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Investment Management ReviewA Quarterly Update for the Investment Management Industry

Evolution

Issue 2 June 2010

• Exploiting Uncertainty in Investment Markets

• Seeking Out the Hot Spots in Global Distribution

• Retail Asset Allocation: Delivering the Promised Product

• Growth Trajectory: The Increasing Popularity of the Manager of Managers Investment Model

• Balancing Risk and Reward in Securities Lending

• Bank Debt: Controlling Your Operational Complexity in a Rapidly Changing Market

• Vision Forward on the Canadian Pension Market

• Asia Pacific’s Pension Market Revolution

• Risk, Yield and Cost Management: The Science Behind Cash and Liquidity Management

• North America Regulatory & Legislative Update

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CONTENTS

Investment Management ReviewA Quarterly Update for the Investment Management Industry

Issue 2 June 2010

Exploiting Uncertainty in Investment MarketsIn this article, Prof. Amin Rajan of CREATE-Research previews a new global survey commissioned jointly by Citi and Principal Global Investors.

Seeking Out the Hot Spots in Global DistributionWhere are the opportunities and how can they be exploited? How can firms best confront the challenge of ever-increasing competition? IMR investigates.

Retail Asset Allocation: Delivering the Promised Product Bernard Hanratty, Managing Director, EMEA Head of Investor Solutions, Citi, examines the execution and asset allocation challenges facing investment advisory firms.

Growth Trajectory: The Increasing Popularity of the Manager of Managers Investment ModelFred Naddaff, Head of Fund Services, North America, Citi, examines the growing trend of asset managers leveraging their internal capabilities in conjunction with external niche-market expertise and implementing a manager of managers (MoM) investment model.

Balancing Risk and Reward in Securities LendingBrian Staunton, Managing Director, EMEA Head of Securities Lending, Citi, looks at the new framework for gauging and communicating risk-adjusted returns that should bring added clarity to the securities lending market.

Bank Debt: Controlling Your Operational Complexity in a Rapidly Changing Market Timothy Downey, Senior Vice President, Head of Bank Debt Operations, Hedge Fund Services, Citi, and Jeffrey Law, Vice President, Product Manager for Complex Assets, Hedge Fund Services, Citi, review the escalating degree of complexity in this marketplace, brought on by the growing number of participants, greater frequency of credit-related adjustments to loan documents, more amendments to credit activity and evolving fund structures.

Vision Forward on the Canadian Pension MarketNow, with the recovery solidly at hand, Gurmeet S. Ahluwalia, Product Head for Canada, Citi, speaks with Canadian Pension and Benefits Institute magazine about his insights on the future of the Canadian pension funds marketplace.

Asia Pacific’s Pension Market Revolution Keng Lian Tan, Vice President, Investor Services, Asia Pacific, Citi, examines the revolution of Asia Pacific’s pension fund market and its movement on a global level.

Risk, Yield and Cost Management: The Science Behind Cash and Liquidity Management Roger Brookes, Director, EMEA Client and Sales Management, Citi, and Hugo Parry-Wingfield, Director, EMEA Liquidity and Investments, Citi, review investment managers’ need to optimize their cash positions across multiple currencies and locations.

North America Regulatory & Legislative Update Bruce Treff, Managing Director of Regulatory and Compliance Services, Citi, and Chuck Booth, Director of Regulatory and Compliance Services, Citi, examine the four major events that dominated the North American financial industry landscape during the first quarter.

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On a similar theme, this issue also investigates today’s fund distribution hot spots. It assesses where the opportunities lie, not only in new growth markets such as Asia and Latin America but in established markets, too, and how to access them.

One common theme is the growing importance of the advisory market in the retail, high net worth and even institutional segments. We look in some detail at the issues retail advisory firms face in delivering the promised product. There are big challenges in allocating assets across a broad spectrum of different client categories and accounts — yet the ability to do so efficiently is one of the keys to profitability.

Citi’s Collective Investment Services funds platform also makes it easier for advisors to offer globally diversified client portfolios by delivering access to the widest range of funds in the market. It can also take over the entire burden of post-trade processing.

As confidence slowly returns to the securities lending market, this issue also reports on a new framework for gauging and communicating risk-adjusted returns and bringing added clarity to the market. A risk-reward analysis should be the starting point for any lending program. The message is that lending can still make a worthwhile contribution to investment performance — provided lenders remain clearly focused on risk management and collateral quality.

Finally, we look at some of the cash management tools and techniques investment managers can use while managing costs, controlling risks and balancing yield and liquidity effectively. In this, as in so many other areas of Citi’s Global Transaction Services business, our highly flexible approach allows us to tailor our solutions to the individual client’s requirements and objectives.

Jervis Smith Managing Director Global Head of Client Executive Global Transaction Services, Citi

Evolution

IMR UP FRONT

Welcome to the summer edition of Investment Management Review. Against the

backdrop of the Fund Forum annual event in Monaco, this issue features a new

global survey by the consultancy CREATE-Research, commissioned jointly by

Citi and Principal Global Investors, looking at the future of the fund management

business. The survey, Exploiting Uncertainty in Investment Markets, looks at the

growth areas over the coming three years, changing trends in client behavior

and the business model most likely to turn firms into winners.

For your convenience, Investment Management Review is now available online. To download current and previous issues, visit our website (https://contentdropbox.citigroup.net/transactionservices/home/sa/2009/imr_update/form.jsp).


ExploitingUncertainty

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Professor Amin RajanProject Leader CFEATE Research


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in Investment Markets

A new beginning emerges from the recent dark clouds prevailing over global economy.


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In this article, Prof. Amin Rajan of CREATE-Research previews a new global survey commissioned jointly by Citi and Principal Global Investors. It will be launched at Fund Forum, Monaco.

Key DriversGlobal economic prospects will be the main driver of organic growth in assets over the next three years. Markets worldwide had an unprecedented bounce in 2009.

Since then, they have drifted sideways. The main silver lining is the economic recovery in the three main engines of global economy: the U.S., China and Japan.

Problems facing indebted governments are immense. So, markets will remain jittery.

But under the surface, there are some definite positives, like the rising prosperity in the emerging markets and growth in private pensions. Their benefits will accrue alongside a significant recycling in the global asset base, as baby boomers approach retirement, as defined benefit (DB) plans change their investment approaches and as regulators frame new rules.

Thus, the next wave of growth will be one third organic, two thirds displacement. The size of new money in motion will be small until at least 2012.

Growth PointsRegionally, Asia will hog the limelight. But it won’t be the next gold rush — yet.

Its recovery star shines brightest of all. It is the first destination for anyone looking for new clients and alpha alike.

However, entry barriers remain formidable for asset managers from the West. Roller coaster rides remain frequent for alpha chasers.

Foreign asset managers’ incursion into Asia’s disparate fund markets will be a matter of more haste, less speed.

In contrast, Europe will offer more fertile ground for expanding the client base.

Its demographics favor private pensions. Its low returns on private savings favor mutual funds. Its policy environment favors a new “era of personal responsibility.” Its regulatory thrust powers UCITS funds.

North America will be the third most important growth point. It will remain the epicenter of the asset business, even though the growth engines will be Asia and Europe in the near term.

Unsurprisingly, everywhere, asset managers are more intent on cultivating their home patch than seeking pastures anew.

They recognize that a more client-centric business model can attract a new generation of clients at home who have hitherto equated investing with gambling.

As for asset classes, new twists and turns are inevitable.

Emerging market equities and bonds will top the charts, as will index funds, in response to a massive rebalancing from the actives to the passives.

The disillusionment with actives will persist. But it can also vanish as fast as the spring snow. Ironically, the factors that promote caution now will also be the ones that will promote risk in the future, in mature and emerging markets alike.

First, the dark clouds prevailing over the global economy will drive a wall of “dumb” money into the passives. Their market cap weightings will carry concentration and momentum risks: stock prices will be influenced more by inclusion in the indices than intrinsic worth. Price anomalies will be rife.

Second, the unprecedented speed and scale of the selloff in 2008 have created a trail of once-in-a-lifetime opportunities in distressed debt, hedge funds, real estate and private equity (secondary market).

Active management may be entering a long ice age. Equally, it may stage a major comeback. This may be the age of stock pickers. After all, the world of investment is cyclical and self-correcting.

As for the client base, it will be more professional, more heterogeneous and more demanding. It will be increasingly populated by new segments, alongside a notable switch within the old (see figure).

Fresh assets will come from sovereign wealth funds (SWF), national pension funds, central bank reserve funds and defined contribution (DC) plans in Asia, Europe and North America.

Those who will benefit from asset recycling will be: wholesalers selling advice-based products; DC plans emerging from the closure of DB plans; and outsourced insurance assets replacing in-house managers.

The demand for target date retirement funds will grow in DC markets as varied as Denmark and Australia, where extremes of cautious and aggressive approaches have been found wanting.

Finally, new clients will not mean new cash cows or business as usual. With a premium on liquidity, clients’ money will be less sticky; their investment reviews more frequent; their service standards more onerous; their due diligence more robust.

They will mostly invest with asset houses that are organiza-tionally stable, financially viable and prudentially ethical. Investment, operational and reputational risks will top their agenda. Fads will no longer make money.


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The Core Improvements Asset managers know that they can’t rely on market recovery to bail them out on this occasion.

Accordingly, they have turned the spotlight on their product as well as service propositions.

They are ramping up expertise in asset allocation, product innovation and customized solutions, while replacing bells-and-whistles products with those anchored in people’s lives.

First, there is new recognition that tough times can be the mother of innovation that seeks new ways of meeting client needs, including ones they didn’t know they had: ways that isolate innovation from novelty.

New tools are being used to seek new product ideas and subject them to reality checks before new launches.

