News & Initiatives

Albourne¹ submitted to the US Securities and Exchange Commission (“SEC”) its views on the SEC’s Private Fund Proposed Reforms announced in February 2022.²   

Please see the following link for the full response. 

We believe Albourne is uniquely placed within the industry to comment on potential unintended consequences and the broader impact of the proposals given our team’s coverage of many critical areas impacted including investment strategy, operations, portfolio management, reporting and private funds’ terms review.

The SEC’s proposed reforms include sweeping changes that could materially impact the private funds industry.³ Albourne understands the concerns faced by investors as well as the challenges fund advisers will face to implement the proposals. The spirit of the proposals is to address many activities that have negatively impacted investors in the past. This could be due to inherent conflicts of the GP, a lack of transparency to investors or other factors.

Albourne is generally supportive of many of the proposals but also notes certain proposals and options outlined by the SEC could have unintended consequences. Given the length of the proposal and the number of questions asked by the SEC, Albourne did not attempt to cover all of them; instead Albourne has looked to highlight five key proposals and provide insight on some of the questions posed by the regulator.

The five key proposals covered are: 

1. Quarterly statements
2. Mandatory private fund adviser audits
3. Adviser-led Secondaries
4. Prohibited activities 
5. Preferential treatment  

With the SEC’s public comment period closed, Albourne expects changes to be made to the final proposed rules.

The final proposal will likely push managers into a more institutional framework. While further progress is needed in the private markets space despite noticeable improvements since Dodd Frank, the downside with such proposals tend to be additional administrative burdens for smaller managers that will need to comply with the SEC’s new reporting requirements. This can increase costs, which in turn could be passed onto investors or reduce competitiveness by increasing the barriers to entry.

Albourne will continue to monitor changes to the proposal and assess how they impact the industry once they become finalized.

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¹ “Albourne” and “we” refer to the group of companies comprising Albourne Partners Limited and its subsidiaries.

² SEC announcement and proposal documentation is available for download at: https://www.sec.gov/news/press-release/2022-19

³ The SEC defines Private Funds as both Public and Private Market funds

Albourne is delighted to have won Hedge Fund Consultant of the Year at Institutional Investor's 19th annual Hedge Fund Industry Awards!

Thank you for your votes! 

For details of all of the winners, please click here.

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The winners of the 2022 Institutional Investor's Hedge Fund Industry Awards were selected by majority vote through an online survey of the readership of Institutional Investor (“II”), which consist of participants in the hedge fund industry globally. There was an open (public) nomination process. The editorial team verified nominations. The nominations were made public and a voting process for the awards, including “Hedge Fund Consultant of the Year” (the “Award”) was opened. Voting for this award was open to investment fund managers. All investment consultants located in North America, Europe and Asia that advise institutional investors on hedge fund investments were eligible to receive the Award under the same survey criteria. The survey was not structured, administered or designed to produce a pre-determined result of Albourne winning the Award. In conferring the Award to Albourne, II attributed survey nominations for any one of Albourne’s affiliates as a nomination for Albourne.

Albourne is not affiliated with II and did not pay a fee to be eligible to be nominated for the Award. The Award is not representative of an Albourne client’s experience. The Award reflects the subjective views of investment fund managers, and not those of Albourne’s own clients. The Award is not indicative of Albourne’s current or future performance.

The Alternative Investment Management Association ("AIMA"), together with leading digital asset custodians and industry experts (including Albourne), has published a new Industry Guide on Digital Asset Custody for institutional investors. The guide provides industry guidance on sound practices and key considerations around due diligence for institutional investors determining how to custody their digital assets. This jurisdiction-neutral guide has been primarily designed for institutional investors who are seeking the services of a digital asset custodian.

It is the initiative of AIMA’s Digital Assets Working Group ("AIMA DAWG") – a cross section of around 300 senior industry experts including institutional investors, custodians, exchanges and other service providers. It is tasked with driving AIMA’s regulatory engagement, thought-leadership initiatives, and operational guidance in the area of digital assets.

The concept of digital asset custody revolves around the safekeeping of a private key. However, as the private keys are used to store, manage, and transfer digital assets by the owner and help with the decryption of messages and authentication of transactions, they represent a single point of failure in the system. Therefore, private keys require sophisticated technologies to prevent theft, loss or destruction. It is the control and management of these private keys which have given rise to the frameworks supporting the custody of digital assets as a distinct and specialist service offering.

