The rapid – and sudden - spread of the Covid-19 virus has not only caused unimaginable volatility in financial markets but it is forcing investment firms – including boutique asset managers - to implement their worst-case scenario contingency plans. The levels of disruption being caused by Covid-19 is unprecedented in modern times, and sadly there will be casualties, even among once healthy and well-run fund management businesses. Collaboration will be absolutely pivotal if the industry is to get through this turbulent period.  What is NCI doing?Fund managers are facing threats on a number of different fronts, and it is likely…

From the end of 2021, LIBOR, which benchmarks interest rates for a whole stream of financial products including securitisations, loans and derivatives, will not exist. Admittedly, some large institutional asset managers have spent a lot of their time readying their operations for the imminent move to SONIA (Sterling Overnight Interbank Average Rate), an overnight risk free rate (RFR). However, a lot of the industry is still woefully underprepared.Conscious that large sections of the asset management community have given little thought to the LIBOR transition, the Financial Conduct Authority (FCA) published yet another uncompromising ‘Dear CEO’ letter reminding investment firms they…

On January 20, 2020, the UK’s Financial Conduct Authority (FCA) sent a brief but blunt letter to the CEOs of asset management companies. The regulator did not mince its words. In the letter’s opening paragraphs, the FCA criticised corporate governance standards at asset managers as being unsatisfactory. The regulator then told asset managers that they did not deliver value to retail customers and had failed to invest adequately in their operational resilience and technology, which it said “could cause harm to market integrity or loss of sensitive data.” This warning shot from the FCA should not be taken lightly by…

Liquidity As returns on traditional investments declined, a handful of fund managers sought out illiquidity premiums by accumulating exposures to hard to sell assets.  While such an investment approach can be justifiable under some circumstances, it can be quite risky as a number of retail and institutional clients discovered to their misfortune in 2019, many of whom remain trapped in funds which were originally sold to them as being daily dealing.The Woodford Equity Income Fund – for obvious reasons – was the best documented example of investors being left unable to access their capital after it was revealed that a…

With 2020 rapidly approaching, New City Initiative (NCI) takes a look at some of the key issues, which could potentially impact its members over the course of the next 12 months.Liquidity risk will not be overlooked in 2020Few would dispute the entire Woodford episode has sullied the reputation of the UK Financial Conduct Authority (FCA). Not only has this whole incident cast a shadow over the FCA, but it is likely to prompt the regulator into adopting a firmer line on the asset management industry. It is very probable the FCA (and other regulators) will now take a much closer…