The second point of departure applies to the emerging service models. There are improvements in baseline service standards for all clients. In addition, institutional clients are being segmented and offered a clear proposition based on their identified needs.

The heads-I-win, tails-you-lose fee structure is under scrutiny, too. The latest bear market showed that some 80% of asset managers had been paying themselves too much.

One in every two managers expects to implement high watermarks that ensure that a performance fee is paid only when a fund exceeds the highest previous value reached by its cumulative returns. Also under consideration are rolling multiyear performance fees that discourage excessive risk taking to hit a given year’s target. Staff incentives, too, are becoming more meritocratic.

The Winning ModelThat small band of asset managers who emerged unscathed had one magic bullet: a clear financial and nonfinancial alignment of interests with their clients, backed by operational excellence.

Outsourcing of non-core activities is becoming a cornerstone of excellence. Strong in back office, it will spread to a number of high-value-added activities in the middle office.

Outsourcing will be ensuring that asset management remains a quintessential craft business, but with a professional overlay of skills and infrastructure to exploit the opportunities created by the crisis.

In the process, new forms of alliances will be delivering higher operating leverage as well as a raft of checks and balances that rank high in due diligence.

Finally, over the next three years, a fiduciary overlay will differentiate winners from losers.

The fund pie will be noted for its subdued growth. Dog fights will be inevitable.

Success will require asset managers to exercise “duty of care” in delivering five things: consistent returns, a deep talent pool, superior service, a value-for-money fee structure and a state-of-the art infrastructure.

These factors have always mattered. But in the post-crisis world, their delivery requires a decisive shift in asset managers’ roles: from distant vendors to close fiduciaries.

Without it, clients will end up with the worst of both worlds: much pain and little gain.

Hard copies of the report are available at the Citi desk in the Exhibition Center or soft copy at www.create-research.co.uk

Which Client Segment Will Grow Most Over the Next Three Years?

Source: Citi/Principal/CREATE Survey 2010

Wholesale packagers (e.g., private banks, IFAs, platforms)

Sovereign wealth funds

National pension funds/central bank reserve funds

DC pension plans

DB pension plans

High net worth individuals

Retail clients

Insurance companies outsourcing their fund business

Endowments, foundations & charities

% of respondents0 10 20 30 40 50


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Where are the opportunities and how can they be exploited? How can firms best confront the challenge of ever-increasing competition? IMR investigates.

Seeking out the hot spots in global distribution

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In a year when the global funds industry was still emerging

from intensive care after the battering it had received in

2008, it might be a surprise that 2009 witnessed a net

1,200 new fund registrations around the world, bringing

the total to more than 58,500. The figures, from Lipper

Hindsight, give some indication of the fevered competition

that now exists in a global funds market that has seen a

150%+ expansion in registrations over the past decade.

A large number of leading asset managers now

distribute in 30, 40 or even 50 different markets.

PricewaterhouseCoopers, whose Global Funds Distribution

business acts for around a quarter of all asset managers

in the industry, calculates that the past decade has seen

a near six-fold increase in the number of fund groups

distributing in ten or more countries. The great majority of

these funds are European-domiciled UCITS products.

Increasingly, however, the promoters launching new funds

hail from non-European countries. “We are seeing growing

interest in UCITS from non-European asset managers,”

says Mark Evans, Partner, Investment Management,

PricewaterhouseCoopers. “We expect a surge in the

number of cross-border promoters over 2010 and 2011.”

That prediction is echoed by Steve Bernat, Client and Sales

Management, Luxembourg, Global Transaction Services,

Citi: “Fund promoters from China, India, Korea and Brazil

who have been successful in their local markets have

started to jump on the UCITS bandwagon. A number are

looking to set up their own Luxembourg or Dublin funds to

compete in the international markets,” he says.

So where are the opportunities in this increasingly congested

marketplace? Lipper’s analysis shows that Asia-Pacific, for

so long viewed as the world’s number one “must-penetrate”

market, saw a net reduction in registrations last year, though

it remains the second-largest distribution region by number

of fund registrations (Europe is by far the leader).

Opening Up the Emerging MarketsIMR has commented before (IMR EMEA, October 2009) on

the opportunities in China and other leading markets such

as Singapore, Hong Kong, Taiwan and Korea. Taiwan was

the largest market for new fund registrations in the region

last year, but recent tax changes have removed an incentive

for Taiwanese nationals to invest abroad through offshore

funds.

One continent that saw marked growth last year was the

Americas. Latin America is a fast-changing marketplace.

Chile has set the pace, and accounted for 120 new fund

registrations last year. “Close to half of local investment

there goes into offshore assets, and all the major asset

managers are selling into the Chilean market,” says Marcio

Veronese Alves, Director for Securities and Fund Services in

Brazil for Citi’s Global Transaction Services. “Now Brazil is

moving in the same direction,” he says.

The world’s eighth-largest asset management market

with around US$850 billion of invested assets, Brazil has

witnessed two major regulatory changes in the past couple

of years that have opened up the possibility of overseas

So where are the opportunities in this increasingly congested marketplace?


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investment for registered investment funds, high net worth

investors and, above all, pension funds. Says Mr. Alves:

“The rules were changed in September 2009 to allow local

pension funds to allocate 10% of their money to offshore

markets.”

That may not sound like much but, since pension funds

account for around half of all investment assets in Brazil,

it amounts to a potential outflow of upwards from $US40

billion. However, with the interbank lending rate yielding

9.37%, Brazilian investors are not exactly rushing to take

advantage of their newfound freedom.

Numerous international fund managers have descended

on Rio with more looking to get in, says Mr. Alves. Most are

setting up master-feeder structures. Offshore investment

vehicles for local pension funds must go through a locally

domiciled “international investment fund,” which can then

invest in other funds or investment assets. At the top end of

the private investor market, the so-called “super-qualified

investors,” individuals can now invest 100% of their money

into an offshore investment fund — but there is a high

minimum of BRL1 million (US$560,000). Around 80% of

local distribution is controlled by banks. Citi has been helping

international fund managers enter the market and create

local feeder funds.

Other markets are attractive too. “In Peru and Colombia —

where pension assets have been growing at a faster rate

than in Chile — pension funds can already access offshore

funds,” says Mr. Alves. “With an increasing appetite for

equities and only small local markets to invest in, these funds

are interesting targets for international asset managers.”

The Developed Market StoryIn the mature markets of the U.S. and Europe, significant

pockets of opportunity persist. After the regulatory

upheavals of recent years and the move to open

architecture, the market in the U.S. is still in transition,

says David Bailin, Global Head of Managed Investments for

Citi’s Private Bank: “Brokers are much more performance-

oriented. People are rethinking their affiliations with the

wire houses, while independent registered investment

advisors (RIAs) are adopting a more rounded approach.”

Mr. Bailin points out that at the ultra-high end of the

market, distribution does not happen without advice.

“People want a deeper relationship across the full range of

their assets. Distribution is tied to advice,” he says.

Cerulli’s Quantitative Update (“The State of U.S. Retail

and Institutional Asset Managers,” November 2009)

commented that the increasing separation of asset

management from distribution is implicit in the emergence

of third-party distribution as the primary channel to U.S.

retail clients. It suggested investor desire for best-of-breed

funds and embedded-advice products would continue

to rise. That, in turn, increased the level of “asset

addressability” within the industry — the opportunity for

one fund manager to take business from another.

So where are the opportunities in this increasingly congested marketplace?


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The rise of the advisors is something firms must take on

board. Many niche players, plus some very large players,

that have specific sector expertise are going to have

the opportunity to take full advantage of the advisors’

distribution.

Revitalizing PensionsCerulli’s research also pointed to the steady growth of

third-party distribution of institutional client assets with

the rise of consultant-intermediated sales in defined

contribution (DC) pension plans. In the defined benefit (DB)

area, it predicted that “changing asset allocation — as plan

beneficiaries age and/or more plans transition to liability-

driven investment strategies — will create above-average

turnover in the DB segment, which could open doors for

asset managers, especially of long-duration fixed income

and alternatives.”

And then there is the expected growth of ETFs. Says

Mr. Bailin: “The ETF market is becoming more and more

attractive. The big change is the rise of actively managed

ETFs. While the indexed ETF market is locked up by three

or four players, more and more people are filing for new

products on the actively managed side. They are playing

an increasing role in covering off-equity positions in 401(k)

retirement and target date retirement funds.” With an

expected increase of around US$5 trillion in U.S. retirement

savings assets over the next five years, this is potentially

very big business indeed.

In Europe, a number of factors are positive for mutual

funds, says Alexis Calla, Global Head of Investment

Products and Advice, Global Consumer Bank, Citi. One

is the shift to transparency and simplicity on the part of

retail investors, who are rediscovering the appeal of the

mutual fund vehicle in this area. In Britain, that shift is

supported by new rules on structured products from the

Financial Services Authority, which came with warnings to

distributors of the risks of mishandling complexity.

“The other factor,” he says, “is regulatory reform in both

the UK and Continental Europe concerning the role of the

advisor. This will have a variety of implications, but it is

positive for a transparent product with a clear performance

record such as a mutual fund.” Mr. Calla also believes that

hedge fund-style UCITS products — so-called “Newcits” —

have the potential to become a major force once customers

are comfortable with them.

One area of growth is Central and Eastern Europe (CEE).

“The challenge is how to access the region when so many

local banks have a strategy of selling primarily their own

funds,” continues Mr. Calla. By contrast, Citi’s presence on

the ground in Eastern Europe, and in particular its branch

distribution network in Poland, courtesy of Citi Handlowy,

allows it to offer a valuable entry point for international

fund managers.