While keeping a private key safe is fundamentally a technical need entailing specific hygiene protocols, when embedded within a commercial service offering, potential users of that service need to consider the terms upon which the service offering is provided, the regulatory framework sitting around the custody provider, any insurance provisions that are required or are in place and the legal basis upon which the assets are held.

As a general resource, the guide should not be regarded as a substitute for professional advice, which should still be obtained where appropriate. Further, institutions engaging in digital asset custody should pay close attention to applicable regulatory requirements and guidelines issued by regulatory authorities in applicable jurisdictions.

For the full paper please click here.

The Standards Board for Alternative Investments (SBAI), an active alliance of institutional investors and alternative asset managers, announced today the launch of its Global Regulatory Committee. The Committee brings together leading institutional investors, asset managers and investment consultants to enhance and support the SBAI’s dialogue with regulators around the world. Chris Bowlin, Sr. Compliance Counsel, Teacher Retirement System of Texas has been appointed Chair of the Committee, and Stephen Berger, Managing Director, Citadel, has been appointed Deputy Chair.

Chris Bowlin said: “I am honored to chair the SBAI’s Global Regulatory Committee, which will help the SBAI further develop its balanced perspective on regulatory topics, taking account of manager and institutional investor considerations.”

The SBAI Regulatory Committee will start work immediately and help formulate the SBAI’s responses to the US SEC's recent requests for public comments on its Proposals for Private Funds, Securities Lending, as well as Short Positions and Short Activity Reporting.

Members of the Committee include:

• Gaurav Amin, Head of Fintech & Implementation, Albourne Partners
• Arthur Bengasino, Portfolio Manager, TelstraSuper
• Stephen Berger, Managing Director, Global Head of Government & Regulatory Policy, Citadel; Committee Deputy Chair
• Hans Bergström, Compliance Officer, AP7
• Chris Bowlin, Sr. Compliance Counsel, Teacher Retirement System of Texas; Committee Chair
• Luana DiCandia, Director & Senior Legal Counsel, Ontario Teachers’ Pension Plan
• Jason Eng, General Counsel and Chief Compliance Officer, Dymon Asia Capital
• Kimberly Hamm, Director, Global Public Policy Group, BlackRock
• David Lau, Chief Compliance Officer, Springs Capital Brigid Rentoul, General Counsel, Winton Group
• Merel Uittenbogaard, Senior Legal Counsel, Regulatory Team, APG Asset Management
• Karl Wachter, General Counsel, Magnetar Capital
• Glen Zwicker, Managing Director, Head of Investment Operations, Howard Hughes Medical Institute

Mario Therrien, Head of Investment Funds and External Management, CDPQ, and Chair of the SBAI said: “We see regulators increasingly turn to the Standards and the SBAI’s work more broadly, as they continue to take notice of the practical solutions the SBAI provides to some of the complex issues the industry faces. We are thrilled to have the members of this Committee support our efforts.”

Since its inception, the SBAI, an Affiliate Member of the International Organization of Securities Commissions (IOSCO), has engaged proactively on a wide range of regulatory topics, including regulation for alternative investment managers, financial stability, short selling and ESG.

Thomas Deinet, Executive Director, SBAI, said: “We look forward to working with the Committee to provide constructive input into the global regulatory process, supporting efforts to facilitate fair and efficient markets, reduce systemic risk, and help investors make well-informed investment decisions.”

As the investment management industry strives to adapt to the increasing momentum of Sustainable Investing, the speed with which ESG-related acronyms appear to be emerging may be disconcerting to many. To help navigate the maze of acronyms, this paper presents a typology of acronyms of organizations or initiatives that aim to contribute to the Sustainable Investing space.

• UN-Related Organizations and Initiatives - Several of these initiatives have been originated by the United Nations, which, given the organization’s mission, is seen as a first mover in the Sustainability space. 
• Investment Industry Organizations and Collaborations - These have also responded to investor interest in ESG, either by leveraging the existing membership groups or by forming new collaborations with specific objectives. 
• Sustainability Reporting Organizations and Initiatives - Several organizations have been formed to establish standards for sustainability reporting, an area of historical inconsistency in terms of format, depth, and quality of information presented. 
• Climate-Related Organizations and Initiatives - There are also organizations that specifically aim to tackle climate change, although in varying ways. Some may focus on advocacy, others on reporting, while some focus on carbon measurement. 
• Impact-Related Organizations and Tools - Lastly, several organizations aim to establish best practices and create investor tools for impact investing.

