ve got a broad range of services as an asset manager, and that variety of services shows up in our subadvisory work,” he said. “We can provide active and passive solutions and provide alternative solutions for clients looking for a broad array of services.”

Mr. Kwok added he’s recently seeing clients “think very hard about how to allocate to fixed income.”

Since it has become difficult to achieve high levels of income while also preserving capital, firms are looking to hire subadvisers to help them achieve both.

“So we’re seeing clients go around this problem by using a core fixed-income manager as a foundation, but expanding into managers that are more flexible and more absolute return-oriented.”

JPMAM subadvised $81.8 billion at the end of 2013, up 18%, to rank 13th.

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“The subadvisory relationship continues to evolve,” said Jack O’Connor, head of business development and client service at DDJ Capital Management LLC, Waltham, Mass. In particular, Mr. O’Connor said he’s seeing more firms take the multimanager approach.

“It’s not a case of, “now you’re it.’ It seems that more managers are looking to add additional subadvisers into the mix. If three are subadvising a fund, they’re often looking for a fourth.”

Mr. O’Connor added the multimanager approach brings a couple of advantages. In addition to bringing in as many specialties and areas of expertise onto one fund, if one manager winds up underperforming, terminating that manager and reallocating its assets becomes easier and less of an ordeal than terminating one firm and then seeking another.

DDJ Capital subadvised $2.99 billion in assets, a 72% increase from the year before.

Another thing Mr. Kwok noticed from firms looking to hire subadvisers is that they’re looking for ones with “deep investment capabilities.”

“A number of years ago, the focus (from managers) was more on performance,” Mr. Kwok said.

Nowadays, however, clients are interested in the subadviser helping solve their investment problems. A subadviser “has to have strong investment capabilities that go beyond track record.”

Barbara A. McKenzie, a senior executive director and chief operating officer of boutique operations at Principal Global Investors, agrees that having strong and broad investment capabilities is essential in being a successful subadviser.

She attributes much of the Des Moines-based firm’s success in winning subadvisory mandates to its executives’ “ability to sit down with clients and have a broad brainstorming session with them.”

“More creative’

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“A lot of firms are very narrow in their focus, and when you’re good at one or two things, if a client is looking for a solution to a problem, you’re going to say the solution is one of those two things,” Ms. McKenzie added. “With broader capabilities, you can be more creative.”

Principal ranked ninth among the 10 largest subadvisers, with $144.7 billion, a 16.5% jump.

Topping the list of the subadvisers this year once again was Wellington Management Co. LLP, Boston, which subadvised $448.2 billion in assets as of Dec. 31, up 10% from a year earlier.

Pacific Investment Management Co. LLC, Newport Beach, Calif., remained in second place with $265.96 billion despite experiencing a 7.5% dip in assets from Dec. 31, 2012. Wells Capital Management Inc., San Francisco, subadvised $248.9 billion, up nearly 6% from the year before.

Toronto-based Manulife Asset Management’s subadvised total of $188.4 billion gained 9%, keeping its fourth-place position, while BlackRock (BLK) Inc. (BLK), New York, subadvised $187.8 billion, up 12.7%, to hold onto fifth place.

Among the top 10, New York-based BNY Mellon Investment Management saw the biggest gain, subadvising $177.2 billion in assets at the end of 2013, up 88% from the end of 2012. This gain in subadvisory assets brought the banking giant up to seventh in the ranking from 10th. BNY Mellon spokesman Mike Dunn declined to comment.

Following BNY Mellon was Geode Capital Management, Boston, subadvising $156 billion, a 46% gain from a year earlier. Geode Capital also moved up one spot on the list, to rank eighth.

Capping off the 10 largest subadvisers is London-based Legal & General Investment Management Holdings Ltd.Holdingssubadvised $131.5 billion as of Dec. 31, up 8.8%.

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Chinese fund groups eye UK launches July 21, 2014 | fundweb http://www.fundweb.co.uk/news-and-analysis/asia/chinese-fund-groups-eye-uklaunches/2012518.article Three of China’s largest asset managers are said to be mulling UK expansion and are close to launching funds in the country.

E Fund Management, Haitong Securities and CSOP Asset Management are reportedly close to establishing subsidiaries in the UK and are looking to bring China-focused funds to European investors, according to the FT. This follows a recent tour of Europe by the three firms with Citigroup, when they met other European fund houses and explored the setting up of Ucits vehicles.

A senior figure within the UK asset management industry told the newspaper that E Fund Management is “close” to establishing a London operation. Haitong and CSOP could not be reached for comment on their UK expansion plans.

UK authorities have been attempting to encourage firms to domicile funds in the UK following on from the 2013 Budget when chancellor George Osborne unveiled a set of initiatives to attract asset management businesses to the UK. Within this strategy, fund-specific stamp duty tax was scrapped in April 2014 and two new authorised contractual schemes were introduced in July 2013 - fund structures designed to be competitive with other fund domiciles.