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“In a number of markets, especially those of the CEE,

Citi is one of very few fund distributors with truly open

architecture.” Mr. Calla notes: “We also have the ability

to combine the Consumer Bank’s distribution with the

experienced support of Citi’s Global Transaction Services

business — which makes for a powerful combination.”

Increasingly, too, the Consumer Bank, with its focus on the

mass affluent, is cooperating with the Private Bank.

With its on-the-ground presence in so many emerging

growth markets, its open-architecture approach and its

ability to reach key customer segments, Citi can offer

a rare combination of distribution breadth and highly

developed funds servicing support. Wherever the hot

spots in fund distribution may be at any given time, Citi is

positioned to help fund managers access them.

Overall the emerging markets remain exciting markets

to be involved in, but the developed markets also have

much to offer. Strategic partnerships can help to instill

best-of-breed products and practices; they may even work

to drive the markets forward. Either way, there is cause

for optimism as investment managers look to win back the

hearts and minds of their investors.

Overall the emerging markets remain exciting markets to be involved in, but the developed markets also have much to offer. Strategic partnerships can help to instill best of breed products and practices; they may even work to drive the markets forward. Either way, there is cause for optimism as investment managers look to win back the hearts and minds of their investors.

With its on-the-ground presence in so many emerging growth markets, its open-architecture approach and its ability to reach key customer segments, Citi can offer a rare combination of distribution breadth and highly developed funds servicing support.


Delivering the Promised Product

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RETAIL ASSET ALLOCATION:

Bernard HanrattyManaging Director, Investor Services Global Transaction Services, Citi


Delivering the Promised Product

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More is being asked of investment advisory firms every day. Citi’s Collective Investment Services (CIS) fund platform provides an end-to-end solution to the execution and asset allocation challenges and helps to manage investment portfolios.

RETAIL ASSET ALLOCATION:


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Nick Titmuss, Managing Director, EMEA Head of Global

Custody, Global Transaction Services, Citi, says CIS offers

extensive process savings: “It provides access to an

unparalleled range of collective investments on one

platform — from mutual funds and closed-ended funds to

hedge funds, private equity and venture capital funds, real

estate funds and ETFs.”

At the heart of the solution, CitiConnect™ for Funds gives

investment managers real operational efficiency via STP

supported by extremely competitive fund cutoff times,

which are in line with the time constraints our partners

must work within.

Our CIS platform continues to grow at pace. More

transactions were processed in the first four months of

2010 than in the whole of 2009. Importantly, CIS is a global

platform and makes it easier for advisors to offer globally

diversified portfolios,” explains Mr. Titmuss.

Set against the backdrop of a more stringent regulatory

framework with a focus on treating the client fairly

and complying with the retail distribution review, the

ability to offer clients the fullest possible range of

investment options while managing execution in the most

cost-effective, automated environment has assumed

greater importance than ever.

With a strategy of continuous investment and a depth of

expertise spanning both the retail and the institutional

investment world, Citi continues to innovate and deliver

true efficiencies to its clients so they can gain a genuine

competitive edge in an evolving marketplace.

The investment management industry continues to build a

new narrative on what it stands for and what it can deliver.

Ultimately, the winners will be those firms capable of

seeing the world through their clients’ eyes and meeting

the portfolio requirements of a changed marketplace.

From the smallest retail investment advisors

to the largest wealth managers, the business

of allocating assets across a broad spectrum

of client portfolios poses countless challenges.

Whether the advisor employs a fund of funds approach or

manages thousands of individual discretionary portfolios,

the ability to transact in a diversified range of instruments

and asset classes, and allocate those assets efficiently,

is one of the key challenges facing wealth managers in

today’s market.

The Wider ImpactCompetitive pressures increasingly require the advisor to

offer the broadest possible range of investment options —

from mutual funds and exchange-traded funds (ETFs) to

hedge funds — and access not just domestic but overseas

funds too. The increasing demands of the clients must

also be considered. As investment managers look to help

them build portfolios that are more resilient to future

market events and deliver results that are worthy of their

attention, so investors’ demands around transparency and

reporting have increased the burden on firms.

In the search for process efficiencies, we have partnered

with clients to develop an automated, end-to-end funds

platform that can service investment advisory firms.

Through Citi’s CIS fund platform, which delivers access to

the widest range of funds in the market, we offer advisors

a one-stop, trade-to-settlement service for more than

70,000 funds. This delivers straight-through processing

(STP), and is integrated within Citi’s custody and fund

administration service offering.

Citi’s Collective Investment Services supports Towry,

the wealth advisory firm, and its clients by providing an

integrated custody and fund platform that reduces risk,

ensures prompt processing of fund transaction, accurate

corporate action reporting and reconciliations to ensure

the investors’ accounts are accurately reported and valued.


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Case StudyTowry: Laying Down an Infrastructure for Growth

The wealth advisory firm Towry has been in the vanguard of moves to end commission-based

advice and move to the fee-based system that will become mandatory in the UK from the

end of 2012. Towry’s Chief Executive Officer, Andrew Fisher, has consistently argued that all

advisors should act clearly as agents of the client and be professionally qualified. “We set out

our stall to say we would do both,” he says. “Towry’s business is entirely fee-based and all its

advisors are already qualified to the level that will be required under the new regime.”

Today, Towry ranks among the UK’s top five wealth advisors with 50,000 clients, of whom

11,000 are discretionary. In the past five years, it has grown discretionary funds under

management from GBP200 million to GBP3.5 billion. Growth continues at a rapid pace: “We

have put on GBP600 million since the start of this year,” says Mr. Fisher.

The firm goes through an exhaustive financial planning process to identify each client’s risk

profile. “We then construct an appropriate portfolio, using up to 18 different asset classes,”

says Mr. Fisher. ”Typically, one third of the portfolio will be in index-linked securities or ETFs.

We blend the different asset classes to minimize volatility in generating returns.” Flat returns

on the defensive portfolios amid the market turbulence of 2008 testify to the success of that

approach.

An efficient administrative infrastructure has been an important plank of Towry’s growth.

The firm operates a series of Dublin-domiciled funds of funds — each representing a different

asset class — and uses Citi to execute all trades through its CIS funds platform and manage the

required fund-allocation process.

Direct, automated links from the CIS platform via CitiConnect for Funds deliver all trade data

for the day to Citi’s fund administration teams. Net asset value statements are produced by

noon the following day. All investor data is then updated on Citi’s transfer agency platform.

Mr. Fisher says that working with Citi has been “hugely helpful.” “We can rebalance more

quickly, add new asset classes more easily and grow in the knowledge that we have a strong,

established infrastructure,” he says. His objective is to build Towry into the UK’s leading wealth

adviser, using the same successful formula as today. Using the most efficient administrative

processes is very much a part of that formula.


Fred NaddaffHead of Fund Services, North America Citi

GROWTH TRAJECTORy: The Increasing Popularity of the Manager of Managers Investment Model

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It’s an unmistakable market reality: Asset managers have recognized they can no longer be all things to all people. They have come to the realization that they cannot always develop every aspect of the ever-broadening range of increasingly complex portfolio products that their clients demand. As a result, more and more are leveraging their internal capabilities in conjunction with external niche-market expertise by implementing a manager of managers (MoM) investment model.


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In brief, a manager of managers is an

investment advisor who hires other

professional investment managers (called

sub-advisors) to oversee specific aspects

of an investment portfolio. A MoM typically

focuses more on the manufacturing and

distribution of a product, rather than the

actual management of the assets. This role

is left to the sub-advisors on an outsourced

basis whereby the best managers can

be leveraged for their particular area of

investment expertise. The MoM dynamic

creates a symbiotic relationship between

both investment advisor and sub-advisor

where distribution and manufacturing

strengths are aligned with specific

investment strategy expertise.

The rationale underpinning the MoM

approach is that diversification

and balance among portfolios of

sector-focused or complex investments

can be achieved more readily and

cost-effectively by having a group of

specialists, instead of a single manager,

executing the fund’s strategy. The MoM

assembles a group of investment experts,

closely monitors their performance and

alters the composition of the team to

adapt to market conditions, overall fund

performance and the performance of the

individual sub-advisors.

Responding to a Dynamic MarketThe multimanager structure has become increasingly

popular in the asset management marketplace, particularly

over the past several years. According to Financial Research

Corporation (FRC), sub-advised products comprised $731

billion in ’40 Act mutual funds in 2008 and are projected to

reach $1.4 trillion by 2014 — forecasting a 12% CAGR since

the market downturn of 2008.

At Citi, we believe four factors contribute to the increased

attractiveness of the MoM model:

• The acquisition of expertise and performance — Faced

with the prospect of deciding to build, buy or rent, many

asset managers have chosen the rent option, allowing

them to fill both product and performance gaps in the

most expedited and cost-efficient manner possible.

• The retirement market — Given the negative effect the

last 24 months have had on the public’s retirement nest

egg, people are working longer and saving more. As a

result, the retirement market and its sticky assets are

viewed as a huge opportunity. The associated demand

for asset allocation and target date products, combined

with the continued importance of open-architecture

distribution, have made the sub-advised model even more

attractive.

• The convergence between traditional and alternative

asset managers — As traditional retail fund managers

have opened up to nontraditional strategies, the expertise

required to run these strategies is typically not available

in-house. Recent examples include 130/30, absolute return

and managed payout strategies, which usually require

sophisticated hedging capabilities often outsourced via a

sub-advised relationship.

• An increased demand for diversification — Tactical global

asset allocation funds, with their “go anywhere” mandate,

have become increasingly popular, as have fund of funds

and international funds, particularly those focusing on

emerging markets. The jurisdiction expertise required to

effectively run these funds is another opportunity that can

take advantage of a sub-advised model.