A non-exhaustive list acronyms falling within these categories are listed in Table 1 below. Please refer to the Glossary at the end for an expansion of the acronyms and links to the organizations and initiatives. 

Table 1 - Typology of Acronyms

Subsequent whitepapers will aim to provide more in-depth discussion on the relevance and application of the various frameworks and tools that have been created by the organizations noted in this paper. 

GLOSSARY

UN-Related Organizations and Initiatives

• PRI: Principles for Responsible Investment
• UN SDGs: UN Sustainable Development Goals
• UNGC: UN Global Compact
• UNDP’s SDG Impact: United Nations Development Programme’s Sustainable Development Goals Impact
• UNEPFI: United Nations Environment Programme Finance Initiative
• NZAOA: UN-convened Net Zero Asset Owner Alliance

Investment Industry Organizations and Collaborations

• ILPA: Institutional Limited Partners Association
• AIMA: Alternative Investment Management Association
• SBAI: Standards Board for Alternative Investments
• CFA Institute: Chartered Financial Analyst Institute  
• The Investor Forum: UK investor collective on stewardship
• ICGN: International Corporate Governance Network 
• ICSWG and ICSWG (US): Investment Consultants Sustainability Working Group European and US Chapter
• ESG Data Convergence Project: GPs and LPs collective
• Diversity Project: Membership organization that initiated the Asset Owner Diversity Charter  
• RIA (Canada): Responsible Investment Association (Canada)
• RIAA: Responsible Investment Association Australasia 
• GRESB: Global ESG Benchmark for Real Assets

Sustainability Reporting Organizations and Initiatives

• GRI: Global Reporting Initiative  
• SASB: Sustainability Accounting Standards Board 
• IIRC: International Integrated Reporting Council
• VRF: Value Reporting Foundation
• IFRS Foundation: International Financial Reporting Standards Foundation
• ISSB: International Sustainability Standards Board
• WEF-IBC Initiative: World Economic Forum - International Business Council Initiative

Climate-Related Organizations and Initiatives

• TCFD: Task Force for Climate-Related Financial Disclosures  
• COP26: 26th Conference of the Parties
• SBTi: Science Based Targets initiative 
• CDP: Climate Disclosure Project
• CDSB: Climate Disclosure Standards Board
• GHG Protocol: Greenhouse Gases Protocol
• IIGCC: Institutional Investors Group on Climate Change
• IGCC: Investor Group on Climate Change (Australia)
• AIGCC: Asia Investor Group on Climate Change
• Ceres Investor Network: North American investor group on climate change 
• NZAMI: Net Zero Asset Managers Initiative
• iCI: Initiative Climat International  
• ShareAction: Key proponent of Investor Decarbonization Initiative
• PCAF: Partnership for Carbon Accounting Financials
• WBCSD: World Business Council for Sustainable Development

Impact-Related Organizations and Tools

• IMP: Impact Management Project
• GIIN: Global Impact Investing Network
• IRIS+: Impact Reporting and Investing Standards+
• OPIM: Operating Principles for Impact Management
• B Lab: Beneficial Lab
• III: Impact Investing Institute
• PFP: Pensions for Purpose
• IWA: Impact Weighted Accounts
• SROI: Social Return on Investment
• Nesta: UK innovation think-tank  

Jennifer Kizilbash Galang - April 2022

What is Impact Investing?

Today, Impact investing is considered to include the pursuit of financial returns at market rates from investments that deliver real world change (or “Impact”), or the pursuit of sound financial investments with positive externalities. This type of Impact Investing, known as “Non-concessionary Impact” Investing, is on the opportunities side of the Sustainable (or “Responsible”, or “ESG”) Investing equation. This contrasts with the more traditional view that Impact investing is “Concessionary” and involves investing for social benefit at the expense of financial outcomes, a view perhaps explained by the origins of Impact in the Social Responsible Investing (“SRI”) movement of previous decades.