Additionally the strategy included concerted marketing efforts and attempts to make regulation more responsive and attractive - including full implementation of the alternative investment fund managers directive and “effective engegemnt” with proposed Ucits V legislation.

Also, the FCA recently pledged to cut authorisation times across non-Ucits, qualified investor schemes and Ucits funds.

Recently BlackRock Advisers (UK) secured a Renminbi Qualified Foreign Institutional Investor licence from the China Securities Regulatory Commission, as a way of offering Chinese equity investment to their global investors.

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Asset Managers’ Profits Surge, But They Face Disruptive Trends July 16, 2014 | Wall Street Journal http://blogs.wsj.com/moneybeat/2014/07/16/asset-managers-profits-surge-but-they-facedisruptive-trends/ Global assets under management grew to a record $68.7 trillion in 2013 and asset managers’ profits surged to $93 billion, 7% below their historic pre-crisis peak, according to the Boston Consulting Group.

But the asset-management industry can’t be complacent as it faces disruptive trends, the consulting group says in its 12th annual study of the industry released Wednesday.

“Growth will become more difficult,” and the industry won’t be able to rely on market performance to grow its assets, says Gary Shub, a partner with Boston Consulting Group in New York.

Among the unsettling changes asset managers now face: Regulatory change: Tightening regulations will affect asset managers as well as their clients and distributors, requiring these managers to continually adapt to new rules in multiple markets, the consultant says. Greater compliance burdens will increase the firms’ operational complexity and pose strategic challenges on issues ranging from product innovation to international growth, it says.

A digital and data revolution: Digital technologies and data innovation are quickly transforming operational aspects of asset management, becoming sources of competitive advantage, the group says.

For example, 96% of equity trades were managed electronically in 2013, compared with about 90% in 2011, it says. The benefits of more advanced enterprise-wide data management in particular have become an increasingly critical focus for asset managers, it said.

More demanding investors with a growing preference for nontraditional assets: Persistently lower interest rates and a shift in investor preferences are boosting the growing appetite for specialty investments. Solutions include absolute-return and target-date funds, multi-asset capabilities, and passive products, according to the consultant. Rather than performance relative to a benchmark, investors are demanding investments specifically oriented to their needs, it said.

New competitors offering nontraditional assets: To the detriment of traditional managers, providers of nontraditional assets are now more often serving traditional clients. Most hedge-fund, private-equity, infrastructure and private-debt business is still provided by specialized alternative managers. Traditional managers are slowly building these capabilities, but that will take time.

Globalization: Demand for greater diversification is accelerating globalization, the study found. Asset managers must adapt their product offerings to local regulations, distributors and the needs of local investors. The global scale and complexity of a multi-country organization will require a carefully designed operational model, the Boston Consulting Group says.

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Fund managers most bullish on equities since Feb 2011: BofA-ML survey July 16, 2014 | Business Standard http://www.business-standard.com/article/markets/fund-managers-most-bullish-on-equities-sincefeb-2011-bofa-ml-survey-114071600246_1.html A total of 228 panellists with $674 billion of assets under management participated in the survey.

Fund managers are bullish on the road ahead for equities in the second half of 2014, according to a recent Bank of America Merrill Lynch (BofA-ML) survey for July, with a net 61% of global asset allocators being overweight equities. This ranks as the survey’s panel’s second-strongest response ever. Only in February 2011 did the reading at 67% was higher.

“This aggressive positioning for recovery in H2 reflects a significant increase in investors’ inflation expectations. A net 71% expect global core CPI (consumer price inflation) to be higher in 12 months, up 13 percentage points since last month. This marks a cyclical high for the survey. Exposure to commodities, an asset class especially sensitive to inflation, has risen to its strongest in more than a year,” findings suggest.

A net 26% of investors are over-weight (OW) Japan equities, highest allocation in five months while the allocation to euro-zone equities dropped in July to a net 35% OW from net 43% OW last month. A net 8% of investors are under-weight (UW) UK equities, down from net 4% UW in June.

On the other hand, EM equities are under-owned relative to history, BofA-ML says, and are still perceived as most undervalued in 13 years. With a country preference of around 80%, India remained the top pick for GEM (global emerging markets) investors’ country preferences in the July survey (up from around 50% in June) followed by Russia, China and Mexico.

A total of 228 panellists with $674 billion of assets under management (AUM) participated in the survey conducted by BofA Merrill Lynch Global Research between July 3 - 10, 2014 with the help of market research company TNS. Capex Fund managers also feel that the companies are under-investing. For the seventh month in a row, investors’ call for companies to invest more in capital spending has again reached a record high of 65% and is mirrored by a record net 71% judging that companies are under-investing - the highest reading since the survey began asking this question in 2005.

Conversely, those wanting companies to return surplus cash are at their lowest level in five years with only 18% of fund managers wanting companies to institute buybacks or dividend payments - or to make acquisitions for cash.

“Improving investor sentiment on global growth, inflation, equities and risk-taking are all testament to potential macro normalisation in the second half. This could eventually feed into a normalisation of rates. If growth does pick up, volatility will rise too,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research.

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