IMR 18

The Role of the Third-Party Service ProviderIn the MoM model, the investment advisor’s responsibilities

not only include identifying, developing and maintaining

distribution partners, but have been broadened in scope

to include robust manager selection, asset allocation and

risk management. Just as investment advisors look to

sub-advisor specialists to complement their investment

capabilities, so, too, should they consider a third-party

provider to deliver the administration services required in

this increasingly complex marketplace.

By selecting the right partner, the MoM will be able to

supplement the strength of their offering by leveraging the

subject matter expertise and focus that a third-party service

provider can offer. A combination of thought leadership,

continued technology investments and deep experience

delivered by the third-party service provider enables the

MoM to remain focused on developing and distributing

products.

Given the additional oversight responsibilities and associated

risk mitigation concerns, when reviewing a service provider’s

credentials, MoMs should select a provider with robust

capabilities:

• High-touch service model — A MoM client is not one

dimensional. Both the investment advisor and the

sub-advisor(s) require constant and consistent access

to a service team that knows the MoM’s portfolio,

how it is constructed and how the MoM and the

sub-advisor(s) interact.

• Manager on-boarding support — A dedicated team

that provides administrative setup services, systems

configuration and entitlements, service integration and

documentation, as well as ongoing support to optimize

operations and pricing.

• Transition management — Replacing an investment

portfolio’s securities mix with another should be a

seamless and transparent process. Service provider

alignment with extensive global markets expertise is

critical.

• Portfolio analytics — The ability to analyze performance

at the portfolio, sub-advisor, strategy and security levels

in order to provide key measures and metrics to enable a

continuous monitoring of sub-advisor benchmarking.

• Technology as an enabler — A robust information portal

with holistic visualization capabilities should provide both

the investment advisor and the sub-advisor access to all

relevant information delivered in real-time with multiple

perspectives and formats.

• Transparency — A compliance-based culture is essential

in providing the investment manager with additional

levels of safety and soundness surrounding all trading

and reporting activities. The service provider needs to

understand the ever-changing regulatory landscape

in order to better understand the challenges and

opportunities faced by the MoM.

• Integrated service suite — In order to maximize the

total experience, all services should be fully integrated

into the core offerings of fund accounting, fund

administration, transfer agency, custody, securities

lending, middle office and regulatory administration.


Prospects for Continued GrowthAt Citi, we are optimistic about the prospects for the future

growth of the MoM investment structure. In our analysis of

the marketplace, we believe the following trends support the

continued popularity of a multimanager product:

• With 2010’s 12-month total returns on equity funds looking

good, the lure of the equity market’s upside should

have investors putting their allocations back in place.

As a result, investors will start moving out of money

markets and other fixed income assets. However, to avoid

concentration risk, they are seeking to diversify and are

looking at more complex equity products, such as those

encompassing international markets, hedging strategies

and more esoteric securities — investment expertise that is

not readily available in most asset management shops.

• Continued growth in the retirement space in general,

with greater application of asset allocation products. The

retirement space is expected to grow $5 trillion by 2014

(see Cerulli Associates graph), with target date funds being

the vehicle of choice, a product uniquely situated to take

advantage of the MoM model.

• As more managers target DC plans and RIA assets,

product-neutral, open architecture platforms offering

best-in-breed products will continue to become more

important. The MoM model is particularly well-positioned

to take advantage of this space, as the use of unaffiliated

asset managers in a plug-and-play model allows for

efficient adding and replacing of the required investment

strategy expertise.

IMR 19

16,000

17,500

18,500

19,500

20,500

2010 2011 2012 2013 2014

$15,815

$16,880

$18,027

$19,197

$20,419

$ T

rilli

on

Source: Cerulli Associates

Total retirement market assets are expected to climb to over $20 trillion by 2014

Sub-advised mutual funds are projected to continue to attain double-digit growth rates

over the next five years.

2010

200

400

600

800

1,000

1,200

1,400

1,600

2011 2012 2013 2014

$

$871$985

$1,113$1,253

$1,409

$ B

illio

ns

Source: FRC

In summary, to succeed in these new market conditions, we believe that fund managers will continue to adopt a MoM investment model — leveraging their in-house capabilities with the external niche expertise of sub-advisors and third-party service providers — for the bottom-line benefits of their firms and their clients.


IMR 20

Balancing Risk and Reward

Brian StauntonManaging Director, EMEA Head of Securities Lending Global Transaction Services, Citi


IMR 21

Global Lendable Securities vs. Total Balance of SecuritiesBefore the credit crunch, the numbers would have been a

whole lot higher. After the well-publicized losses sustained

by a number of securities lenders in 2008/09, and the

counterparty default issues raised by the collapse of Lehman

Brothers (then a top-five borrower), lending activity slumped

as investors withdrew from the market. From a peak of just

under US$4 trillion during the 2008 European dividend

season, the value of securities on loan halved over the

following year.

A Return to LendingThe losses were typically incurred in managed pooled

vehicles set up to reinvest cash collateral and, as such,

should realistically be categorized as investment losses

rather than securities-lending losses. Nonetheless, the shock

waves from those losses caused many funds to stop lending,

at least until they had completed a comprehensive review of

their lending activities. Now, having seen the negative impact

that decision has had on performance, most are back in

the market. But they have returned with a new approach to

managing and controlling their lending programs.

“In the past, a lot of beneficial

owners viewed securities lending

as part of their operational

activities,” says Gareth Mitchell,

Director, EMEA Head of Trading

and Cash Reinvestment, Global

Transaction Services, Citi. ”The

business was controlled by

operations staff. There were not

the same risk controls in place

you would expect if a firm were

assessing one asset class against

another. That has changed.

Balancing Risk and Reward

Despite the events of the past two years, securities lending remains big business. Annual revenues are thought to top US$20 billion. That sum is shared between more than 25,000 funds, which have enjoyed total returns reckoned to have fluctuated between 25 and as much as 135 basis points over the past year (Data Explorers, “Making Better Informed Securities Lending Decisions,” March 2010). The figures illustrate not just the scale of the activity but the role securities lending can play in boosting investment performance.

in Securities LendingAs lender confidence slowly returns, a new framework for gauging and communicating risk-adjusted returns should bring added clarity to the securities lending market.

0

5,000,000

10,000,000

15,000,000

20,000,000

01 Jan 1001 Jul 0901 Jan 0901 Jul 0801 Jan 0801 Jul 07

Group Lendable (M) Group Total Balance (M)

Tota

l Bal

ance

(M

) Lendable (M)

All Securities

0

1,000,000

2,000,000

3,000,000

4,000,000

Source: Data Explorers


IMR 22

Where two or three years ago we tended to talk to the chief

operating officer, now we are often dealing with the chief

investment officer.”

Most lenders, says Mr. Mitchell, have concluded that a

securities-lending program can be run as a low-risk business,

generating steady returns. “They have operations staff

to monitor and control the risks. But the decisions on

which markets to lend in and what collateral to accept are

increasingly being taken in the front office,” he says.

One other factor has helped to encourage funds back into

the lending market. Pension fund consultants are now

better equipped to advise their clients on securities lending.

Post-Lehman, clients were citing advice from consultants

that they should pull out. That has changed. Now the

consultants are more clearly focused on assessing risk and

reward. It is a much more balanced approach.

Depicting the Securities Lending “Signature”A clear risk-reward analysis is fundamental to any

securities-lending program, but until now there has been no

industry-wide method for evaluating risk-adjusted returns

across different programs and lending agents. In March

2010, however, the consultancy, Data Explorers, published

a white paper entitled “Making Better Informed Securities

Lending Decisions — Defining Best Practice in Developing a

Risk-Adjusted Returns Framework.” The paper paves the way

for a common set of analytics that can be represented in a

graphic format to represent the securities-lending “signature”

of any fund, and which is accessible to nonspecialists.

The firm brought together a group of practitioners and asset

managers with the objective of agreeing on “a framework

that facilitates the communication of securities-lending

risk-adjusted returns to beneficial owners, demonstrating

best practice and aiding the education process,” says Mark

Faulkner, Co-Founder and Head of Innovation at Data

Explorers. The paper is also designed to help investors build

optimal portfolios that reflect their objectives, establish

industry-wide metrics and position securities lending as a

recognized asset class in its own right.

“What we have tried to do is put together the highest

common denominator for calculating risk and reward,”

continues Mr. Faulkner. “The problem is that the agent

banks all have different ways of doing things. But we have

come up with a framework where customers of multiple

banks can compare the risk-adjusted returns across

multiple programs.”

The firm compares programs in terms of their structures,

risks and returns and comes up with individual risk

calibrations. The inputs include stress tests to calculate the

impact of another Lehman-scale default or credit crisis and

a variety of factors such as volatility, asset performance

correlations, confidence intervals, time horizons and

counterparty default probabilities. Outputs include a family

of generic collateral schedules to allow for client collateral

preferences.

More than 100 investor peer groups (such as U.S. mutual

funds, Luxembourg SICAVs, UK pension funds, etc.) have

been created. The idea is that a program owner can then

see whether the current program structure is optimal in

relation to their objectives, their risk appetite and in the

context of their peer group.

Understanding the RisksThe white paper also highlights a number of other issues

lenders need to take on board. Says Mr. Faulkner: “They

need to look at the strength of their provider, the strength

of any indemnity and the strength of the provider’s

procedures in the event of a disaster. The people who lost

money in the crisis were those who took too long to do

things. Many equity markets, somewhat counterintuitively,

rose in the first few days following the Lehman collapse.

Ten days later they collapsed.”

The key message, he says, is that even in difficult times

securities lending can be relied upon as a good source

of additional returns. “It is low-risk and it generates high

returns in relation to that risk. But collateral is the key.