Whether or not an Impact investment programme is Non-concessionary or Concessionary depends on the intentions of the investor at the point of taking the decision to invest.  If their minimum acceptable rate of return is driven only by financial risk, i.e., it is same as for a non-Impact investment of similar financial characteristics, then it is Non-concessionary. If, on the other hand, they would apply a lower return hurdle in order to secure their Impact objectives, then it becomes Concessionary. This ex-ante designation is independent of the financial outcome realised and cannot be reinterpreted ex-post:

• A Non-concessionary Impact investment that yields poor financial returns does not become a Concessionary Impact investment; it remains a poor investment, perhaps a potential “lessons-learned” case study; and
• Conversely, a Concessionary Impact investment that yields higher than expected, market rates of financial returns does not become Non-concessionary.

The Global Impact Investing Network (“GIIN”), a global champion of impact investing, defines Impact as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return”¹.

Article 9 of the EU’s Sustainable Finance Disclosure Regulations refers to “a financial product [that] has sustainable investments as its objective”², and anecdotally, this seems to be widely accepted as capturing Impact Funds.

Realising outcomes, or, extracting the essence

The path to realisation of the financial outcomes of an investment is well-established and almost obvious. Consider an Impact investment that achieves a sound financial return as well as its Impact Objectives.  The sale or redemption of the investments will be accompanied by the investors’ receipt of realisation proceeds; they’ll “see” the money in their bank account.  However, this does not, by itself, enable them to participate in or receive or consume the Impact benefit of their investment.  

The investors’ participation in the Impact outcomes may be necessary for reasons of accountability: they may have represented to a Board or other stakeholders that the investment had a dual purpose, and mere receipt of expected redemption proceeds does not allow them to confirm attainment of the second, Impact-related objective.  The participation may simply comprise the quite legitimate outcome of a feeling of satisfaction that their investment has delivered the real world change they desired.  It may also be much more serious than that: the Impact Objective may be a major strategic objective for the Investor, e.g., the pursuit of Net Zero. 

For an investor to realise the Impact objective from investing in an Impact Fund, the GP of the Fund would need to first identify the potential for Impact and determine appropriate Key Performance Indicators (“KPIs”) to capture this prior to each investment. These KPIs would be measured at the point of investment, then monitored and tracked throughout the life of the investment up to its realisation³, and reported, with due reliability, to the Investor.

Consider the case of two hypothetical funds, Fund P and Fund Q. They made identical investments on identical financial terms and realised the same financial outcomes.  Their investments had significant Impact in their sphere of activity.  Fund P determined, measured and monitored KPIs which it reported as Impact outcomes to investors, and Fund Q did not⁴. An Investor seeking Impact outcomes would have a rational preference for Fund P, over Fund Q. This would be because Fund P has a track record of facilitating Investors’ participation in the Impact outcomes and Fund Q does not.  In a world where investors may be seeking Impact, subsequent raises may either favour Fund P, or put competitive pressure on Fund Q to report Impact.    

The Future of Impact Reporting

The rise in awareness of Climate Change and Net Zero pledges by many asset owners is one indication of a growing demand for Impact participation by investors.  Asset owners will be seeking investments that help them achieve such real-world objectives (or Impact), and it does not seem unreasonable to expect that demand for Impact strategies (whether or not labelled or marketed as such) will increase.

Today, the SBAI, a global alliance of alternative investment managers and allocators and custodian of the Alternative Investments Standards, released a new Toolbox memo providing guidance on completing operational due diligence on crypto assets. The memo can be found in the SBAI Toolbox for Crypto Assets.

More recently the asset class has gained attention from institutional allocators and alternative asset managers and some more traditional hedge fund managers are now allocating to this asset class. Institutional allocators conduct operational due diligence (ODD) on the underlying managers and funds that they invest in, and since crypto assets operate using different infrastructure than more traditional asset classes, any ODD must take account of certain more prominent risks.

Steven D’Mello, Partner, Operational Due Diligence, Albourne Partners said: “ODD of crypto assets requires a more in-depth look into certain operational risks. The infrastructure is still in its infancy, and whilst it is becoming more institutionalised, careful attention needs to be paid. This memo from the SBAI continues its work on improving industry outcomes by providing a valuable toolkit for allocators to understand where the risks might be different from more traditional asset classes and provide guidance on the types of questions that should be asked in due diligence processes.”

