News & Initiatives

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. 1) Environment, Social & Governance ESG data at the company level lacks a globally recognized standard and as a result is often fragmented and inconsistent, with data providers often arriving at different ESG scores for the same issuers. This complicates the assessment of ESG risk for investors who are seeking to appraise and aggregate risk across portfolios of funds and strategies. The ESG module in Open Protocol helps address this challenge by drawing upon existing sector exposure data within the Open Protocol framework such as equity, credit, convertible bonds, sovereign and interest rate exposure, real assets and commodities. The data is not intended to be a definitive picture of the ESG risks in a fund, but rather aims to provide the first step in an investor’s journey to understanding the potential ESG profile of their portfolio, facilitating further analysis and discussions with asset managers. 2) Digital Assets Digital assets are becoming an increasingly larger part of the alternatives industry, but traditional risk reporting does not usually capture these exposures and related risks. The new Digital Assets tab of the Open Protocol report helps investors understand their exposure to different types of digital assets (for instance, cryptocurrencies versus stablecoins), instrument types, liquidity, etc., and changes in exposure over time. To find out more about the 2021 Open Protocol update please click here. – ends –