The people who came unstuck in the crisis were those who

looked on collateral as an additional opportunity to make


IMR 23

money. They were straying too far from what securities

lending should be about.”

Ultimately, it is important to distinguish between two

very different ways of doing things. The plain vanilla

market where beneficial owners lent equities and took in

government bonds as collateral came out of the Lehman

default in good shape. On the other side of the fence

were those who engaged in cash-collateral lending and

reinvested that cash in the money markets.

The big losses were sustained by funds that invested cash

collateral in specially devised pooled investment vehicles.

Many of these in turn invested in asset-backed commercial

paper of varying maturities, much of which suffered a

catastrophic price collapse. Some lenders are even now

continuing to pump cash into these pooled vehicles in

order to fund their liquidity requirements, viewing that as

preferable to booking large losses. Citi never employed

pooled vehicles, preferring to manage each lender on a

segregated basis with a program tailored to their risk profile.

“Because of what happened,” says Mr. Mitchell, “there

has been a sharp decline in the number of cash programs,

especially in Europe. Lending against cash is now seen

as risky. But it does not have to be. Cash should simply

be viewed as a means of acquiring further collateral. The

reverse repo market, for instance, delivers precisely that —

plus a margin. Reverse repos are in essence collateralized

cash lines. The return they produce will depend on the

lender’s appetite for credit risk, but there will always

be a firewall of collateral in place to deal with most

eventualities.”

There is clearly a big distinction to be drawn between

collateralized cash reinvestment and uncollateralized cash

reinvestment. With the former, the chances of principal

loss are as low as where lending is collateralized against

securities from the outset. Of course, the lender is at risk if

the borrower defaults and the value of the collateral were

to fall by, typically, 5% or more.

Keeping the Risk-Reward Equation Top of MindIt should be stressed that it is up to the lender to determine

the risk-return parameters of their program. Citi’s approach

is to consult clients and agree to a strategy at the outset.

The return will be a function of the instruments in which they

reinvest. Government bond repos will deliver low returns;

well-rated corporate bonds, much more. The key is to find

a realistic point on the credit curve where the risk-adjusted

return is high.

There is a lot of flexibility on offer, says Mr. Mitchell: “Clients

can set the maturity profile to one day, one week, one month

or longer, and dictate the quality of the collateral to be put

up. In the corporate market, we monitor and charge for

liquidity risk and we demand extra margin for any bond that

has not traded for five days. If it has not been priced for 30

days, we remove it from our list of acceptable collateral.

Clients can impose their own limits on individual issuers or

request additional margining for different types of security.”

“Every program needs to be based on a risk-reward

equation,” says Mr. Mitchell. “Securities lending should be

no different from any other asset allocation decision. It is

important to work out the value at risk and compare it with

the return on offer. If your value at risk is no more than two

or three months’ revenue, then your risk-reward ratio is

heavily in your favor,” he says.

The moral of the tale is that the case for securities lending

remains as firm as ever. Citi’s highly conservative approach

to securities lending has placed its lenders in good stead

through the events of the past two years. There are still

plentiful opportunities in the core business for lenders to

achieve a positive performance — provided they remain

focused on risk management and collateral quality.


IMR 24

Bank Debt:


IMR 25

Timothy DowneySenior Vice President Head of Bank Debt Operations, Hedge Fund Services Citi

Jeffrey LawVice President Product Manager for Complex Assets, Hedge Fund Services Citi

Controlling Your Operational Complexity in a Rapidly Changing Market


On the settlement side, the complexity within the space

and the larger trading volumes of the distressed paper

are extending settlement times, which leads to increased

counterparty risk and adds to the overall operational

complexity. As reported by the LSTA, last year par trades

settled within the LSTA guideline of T+7 fell to a two-year

The evidence of the marketplace’s growing complexity

is apparent in the trading data. While the overall trading

volumes of bank debt shrunk in 2009, the distressed debt

component — the complex settlements — increased 250%

to $140 billion in 2009 vs. 2008, according to the Loan

Syndications and Trading Association. (See table below.)

In a word: complexity. Bank debt — as with all components across the global financial marketplace — has endured the most brutal economic conditions since the Great Depression. For alternative asset managers within the space, the result of those tumultuous market dynamics has been an escalating degree of complexity, brought on by the growing number of participants, greater frequency of credit-related adjustments to loan documents, more amendments to credit activity and evolving fund structures to better match the illiquid nature of assets. All of this in a multijurisdictional world.

Trade Volume ($ Billions)

Par Distressed Total Par Distressed Total

1Q08 155.3 10.8 166.1 1Q09 84.1 26.8 111.9

2Q08 128.5 18.8 147.3 2Q09 90.4 43.7 134.1

3Q08 100.3 12.7 108.8 3Q09 81.7 34.6 116.3

4Q08 88.9 13.8 102.7 4Q09 81.5 35.3 116.8

Total 56.1 Total 140.4 (250% increase over 2008 distressed debt volume)

Source: LSTA

IMR 26


IMR 27

low of 22%. Likewise, the percentage of distressed trades

settled within the LSTA guideline of T+20 dropped to a

two-year low of 14%.

Contributing to the complexity, too, are the rising amounts

of amendments to credit agreements. Because borrowers

are finding it increasingly difficult to refinance loans, they

are restructuring them and amending credit agreements,

often to extend maturities, at previously unseen levels.

These complications will only be exacerbated by increasing

loan activity as issuance rebounds. In the first quarter

of this year, Thomson Reuters reported that issuance

reached $159.13 billion, up 36% over the $116.88 billion

level in 1Q09.

A Flexible End-to-End Solution, Seamlessly IntegratedAt Citi, we believe the solution to controlling the complexity

within the bank debt marketplace is an operating model

that’s end-to-end, aligning data production with loan

servicing. It requires flexible, continuous, integrated

communications across the entire process — from loan

settlement through loan administration and ultimately

down into the accounting system. In this environment,

any adjustment or amendment to a credit agreement

is automatically updated throughout the system

supplemented by the necessary expertise for a high-touch

process.

This comprehensive, tightly bundled operating model leads

to a more controlled operating environment through:

Improved settlement processing. An experienced and

proactive settlement team, backed with the technology

and data sources to track credit activity, greatly improves

participants’ ability to manage principal and interest

activity of unsettled loan transactions. Buyers will

have improved visibility into underlying credit data for

purchased yet unsettled loans to better manage upcoming

settlement obligations.

Streamlining the process for improved efficiency.

Automating processes for obtaining credit data from agent

banks enhances straight-through processing to record credit

activity in the accounting system and reconcile inbound

P&L in near real-time, while maintaining flexibility to handle

complex loan activities.

Eliminating data redundancy. The ability to produce and

share credit activity across functions — i.e., front office/

settlements/administration/cash management/accounting —

optimizes data flows rather than relying on a point-to-point

architecture.

A consolidated ledger across assets, updated seamlessly.

The capability to generate and edit accounting activity at

the transaction level for any type of fund including complex

funds — managed accounts, hybrid private equity structures,

— without having to depend on topside or summary entries

that are difficult to interpret over time, results in a single

set of books and records for all asset classes, enhancing the

ability to more effectively audit.

The FutureAlthough bank loans are similar in many respects to

traditional fixed income securities, borrowers utilize the

loan market for a reason: to preserve the flexibility of a

true credit agreement that can be amended on a bilateral

basis versus a bond that is restricted by its covenants. That

feature of the asset class drives complexity and is here for

the long run. Without question, bank debt is evolving from

an esoteric asset type to a much more mainstream offering.

And much is being done within the industry to solve for the

operational pains of loans, including efforts by the DTCC,

Euroclear and others. In the meantime, bank debt owners

need an integrated and specialized system and operation

at their disposal to truly understand what they own, avoid

settlement issues and put themselves in a position to make

the optimal investment decisions.


IMR 28

Vision Forward on the Canadian Pension Market


IMR 29

Like the rest of the global economy, the pension funds industry in Canada is recovering from the most brutal financial market conditions since the Great Depression. From a peak of $970.8 billion in 2Q08 to a bottom of $801.9 billion in 1Q09, Towers Watson reports that total assets in Canadian pension funds rebounded to $1.2 trillion at year-end 2009.

Vision Forward on the Canadian Pension Market


IMR 30

Now, with the recovery solidly at hand, Gurmeet S. Ahluwalia, Citi’s Securities and Fund Services Product Head for Canada, spoke with Canadian Pension and Benefits Institute magazine about his insights on the future of the Canadian pension funds marketplace.

What is the single most significant development the industry can expect going forward?In the pension industry, what we see happening is

pensioners demanding more of their pension plans. Over

the next ten to 20 years we will be seeing the retirement

of the wealthiest and most well-traveled group of retirees

ever. As such, these pensioners will demand transparency,

flexibility and control when it comes to receiving their

payments.

Transparency means having a clear view into what is

happening with their payments — how much they should

have received, where the payment went, how it got there,

where future payments will go, when the next payment will

be made and how much will be remitted to tax authorities.

Pensioners will demand flexibility in how they receive

their payments. They may want payments sent to foreign

addresses, delivered in foreign currency or to foreign

banks, as well as the ability to change those parameters

as they change their lifestyle. Pensioners may be working

for part of the year, which may put them in a different tax

bracket, so they will want the ability to change how much

tax will be taken off each payment.

Retiring pensioners often have investments outside of

pension plans, so they are used to having full control of

managing their assets online. Rather than dealing with call

centers, they may want the option to make changes to their

pension payments on their own through web portals.

This is where Citi can help. We’re working with our Citi

colleagues around the world to create a solution specific to

the Canadian marketplace by leveraging what we have in

other markets that already provides this level of flexibility,

transparency and control.