For the full press release, click here.

The Co-Chairs of Open Protocol, Albourne and the Standards Board for Alternative Investments (“SBAI”) are excited to announce the 2021 Open Protocol update. The update includes a module for potential ESG risk exposure and a new tab for Digital Assets reporting. Launched in August 2011, Open Protocol is a free and publicly available exposure and risk reporting framework for Alternative Investment Funds.

Open Protocol is taking the lead in addressing the increase in investor demand for consistent and comparable data by expanding its risk reporting framework into ESG and Digital Assets. The new ESG module helps enable investors to better understand the potential ESG profile of their portfolio as a starting point for further discussion with investment managers. The new tab for Digital Assets allows investors to assess their exposure to different types of digital assets and changes in allocation over time.  The data can be aggregated across funds, thereby providing investors with an overall understanding of exposure. 

“At the SBAI, our mission is to improve industry outcomes by promoting responsible practice, partnership, and knowledge. Key to this is making the industry more transparent and efficient. We are excited to expand the Open Protocol framework in the important areas of ESG and crypto risk reporting to facilitate better investment decision making by institutional investors,” says Thomas Deinet, Executive Director of the SBAI.

The changes to the Open Protocol framework were developed in consultation with the Open Protocol Working Group, the SBAI Responsible Investment Working Group and other parties with interest in Open Protocol and Digital Assets.

“After over a decade of providing a consistent framework to enable investors in alternatives to compare ‘apples to apples’ – we are delighted to be taking risk transparency to the next level. Both ESG and Digital Assets hold their own challenges when it comes to consistency and transparency.  By incorporating them into an established framework with reporting managers representing over $2.37trn of AUM¹, we are starting the journey in pushing the boundaries on ESG and Digital Asset Reporting,” says Gaurav Amin, Albourne’s Head of Fintech and Implementation.

The new Open Protocol template can now be accessed in SBAI’s Toolbox, alongside the updated Open Protocol manual and a document highlighting all 2021 changes. Funds are expected to switch to the 2021 Open Protocol template after a 6-month implementation period.

Chief Investment Officer magazine is pleased to present its 10th annual list of the world’s most influential investment consultants and advisers.

Each year, the publication asks a varied group of chief investment officers and allocators which consultants and advisers have “done right by them” for the current markets. This year’s list compiles the names that CIOs would recommend to their peers.

Andrew McCulloch

What new qualities do you look for in a manager/service provider given the pandemic’s financial and economic impacts?

The volatility catalyzed by the onset of the pandemic served as a stark reminder for allocators and managers alike that they must embed a high degree of intellectual rigor, humility, transparency, and forethought within their investment processes. Governance structures, risk management constructs, liquidity budgets, and regional diversification were all briefly tested in March 2020 before the rebound that followed. Managers with expertise and exposure in Asia fared substantially better as their markets decoupled from the rest of the globe, and we saw stronger governance structures empower investors to play offense in strategies which drew down more severely, anticipating a recovery. Still, others found themselves “fixing their roof during a rainstorm,” triaging potential liquidity concerns and stakeholder inquiries. Despite financial conditions not deteriorating further in this crisis, reactions to pandemic-driven volatility reiterated the value of these critical qualities in portfolio success when a future storm evolves into something more severe and unforgiving.

Read the full article here.

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David Tatkow

What do you think will be the biggest innovation in your industry in the next 10 years?

The pandemic-era brought to the forefront issues of wealth disparity and racial inequality in a way that I believe will significantly influence our industry over the next 10 years. I believe that managers who acknowledge these issues, both in how they build their portfolios, and run their businesses, demonstrate great character, which is an essential factor in building fiduciary trust. Whereas even five years ago, many investors and managers regarded ESG as a niche consideration, the events of the pandemic I believe have compelled many investors to elevate social concerns, and evaluate prospective managers in part through those same concerns.

Investors are looking at managers more closely both in terms of what companies they invest in, but also in how they manage their organization: What is the manager’s commitment to building a diverse organization, and how is this demonstrated through practices in hiring, terms of employment, and career development? I believe that the invigorated focus on ESG that the pandemic brought on will be a win-win in terms of creating a more equitable society, but also in strengthening organizations that embrace best practices.   

Read the full article here.

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Southeast Asian GPs jockey for global attention with mixed results as the largest LPs continue to hesitate to commit to the region. A trickle of investment fuels theories about how to get more.

Most recently these concerns have been compounded by a generally ineffective response to COVID-19 across the region.

There remains a sense, however, that Southeast Asian gambits in specialization and pivots to more hands-on models are merely meeting the baseline of expectations, rather than setting any of the region’s investors above the pack. These are areas of focus – tech and ESG in particular – that are not only essential to getting a commitment from global LPs; they’re essential to just getting a meeting.

“Having a technology and operational value creation focus is no longer a differentiating factor but a critical component of any PE strategy,” says David Low, Partner and Head of Asia Private Markets at Albourne.

David cites that, “in Southeast Asia, entrepreneurs may lack the experience, expertise and resources to expand regionally or globally or take their business to the next level. This is where PE managers can add the most value beyond bringing capital to the table. GPs that are able to execute this consistently and generate outsized returns will have an edge in attracting investors.”

For the full article can be found here or expand below.

The Standards Board for Alternative Investments (“SBAI”) recently published a new memo on indemnification wording, as part of its Governance Toolbox.

This memo provides an informational overview of indemnification wording, which is used by most funds in their governing documents. Indemnification clauses are crucial to investors, as they highlight circumstances that may require a fund to reimburse the asset manager for losses related to the investment management of the fund.

Craig Dewberry, Partner and Operational Due Diligence Analyst at Albourne Partners said, “A robust and clearly written indemnification clause can provide comfort to an investor that this indemnity will only be relied on in appropriate circumstances. As such, investors should review this language as part of their initial due diligence processes to understand the implications of the specific way that it has been worded. This Toolbox memo is an important tool to help investors understand potential implications and due diligence questions they should be asking.”

Please click here to read SBAI’s full press release.

Albourne Partners Limited (“Albourne”) is pleased to announce it was named “Best Investment Consultant” at the inaugural 2021 Institutional Asset Manager (“IAM”) Awards on 27 May 2021.

The awards were based on a survey of Institutional Asset Manager’s readership of investment industry participants, encompassing fund managers, asset owners, allocators, intermediaries, advisers, service providers and counterparties.

Voting for the awards was conducted via an online poll of Institutional Asset Manager readership, with participants nominating their top three candidates in each category. In total there were over 7,500 votes cast, with 42% coming from Fund Managers, 30% from Investors/Allocators, and 28% from Service Providers.

John Claisse, Albourne’s CEO, commented, “While remaining committed to non-discretionary advice, fixed fee pricing and independence, our mission over the years has been to empower our clients to be the best investors that they can be. We are happy to see that this continues to resonate with the industry’s stakeholders”. 

Please see the interview John Claisse gave to IAM on recent changes in the industry, the importance of ESG, and more. 

Clare Cuming, Head of Communications at Albourne, mentioned, “The Institutional Asset Manager Awards recognize excellence among service providers; for Albourne to be named Best Investment Consultant is recognition that our hard work and contribution to the alternative investment sphere over the past 27 years – ever since the company’s inception – has had an important impact across the industry.”

Please see the attached report issued by IAM on Albourne and other winners, as well as the link to the press release.

-ENDS- 

For the second year, Albourne participated in She Can Be, an event based on the initiative led by The Lord Mayor’s Appeal charity. 

She Can Be endeavors to empower young women to make informed decisions about their careers and allow them to see all of the great work that London’s businesses are doing to make their workplaces more inclusive for women. The four key skill sets the initiative encourages are: communication, confidence, taking initiative and problem solving. 

Albourne hosted a group of young women (aged between 17 and 18) from the Folkestone Academy in Kent, providing an interactive online session aimed at introducing alternatives and some of the exciting roles within finance today.  This year’s agenda featured a game aimed at demystifying commonly used financial jargon, a role-matching game and several films on what it’s like to work at Albourne.

“We believe that taking part in this event will help young women have the confidence to take on careers where they may be underrepresented. As a global company, Albourne is committed to fostering, cultivating and preserving a culture of diversity and inclusion; promoting an increased female presence in finance aligns with Albourne’s efforts towards a diverse and inclusive workplace,” commented Clare Cuming, Head of Communications at Albourne. 

For more information on this event and how you can support this initiative, please click here.