IMR 31

How can a service provider assist pension plans in executing new strategies of increasing alpha?As pension funds move into new areas of growth and

investment in new markets and asset classes, they want

an administrator that can work with them, be flexible

and adapt.

On the front end, pension funds are looking to make

new investments and explore new asset classes, like

hedge funds. A partner that can assist with that can be

exceptionally valuable to the pension fund. Citi is in more

markets than any other administrator, which means that

we’re already on the ground with access to markets,

depositories and major corporations and we can provide

that access to our clients. We can work with our clients on

their advocacy requirements in different markets as well as

provide them with direct access to management teams as

they analyze potential investments.

On the back end, the more an administrator can be a

partner in terms of performing operations processes for

a pension fund or plan, the more pension leaders can

focus on the core business of growing their investments

in a manner such that they are fully aware of their risks.

This requires an administrator that can add value through

analysis, reporting and communication. Pension clients

require an administrator with the capability to not only

“keep up” with the client’s current strategies, but also

enable clients to expand into new areas of investment.

Based on market turmoil, pension plans are becoming more concerned about risk. How can they leverage a service provider to help manage risk?Risk can be managed directly by using a service provider

that offers transparent reporting on where a pension fund

generates its returns, and the analysis of correlations

between those investments. As a top global administrator,

Citi can take a leading role in helping clients manage their

risk. Taking on these functions on behalf of our clients

allows them to minimize risk because our global scale and

local Canadian expertise can be leveraged on their behalf.

Citi seeks to provide boutique service with an industrial

strength infrastructure by leveraging our global knowledge

and expertise to create a custom solution for our Canadian

clients’ individual needs.


IMR 32

Keng Lian Tan Vice President, Investor Services, Global Transaction Services, Asia Pacific, Citi

Asia Pacific’s Pension Market Revolution


IMR 33

Asia Pacific is home to some of the largest pension funds globally, with eight of the largest 20

worldwide based in the region. Traditionally, when compared to North America and Europe, the

Asia Pacific pension market has a perception of being underdeveloped, overregulated and too

domestically focused and conservative in their asset allocations. This may have been an accurate

description in previous years, but in 2010 this conjecture is clearly outdated.

In fact, a revolution of Asia Pacific’s pension fund market

is gathering steam on a global level. In recent years,

pension and retirement schemes have become one of the

largest and fastest-growing pools of capital in the region.

Given the government support, a growing population and

an expanding middle class in the region, the explosion in

pension assets and reform of the pension fund sector will

be one of the defining moments of Asia Pacific’s ongoing

investor revolution.

However, the revolution will come at different stages in

local markets and will be driven by contrasting sets of

issues. While greater diversification into international

and nontraditional assets is core to the maturity of many

national pension schemes, there are also other drivers

such as risk management and cost management, which

will place greater onus on global custodians to cater to

demand. Given the enormous population of Asia Pacific

and the desire to build contributions, the regional pension

fund revolution will continue for many years and require

substantial support.

The Current Environment There are numerous factors working in favor of substantial

and sustained pension fund growth in Asia Pacific. Across

the region, people are living longer, which requires a

higher cost of financing for retirement. Additionally, the

population across the region is growing; estimates by the

United Nations suggest it will be over one billion by 2030.

Mass urbanization in the region will also continue and has

highlighted the need to expand national pension schemes

to cover a greater segment of the population.

Simply put, these factors add up to two clear conclusions

for Asia Pacific’s pension fund market. First, the number

of beneficiaries will increase. Second, the need to manage

costs, risks and maximize returns on contributions will

be pivotal to the long-term plans of national pension

services.

Currently, there are more than 150 pension funds in

Asia Pacific. Assets under management stand at over $3

trillion, which is roughly 15% of the $23 trillion globally,

according to Towers Watson’s Global Pension Asset Study

2010. The number of funds in the region is expected to

grow dramatically in the coming years, but there will be

different motivations and contrasting asset realignments

to support the expansion of assets in Asia Pacific’s

pension fund chest.

China and KoreaTo best illustrate the continual development and

evolution of the pension fund industry in Asia Pacific,

China and Korea are two of the more prominent examples

of how this sector is developing in the region. Similar to

long-established markets such as Australia and Japan,

the pension markets of both China and Korea have made

great strides in recent years, in terms of increasing the

number of beneficiaries and augmenting contributions.

With supportive regulatory environments and an eye to

optimizing returns for a growing and aging population,

both markets are poised to become major pension

markets in the coming decade. However, they are at

different stages of development and are growing for

different reasons.


IMR 34

The creation of a national pension fund in China had been

identified as a pivotal governmental project long before

the establishment of the National Council for Social

Security Fund (NCSSF) in 2000. Since the launch of the

market-oriented fund, which is allocated revenue by the

government and 10% of total proceeds from initial public

offerings of state-owned enterprises, the capital pool has

grown to RMB776.5 billion ($114 billion).

Compared to other national pension funds in Asia Pacific,

the NCSSF trails significantly in terms of assets. Given the

number of aging beneficiaries and the immense population of

China, this paradox is not lost on the NCSSF board.

In March 2010, the NCSSF declared it wanted to increase its

total assets to RMB 2 trillion (approximately $300 billion)

by 2015 and that it would need to realign its investments

to achieve this. To meet this goal, the NCSSF has publicly

stated that it will expand its overseas investment and look at

unorthodox options, including private equity funds.

Korea’s pension sector is in a slightly different situation

to China. The country’s population is relatively stable and

its various national pension schemes are long established

and well capitalized. Combined, Korea’s domestic pension

plans currently hold over $300 billion in assets under

management, making it the third-largest market in the region

after Japan and Australia.

Korea’s domestic pension fund sector is dominated by

the National Pension Service (NPS) which, with assets of

approximately $260 billion, stands as the fourth-largest

pension fund globally. As has been well reported, the NPS

issued a defining mandate in 2007 declaring its intent to

quadruple its offshore investment stake by 2012, which

currently stands at approximately 10%.

While not facing the challenges of China’s NCSSF, the NPS’

move has evidently signaled its desire to diversify holdings

away from its traditional domestic fixed income investments

to spread risk. Additionally, the move by the NPS is seen by

many as promoting Korea’s role as a serious institutional

investor on the global stage.

Although enhanced yield lies at the core of the offshore

ambitions of China and Korea’s national pension funds, the

end results for both nations differ. This scenario is playing

out across the region in other markets such as Taiwan,

Malaysia and Singapore, where national pension funds are

diversifying investments to not only cover beneficiaries but

to also spread risk, drive down costs and gain exposure on

an international level.

Supporting the Momentum in Asia Pacific While the strategies, future ambitions and schemes

of pension funds in Asia Pacific vary significantly, as

illustrated by the China and Korea models, there are

implications for external parties in the region. Specifically,

as increased offshore investment and asset diversification

by pension funds in Asia Pacific gain momentum, the

expectations of providers, particularly global custodians,

will change, not just in terms of credit ratings. In our

experience, we have identified several areas where global

custodians will need to focus to match expectations,

regardless of the plans of pension fund clients.

First, for global custodians to best serve pension fund

clients, a closer relationship with investment consultants

is clearly required. With greater asset diversification,

enhanced focus on risk management and cost management

driving many pension funds (as in the case of China and

Korea), investment consultants are pivotal.

The number of investment consultants in Asia now

including custodian evaluation and selection services has

increased. Consultants play a pivotal role in establishing

communication flows between pension funds, external


IMR 35

fund managers and global custodians. Global custodians

ensure seamless account setups in multiple markets, and

instructions flows between these three parties. The ability

to establish this service structure for a pension fund

through its own network should be a consideration for

pension funds in Asia Pacific looking to appoint a global

custodian.

In addition to the traditional fixed income, equities

and cash, as more pension funds increase allocations

to a greater variety of assets, such as private equity

investments, alternative funds, real estate and illiquid

instruments, the ability to provide accurate and efficient

consolidated valuations will become a key requirement.

Second, as they evolve further, pension funds in Asia

Pacific are turning to global custodians with transition

management, commission recapture and securities lending

capabilities. For portfolio realignments, an increasingly

common theme as pension funds diversify assets, an

in-house transition management capability has become key

in appointing a global custodian in Asia Pacific.

Similarly, as global markets remain volatile, securities

lending schemes that provide for efficient recall procedures

and address market-wide concerns of cash collateral have

been used by a broad range of funds in Asia Pacific. As

restrictions on short selling are lifted in markets such as

China and India, pension funds will clearly utilize securities

lending programs even more, which can be managed in

partnership with global custodians.

Finally, as the number of beneficiaries, schemes and

total assets expand, efficient administration of benefits,

contributions, employee payroll and other payments

through centralized secure, prompt and accurate domestic

and cross-border payments will become more critical, as

will receivables solutions and prepaid cards, which will

become a medium to effecting secure disbursements to

beneficiaries.

To enhance cash flows for working capital requirements

and to improve returns on surpluses, many pension

funds in Asia Pacific are now utilizing daily sweeps into

high-interest accounts and the liquidity investment

platforms offered by banks. Global custodians with a

robust cash management platform that can provide

comprehensive securities, funds and cash solutions, as

well as transition management, commission recapture

and securities lending to contain administrative costs,

with easy-to-use web applications, accurate reporting

and competitive foreign exchange rates, will be well

positioned to meet the growing requirements of pensions

in Asia.

To optimize yield, many pension funds in Asia Pacific are

now utilizing daily sweeps into high-interest accounts

and associated liquidity management. In our experience,

custodians with a robust cash management platform will

see increased business as a result of the risk management

drive by pension funds in Asia Pacific.