Emlyn Ade Palmer, Head of ESG investing and Partner at Albourne Partners Limited, recently talked with Seward & Kissel’s Debra Franzese in a dedicated ESG-focused podcast.

Albourne has been a strong advocate of industry best practices since inception, and last month the firm announced a new ESG questionnaire (based on the PRI questionnaires) and a new scoring framework based on a short form questionnaire.  

In this podcast, Emlyn and Debra discussed many topics, including:

i. The drivers for launching a new questionnaire based on the PRI framework and the importance of adopting a scoring framework. 

ii. The importance of managers developing policies and procedures to monitor their compliance with ESG standards.

iii. Some of the risk-related issues that managers should be considering in regard to ESG integration into their investment processes.

iv. What investors are looking for in relation to ESG matters and the key points that managers should be thinking about in connection with their reporting.

Alternative investment managers are invited to complete the questionnaires on Albourne’s dedicated manager portal, MoatSpace.

The Last Year

This past financial year, our 27^th, has brought with it unprecedented challenges for everyone across the world, and our thoughts are with those who have been so badly impacted by the pandemic. We are immensely proud of the incredible effort of everyone at Albourne over the last year, but also how we have pulled together to support our colleagues, our clients, and our communities through these difficult times. 

It doesn’t take a global pandemic to make one understand the importance of Family, but our company has never felt more like a family as we continue to fear for the loved ones of colleagues and our clients from around the world. We hold our breath until they can all again breathe easy.

Albourne New Partners, Equity Recipients and Other Announcements

Against such a backdrop, it would feel somewhat hollow to report that we are proud to have notched up yet another year of growth, both in terms of revenue and client numbers, except for the fact that it is this growth that allows us to create new Partners and allocate equity options to both first time and existing equity participants in our firm. Knowing the emotional investment made by all those named below, as well of their tireless fine-spirited contribution to all aspects of the firm, we are both truly humbled and deeply proud to make the following announcements:

New Partners

New Equity Option Participants

Additional Equity Option Participants

Angela Borrett, Anita Kouzapa, Carmen Lam, Clare Cuming, Craig Toner, David Low, Gaurav Amin, Jane Hughes, Kellie Hata, Kristen Jones, Neil Mackie, and Ryan Teal.

The Standards Board for Alternative Investments (SBAI) announces its latest Toolbox publication on side-pocketing within Insurance Linked Strategies (ILS). The memo provides practical guidance on the side-pocketing methods that can be used, robust governance arrangements, the appropriate charging of fees, and provides detailed questions for investors to ask asset managers during their due diligence on ILS funds.

Following insurance losses from worldwide catastrophic events in 2017 and 2018, as well as potential insurance losses from pandemic related claims, the use of side-pockets within ILS funds has come under increased allocator scrutiny alongside valuation and risk reporting. This memo is part of the SBAI’s ILS Toolbox which also contains guidance on valuation in ILS funds and The Insurance Open Protocol risk reporting template.

Michael Hamer, Senior Analyst at Albourne Partners (Bermuda) Limited said, “While the use of side-pockets within ILS funds is typically an investor friendly practice, this SBAI Toolbox memo provides a very useful framework for considering the appropriate alignment of interests between the various groups of investors and asset managers as well as a toolkit for ensuring robust practices and governance of the side-pocketing process.”

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Albourne is excited to announce that the firm has become a signatory of ILPA’s initiative, Diversity in Action. The ILPA Diversity in Action initiative brings together limited partners and general partners who share a commitment to advancing diversity, equity and inclusion in the private equity industry. The goal of the initiative is to motivate market participants to engage in the journey towards becoming more diverse and inclusive and to build momentum around the adoption of specific actions that advance DEI over time.

ILPA has issued the attached press release to mark the first report in its Diversity in Action - Sharing Our Progress series. 

The first report focuses on how signatories are approaching DEI metrics and data capture. ILPA found that there is a strong desire for standardization and an appetite to expand metrics to cover additional underrepresented groups. Among signatories, 2-in-3 use the ILPA D&I Team Metrics Template which provides a model for reporting diversity metrics across 11 role categories, including gender and suggested race and ethnicity designations. ILPA and Initiative signatories are now working to expand the template to include metrics not represented today including: a non-binary/not disclosed option on gender, LGBTQ, veteran status, disability and age.