The decision by national pension funds in Asia Pacific

to diversify asset allocations, as illustrated by the China

and Korea examples, depends on the fund’s individual

motivations, be they yield enhancement or risk mitigation.

Their success will be defined by their ability to evolve

their investment strategies to address demographic

changes and balance national interests and market

movements, albeit at different levels of pace.

Given the increasing and aging populations, urbanization

in emerging markets and the drive toward more universal

coverage, the pension market in Asia Pacific is large,

diverse and poised for further growth, as is the enhanced

set of solutions that will be required to support this huge

asset base.


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Roger BrookesDirector, EMEA Client and Sales Management Global Transaction Services, Citi

Hugo Parry-Wingfield, DirectorEMEA Liquidity and Investments for Citi’s Global Transaction Services


IMR 37

While the markets remain on a jittery path, investment managers have sought new ways to maximize their performance and better their risk-management processes. Operational excellence has been one of the defining characteristics for those asset managers who have outperformed during the recent melee.

Risk, Yield and Cost Management:The Science Behind Cash and Liquidity Management


IMR 38

As complex businesses with a variety of operational

activities support their core services, investment managers

frequently find themselves spread across multiple currencies

and locations. Cash management touches most of these

activities, and the value of optimizing these practices can be

extremely high — as can the cost of getting it wrong.

The industry currently faces a number of challenges, some

quite clearly derived from recent market conditions, others

arriving as the industry continues to change and evolve.

How can investment managers turn these challenges into

business opportunities?

Cash management is a logical area to focus on for quick

wins. Moreover, it helps to support long-term change in a

company’s strategic direction, underpinning operational

and structural processes, infrastructure and technology.

This article reviews some of the cash and liquidity

management tools and techniques that investment managers

are currently using to manage costs, improve transparency

and boost the liquidity of their funds when required.

What Are the Key Challenges?• Managing Costs. As the industry

strives for greater efficiencies,

the focus continues on ways to

manage costs by either direct

cost-cutting or by seeking more

effective ways to operate in order

to contain those costs and to

increase value.

• Controlling Risks. Much has been

achieved in risk management

since the financial crisis first hit

the headlines, but investment

managers continue to seek ways

to enhance the risk framework

as well as the process of

execution. Increasing demands

from regulators are also coupled

with far greater calls from investors for increased

transparency.

• Balancing yield and Liquidity. As the global interest

rate environment is expected to remain low into 2011,

managers are returning to the question of yield on

cash. While this must be in the context of a robust risk

management approach, it is also important to weigh

up liquidity to ensure it can meet obligations without

having the opportunity cost of too much cash in hand.

Understanding Different Profiles of CashTwo rudimentary but extremely effective steps that serve

to identify opportunities where control and returns can

be improved are to define where cash balances can lie

within business and to understand the differing nature

and profile of the balances. An investment manager

can have cash in a variety of pockets, both within the

investment operations and at a corporate or treasury

level. So what must be changed for a benefit to

take place?

The following diagram illustrates the variety of cash purposes and activities that can

exist within an investment management company and how these are linked to the

underlying transaction flows.

RedemptionsDividends

Commissions

Subscriptions

Fees

Corporate Cash

Investment of Client/Fund Cash

Client Cash

CHF USD

GBP EUR

USD

EUR

Investment of Corporate Cash

Receivables Payables

Cash Management

Cash as an Asset ClassInvestment in cash/liquid instruments as a defined asset class within a portfolio (within a fund or an individual mandate).Cash as CollateralCash that must be held and managed as collateral/margin, for example, for derivatives or within securities lending programs.Cash as an Operational “Biproduct”Large amounts of residual cash generated as a result of operational activities such as securities settlement, and cash flows before/after.

Corporate/Treasury Cash The “house” cash of the business that needs to be managed for operational needs and strategic activities.Regulatory CashCapital required centrally and across markets to adhere to the multitude of local regulatory requirements.

CHF


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How Can You Optimize Your Cash and Liquidity Management?The panacea of most firms is to deliver real results — reducing or controlling costs, managing risks and generating business

and operational efficiencies.

1. Enhanced Cash VisibilityIdentifying the variety of pockets and locations where cash

can reside is only the start of the journey. The complexity

that many face in the investment management world,

indeed a challenge for cash managers and treasurers

across industries, is to gain maximal visibility of those cash

balances, whether that is corporate cash or client/fund cash.

While great strides have been made in recent years to

improve visibility, it is clear investment managers need to

enhance this further:

• Manage counterparty risks. Knowing where and what your

balances and exposures are at any given point in time.

• Control currency exposures. Understanding the individual

currency balances as well as the aggregate.

• Mobilization of funds. With cash residing across a variety

of bank providers, business functions and locations, full

visibility provides the basis for determining where funds

can be most optimally deployed if they are to benefit

from efficiencies in concentrating/pooling cash balances.

• Support forecasting and decision-making. Continually

reconciling actual cash positions against planned

positions, and feeding this information into the

operational and investment decisions. This approach is

frequently used when considering the duration of a cash

investment or the required time to access liquidity.

• Improve transparency. For internal and external

reporting and governance.

If an investment manager can maximize their cash and

short-term investment visibility, they achieve a crucial

milestone on the journey to enhancing their overall cash

management processes. This “quick-win” option gives an

investment manager’s cash manager the chance to quickly

review the associated risks or opportunities.

At Citi, many of our clients use our TreasuryVision®

application for a single view of all their cash and investment

balances, irrespective of bank, currency or location.

Tailored reporting is combined with strong functionality so

that the potentially sizeable information base is perfectly

aligned to the underlying client’s own corporate structure.

Moreover, improved access to cash and effective platform

management work to improve cash forecasting and support

critical decision-making and executing, e.g., the profile and

tenure of cash investment programs.

2. Leverage Liquidity StructuresDriven by the exacting demands of treasurers at

multinational corporations, the leading service providers

in the global cash management world have developed

many sophisticated tools to assist the mobilization and

optimization of cash balances. These tools are used by

the investment management community for their own

working capital and treasury management. They can

include liquidity structures that automatically concentrate

or sweep cash balances between multiple accounts and

locations, even between multiple banks, with the goal of

having a single position to manage at the end of each day.

The notional pooling of cash balances is another option —

provided this is permitted by the company’s legal structure

and country rules. Of course, notional structures achieve

the same goal without the physical movement of funds

associated with concentration structures.

What is for certain is that, when cash balances reside in

a variety of locations around the world, only those banks

with a truly international proprietary network, such as

Citi, can provide the consistent approach an investment

manager needs to manage their balances effectively.


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A recent addition to the liquidity management toolbox is

the ability to pool across multiple currencies. By managing

several currencies as a single position without the need to

perform FX swaps, investment managers can take advantage

of a multicurrency pool, where individual currency balances

can be treated as a single position, to support specific

currency-related strategies, such as FX hedging.

3. Revisit Cash Investment Practices

Given the low global interest-rate environment, coupled

with a renewed focus on risk and liquidity, many investment

managers have been content to restrict the investment

of their cash balances in highly liquid options. This has

included government securities and repos, overnight

or short-term bank deposits concentrated with the

stronger counterparties, and money market or

treasury/government funds.

While there will be no radical change in the market

overnight, we do see a gradual shift as investment managers

look for ways to minimize the operational effort associated

with retaining liquidity on a far shorter basis than in the past.

The trend also includes the consideration of outsourcing

cash investment execution as a way to reduce costs and

enhance risk management. The primary drivers for these

changes are still typically associated more with managing

risks and liquidity than with yield, although the goal would

still be to maximize returns commensurate with a robust

risk framework.

Cash balance investments are driven by different

requirements, especially when the manager has a variety

of cash profiles to consider, as well as whether the cash

belongs to the business, a fund or an underlying investor.

Indeed, regulatory cash must also be considered as must the

restrictions that surround how it is to be managed.

There is, however, a common set of approaches that can be

applied as appropriate to those pockets of cash, and at Citi

the following have been of particular focus for many clients

as they look to enhance these activities.

• Deposit Accounts vs. Time Deposits. Fixed-term bank

deposits are an extremely valuable way to place

available cash for a defined period in return for a defined

rate. Managing multiple time deposits across tenures and

counterparties requires operational effort and generally

requires good forecasting to ensure you are accessing

the best rates as early in the day as possible.

This does not always lend itself to cash management

operations where cash can arrive later in the day, whether

it is the investment manager’s cash, from a security

settlement or from other investment activities. Using high

yielding deposit accounts can be an attractive alternative

that pays a competitive yield — typically in return for a cash

balance that has a largely stable nature.

Unlike a time deposit, these accounts can offer access to

immediate liquidity if needed, and they are also able to pay

the agreed rate for the closing balance on the account,

which could benefit later-day flows. A deposit account can

reduce the operational effort associated with time deposits

and requires no daily action since the balances do not need

to be moved. Overall, these are effective and automated

options that do not necessarily forgo yield or liquidity.

• Accessing Money Market Funds. Money market funds

diversify a cash investment across a variety of money

market instruments while retaining the desired liquidity

and capital preservation of the investment manager. At

the height of the financial crisis, many investors retained

their appetite for a pooled fund approach but shifted

toward government or Treasury-style funds, although

that trend has been steadily reversing.

For many, the decision to invest in a money market fund

is to maximize their investable cash while retaining full

control and visibility of the balance.

Investment portals are available from a number of

providers, giving a single entry point to access multiple

fund families. Citibank Online Investment (OLI) simplifies

the cash investment process and provides a consolidated

view of a firm’s cash investments. The portal covers ten

different fund families (for offshore funds), with simple

settlement from a Citi or even a third-party bank account,

in 21 countries and 18 currencies.