Please see attached the full ILPA press release and paper for more details. 

Investment consultant Albourne¹ has launched a new Environmental, Social and Governance (ESG) framework for Alternatives (including both Hedge Funds and Private Markets). This initiative is supported by Border to Coast Pensions Partnership (Border to Coast), one of the largest public sector pension pools in the UK.

With a Private Markets investment program expected to grow to over £5bn in the next 12 months, Border to Coast is concerned at the lack of robust and consistent ESG standards in Private Markets. It is therefore supporting Albourne as it develops a framework based on the recommended due diligence questions (DDQs) set out by the United Nations-supported Principles for Responsible Investment (“PRI”).

Albourne is taking a multi-tiered approach and has just launched:

1. A new questionnaire based on the PRI framework (replacing Albourne’s ESG DDQ originally launched in 2011);
2. A new Albourne proprietary short form questionnaire; and
3. A new proprietary ESG scoring framework (based on the above short form questionnaire).

Albourne is rolling out the above approach for all the alternative investment managers it is engaged with. Managers are invited to complete the questionnaires on Albourne’s manager portal, MoatSpace.

Border to Coast Chief Investment Officer, Daniel Booth said: “While ESG reporting has improved in public markets, there is a clear need to enhance standards, transparency and how we measure ESG risk, opportunity and performance in Private Markets. Albourne has a successful track record of implementing improvements on behalf of investors and we are delighted to work with them to enhance ESG reporting.”

Albourne’s Chief Executive Officer, John Claisse said: “Reporting around ESG is important and at Albourne we strive to change the view that ESG in the context of due diligence is just a ‘nice to have.’ We urge investors and managers alike to be thoughtful in their approach to ESG issues.”

The new scoring framework will cover three areas:

• Policy and Governance;
• Investment Process and Monitoring; and
• Reporting.

The output will be a numerical score out of 100 which aims to enhance standards and transparency in the Alternatives industry.

Emlyn Palmer, Head of ESG Investing and Partner at Albourne, who leads the firm’s ESG initiatives, said: “Today, the game changer is that investors are increasingly looking at ESG factors as investment risk factors. Incorporating an ESG scoring framework helps encourage managers to not only meet minimum acceptable standards, but to raise industry standards overall. We anticipate a robust adoption rate by managers. In August 2020, we launched a new diversity and inclusion questionnaire, in partnership with the Alternative Investment Management Association and in just eight months received responses for more than 2,000 funds.”

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Albourne Partners has been an advocate for fee innovation in the investment industry, focusing on the shape of fees, and fee discovery and transparency. A recent review by the firm showed that managers are being rewarded for fee innovation. John Claisse, the firm’s chief executive said there was also a relationship between manager performance and willingness to be flexible on fees.

“We looked at managers that had a collective 189 different fee changes made over the last two years, and our research showed that, from the point where those changes were made, 70% had a positive trailing three-year return, so it was not necessarily managers that were already underperforming,” he said in a Fiduciary Investors Series podcast.

Albourne has been looking at the shape of fees since 2012 for its clients, and implemented a 1-or-30 approach to alternative manager fees. The consultant also launched Into the Matrix initiative in 2016, gathering data from 750 funds with over $600 billion in assets, who are answering surveys about what types of fee structures they’d be willing to look at and be flexible with.

Most recently, Albourne, in conjunction with AIMA, launched a due diligence questionnaire that focuses on diversity and inclusion.

“We’ve had phenomenal feedback about the questionnaire and already more than 400 funds that have submitted the questionnaire. The feedback from investors is they have been struggling on how to gather the data, so having a standardised template for them is helpful. On the manager side our preliminary feedback has been positive, it is helpful in triggering their own work internally and new policies in response to thinking through the questions and enhance their own D&I.”

For the full article, click here.

Albourne has just published a film on its recently launched Diversity & Inclusion (D&I) Questionnaire.

Please click below to watch the clip:

The film encourages managers to complete the questionnaire, and covers why this is an important first step in increasing transparency around the alternative industry’s efforts to embrace D&I.

The new and freely available D&I Questionnaire, produced by Albourne and AIMA, is available for all alternative investment managers. It provides a means for managers to supply information to investors in a standardized format.

For more information on this questionnaire and Albourne’s D&I initiative, please see the relevant news release here.