IMR 41

• Directed Investment Mandates. Investment managers

are increasingly looking to tailor their investment

guidelines for short-term cash while managing their

operational balances with cash management or custody

providers more effectively.

Investment managers should employ the scale and

expertise of their provider by setting parameters for

instruments, tenure and counterparties. Thus they can

leave the provider to manage the cash on a daily basis as it

adheres to the investment guidelines and adds value via its

own monitoring and control framework. Such a service can

provide an easy route to diversify residual, or investment,

cash balances across multiple counterparts through repo,

cash deposits or a variety of other instruments.

Finding the Right PathInvestment managers face myriad challenges in

protecting and investing cash, while managing costs,

meeting regulatory requirements and maintaining a

vigilant eye on risk management disciplines. Given the

tumultuous environment we still seem to be in, it is as

critical as ever to find efficient ways to manage these

needs without overly distracting from the fundamentals of

the business.

That said, with the right tools there are clear opportunities

for investment managers to enhance their current

practices and achieve many quick, yet real, wins — from

reduced operational effort and costs to improved control

and risk management. With the right partner, these can

become flexible, long-term strategies. Given the current

environment, this is a benefit that cannot be dismissed.

While there will be no radical change in the market overnight, we do see a gradual shift as investment managers look for ways to minimize the operational effort associated with retaining liquidity on a far shorter basis than in the past.


IMR 42

Regulatory & Legislative Update

Bruce TreffManaging Director of Regulatory and Compliance Services Citi Investor Services

Chuck BoothDirector of Regulatory and Compliance Services Citi Investor Services

North America


IMR 43

Four major events dominated the financial industry landscape during the first quarter. Specifically, the new amendments to the rules governing money market funds were adopted by the SEC at its open meeting on January 27 and subsequently released in late February. In addition, the compliance date for the Custody Rule affecting registered investment advisers occurred on March 12. Furthermore, a historic (and massive) financial regulation reform bill was introduced in the U.S. Senate through Senator Dodd’s Restoring American Financial Stability Act of 2010 on March 15. And, finally, the Supreme Court’s decision in the Jones v. Harris excessive fee case was announced on March 30, upholding the mutual fund industry’s standard for examining fees and services related to investment advisory contracts.

The issuance of final amendments to the rules governing money market funds is the SEC’s attempt

to address the credit and liquidity risks experienced by these funds during the financial market crisis

in 2008, which culminated in the Reserve Money Market Fund breaking the dollar in the fall of that

year. The final amendments attempt to strengthen money market funds’ ability to withstand severe

adverse market conditions by increasing portfolio quality, reducing overall portfolio maturities,

increasing existing liquidity requirements as well as imposing new ones, increasing diversification,

imposing additional monitoring of rating agencies and imposing new stress testing requirements on

a money market fund’s portfolio. Although already quite extensive, the SEC left room for additional

changes as well, not ruling out the most controversial change: implementing a variable net asset

value requirement for money market funds in the future.

Bruce TreffManaging Director of Regulatory and Compliance Services Citi Investor Services

Chuck BoothDirector of Regulatory and Compliance Services Citi Investor Services


IMR 44

The compliance date for the so-called

Madoff Rule took effect on March 12.

Amended Rule 206(4)-2 under the

Investment Advisers Act of 1940 is designed

to provide additional safeguards when a

registered investment adviser has custody

of client funds or securities by eliminating

certain exemptions that had previously

existed under the rule. Key provisions of

the amendments include requirements for

the delivery of account statements and

notices to clients, surprise examinations

by an independent public accountant and

additional SEC reporting requirements. The

SEC posted “Staff Responses to Questions

About the Custody Rule” on their website,

and subsequently updated it several times,

to provide additional guidance by the SEC

staff regarding the practical application

of the Custody Rule’s requirements,

including the various compliance dates,

documentation and other specific details

not addressed in the rule or the adopting

release.

The Restoring American Financial Stability Act of 2010

was introduced through the Senate Banking Committee to

strengthen the power of the U.S. government to oversee

financial institutions and their products, and weaken Wall

Street’s ability to influence regulatory policy. While activity

on this bill continues as we go to press, it is certain that the

bill and the resulting resolution with the House version, the

Wall Street Reform and Consumer Protection Act of 2009

(passed by the U.S. House of Representatives on December

11, 2009), will have a long-lasting affect on the U.S. financial

services industry. Most dramatically, the likely creation

of a new Consumer Financial Protection Agency and new

registration requirements for investment advisers to

hedge funds will strengthen the U.S. government’s ability

to regulate previously unregulated entities and financial

products largely blamed for the recent financial crisis.

The Supreme Court decision in the Jones v. Harris case

also merits attention. The decision was viewed as a victory

for the mutual fund industry and (more or less) upheld

the Gartenberg standard used by boards in approving

investment advisory contracts for decades — that fees

should be determined from an arm’s-length bargaining

between the fund’s adviser and its board of directors. Still,

the case, which was the first to focus on the difference in

fees charged by an investment adviser to a mutual fund

and the adviser’s institutional clients, is likely to result in

additional analysis and documentation of the adviser’s fees

and its approval by the fund board.

While these developments dominated the financial news

during the quarter, there were several other items worth

mentioning. For example, the upcoming June 1 compliance

date for three different new regulations (Regulation

S-AM, the Red Flag Rule and Regulation GG) have many

funds and investment advisers still examining their

operations and compliance programs. Regulation S-AM


IMR 45

provides several limitations on the ways firms, including

mutual funds and their investment advisers, can share

customer information for marketing purposes, including

new opt-out requirements. The Red Flag Rule, which has

had its compliance date extended a total of four times,

requires firms to establish written identity theft programs

reasonably designed to detect, prevent and mitigate

identity theft in connection with the opening of a covered

account or any existing covered account. In addition,

Regulation GG requires financial services providers to

implement certain compliance requirements that impose

restrictions on Internet gambling.

In addition, on February 26, the SEC amended Rule 201

of Regulation SHO, adopting a short-sell related circuit

breaker which, if triggered, would impose restrictions on

all short sales initiated in the U.S. for the remainder of the

day and all of the following trading day. The circuit breaker

would be triggered by a 10% drop in a security’s price from

its prior day’s close. The new rule would require compliance

beginning November 10, 2010.

There was also a plethora of new rules aimed at

strengthening anti-money laundering regulations. On

February 10, FinCEN expanded the information sharing

provisions under Section 314(a) of the Bank Secrecy

Act (“BSA”) to allow certain foreign governments and

state and local governments to submit requests for

information to U.S. financial institutions through FinCEN.

Then, on February 26, in a move that provided leniency

for delinquent filers of the Report of Foreign Bank and

Financial Accounts (“FBARs”) due to confusion over

reporting requirements, the IRS extended the deadline for

FBAR filings for calendar year 2009 and earlier until June

30, 2011. Also, on January 10, the SEC extended a previous

no-action position that permits broker-dealers to rely on

an investment adviser’s AML program for some or all of its

customer identification program requirements, provided

certain conditions are met. Also, on March 5, FinCEN

and six other federal regulators issued joint guidance

emphasizing existing regulatory expectations for financial

institutions to obtain beneficial ownership information for

certain accounts and customer relationships. Lastly, on

April 12, FinCEN issued amendments to the BSA defining

mutual funds as financial institutions under all aspects of

the Act. The change, effective May 14, changes a mutual

fund’s currency transaction reporting requirements and,

beginning January 10, 2011, imposes new information and

record-keeping requirements on the transmittal of money.

In addition, for a fund’s tax year beginning on or after

January 1, 2010, the exemption for foreign investors from

the 30% U.S. withholding tax on qualified interest income

(“QII”) and qualified short-term capital gains (“QSTICG”)

expired. Thus, funds must begin withholding taxes on such

dividends to foreign investors beginning in their next tax

year. Although there are bills passed in both the U.S. House

of Representatives and the U.S. Senate that would extend

the exemption for another year, there are a number of

amendments on both bills that must still be reconciled

before the bill can be signed into law and the exemption

restored.

As you can see from the huge amount of regulatory activity

during the quarter, it is very easy to be overwhelmed by

the breadth and depth of change facing us. While success

can be anything but assured, it is clear that we must all be

active participants to successfully effectuate the required

changes.


Global Transaction Services www.transactionservices.citi.com

© 2010 Citibank, N.A. All rights reserved. Citi and Arc Design and Citibank are trademarks and service marks of Citigroup Inc. or its affiliates, used and registered throughout the world. All other trademarks are the property of their respective owners.

Citigroup Fund Services Canada Inc. is a non-bank member of Citigroup.

The material in this magazine is for informational purposes only. Information herein is believed to be reliable but Citigroup does not warrant its accuracy or completeness. Information provided herein may be a summary or translation. Citigroup is not obligated to update the material in light of future events. This magazine does not constitute a recommendation to take any action, and Citigroup is not providing investment, tax accounting or legal advice. Citigroup and its affiliates accept no liability whatsoever for any use of this magazine or any action taken based on or arising from the material contained herein.

The views expressed by contributing authors may not represent views or opinions of Citigroup or any affiliate. No part of this publication may be reproduced, in whole or in part, without written permission from the publisher.

653546 GTS25487 06/10

Calendar of EventsSEPTEMBER:14 TheAssociationofCanadianPensionManagement

(ACPM)ConferenceWhistler,BritishColumbia

15 Citi’sU.S.RegulatoryandComplianceQuarterCASTWebEvent,NoonET

28–29 DowJonesPrivateEquityAnalystConferenceNewYork,USA

30 InvestmentFundsInstituteofCanadaConferenceToronto,Ontario


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Investment Management Review - Citi | Responsible · PDF file · 2010-07-15Investment Management Review ... thirds displacement. The size of new money in motion will be small until