30/03/2011 Author: Tony Griffiths

The 2011 managed accounts universe

In its second annual overview of the managed accounts industry, HFMWeek counts down the top ten platforms and investigates whether the much-discussed growth in the use of segregated
investment vehicles has materialised in 2011

In March 2010, following months of hyperbolic rhetoric on the theme from both industry and press, HFMWeek undertook its first annual survey of the hedge fund sector's managed accounts
platforms. The AuM totals were impressive, the interest was keen and further growth was predicted. Looking ahead to 2011, expectations were for new platforms to join, shaking up the established
order, and for new initiatives to put pressure on the big names. Some commentators were even prophesying a wholesale switch in which hedge fund inflows would come to be dominated by managed account
mandates.

While not quite shooting out the lights, growth over the last 12 months has indeed been impressive, with the combined AuM total for the entire top ten jumping 27.7%, up to $52.8bn, from $41.35bn in
2010 - a rise of $11.45bn. Those who cried 'fad' have been proved misguided, but, equally, the new era of dominance that some predicted has not materialised. Not a panacea, then,
but still hugely popular.

Contrasting predictions for growth for the sector as a whole have been more prominent, including a sceptical appraisal in JP Morgan's 2010 institutional investor survey, which said
that, despite the noise, the sector faced "significant headwinds". Vernon Barback, president and COO of GlobeOp, one of the industry's biggest administrators of managed accounts,
sees the platform contingent as a separate animal.

"In the middle of 2009 there was a lot of talk about managed accounts. Growth started in earnest in 2010 and is ongoing," he says. "We've seen this growth particularly
in managed account platforms, because the extra work that the managed account requires is shared between manager and sponsor."

In terms of the list itself, the names remain the same and the order similar. The top three still account for the vast majority of the top ten's total AuM, but have had their lead cut by a
particularly strong showing by AlphaMetrix. Summer troubles at Lyxor, stemming from the European debt crisis, meanwhile, have made this year's race for top spot a far closer, and less
predictable, affair.

New entrants to the space have been forthcoming but low critical mass has seen all miss out on the top ten. Teething problems at Butterfield Fulcrum's Altinus platform, and the resultant
period of recalibration, put paid to its challenge, while new offerings from UBS and Morgan Stanley have had impressive starts but are too new to have built significant enough AuM. Kenmar's
long-standing CLariTy platform, offered to institutional clients in 2008, currently supports $1.1bn and 33 funds. Of the four, Morgan Stanley seems most likely to gatecrash the 2012 party, short
this year by what is believed to be a nominal amount.

However, while the names remain the same, "the landscape has changed and the providers have morphed into something new," says Martin Gagnon, CEO of Innocap, where growth has come
largely from securing institutional mandates. According to Gagnon, it has been the same names vying for the same mandates and the key to making the final shortlist has been flexibility.
"Large pension funds want everything bespoke, meaning the cookie-cutter approach is no longer good enough," he explains. "So, if you're a large shop, and you don't
want to adapt, you're quickly eliminated from a lot of the mandates."

Growth in segregated accounts was predicted last year and for most of the providers HFMWeek spoke to, so it has proved the biggest change in the last 12 months. HFR Asset Management managing
director Marc Denogent said the firm's platform had seen a roughly 40% increase in interest in segregated accounts in the last 12 months. Assets in bespoke accounts at Innocap have risen from
18% of total AuM to 31% in the same period.

At Lyxor, an extensive move last year into the dedicated business has produced an "acceleration" in the number of institutional investors, says Nathanael Benzaken, the platform's
head of development. The firm's ramping up of construction and advisory services - characteristic of a wider trend - has also proved fruitful. "The managed account

solution has now been validated as the way for the future for institutional investors," he says.

Along with the hedge fund industry at large, the managed account sector is becoming institutionalised. If the expected windfall materialises, those platforms that want to remain, or become, a
top-ten player in 2012, will need to provide an increasingly agile offering.

THE TOP TEN IN FULL

10 Amundi $1.7bn

Experiencing both inflows and outflows during 2010, Paris-based Amundi is the

only platform in the top ten to see stagnation in overall asset growth. However, an increase in AuM at the firm's two segregated accounts bodes well, and a pipeline of $2bn is likely to boost
the platform's total AuM in the coming months. A strong player in continental Europe, Amundi's main investor type is European funds of funds (FoF).

09 Guggenheim Partners $2bn

Having repurchased its platform back from the Bank of Ireland in 2009, the last 12 months have seen yet further changes at Guggenheim. A new business model is on the cards, prompting further hires
and postponing the likelihood of significant growth to 2012. The platform - which utilises a FoF model - deals mainly in bespoke accounts, though a commingled option is available.

08 Innocap $2.1bn

Embracing the recent appetite for bespoke accounts, Innocap has seen the majority of its growth via institutional mandates. The AuM proportion in segregated managed accounts has jumped from 18% to
31% in the last 12 months and further interest is expected to push the platform past the $3bn mark by year-end. Currently working on on-boarding major names for a large North American pension plan.

07 HFR Asset Management $3.1bn

One of the first movers in managed accounts, Hedge Fund Research (HFR) Asset Management has enjoyed strong recent growth, doubling in size in 24 months. Its long utilisation of Bermuda unit trusts
may be considered conventional, but also means the platform has particularly strong functional and legal independence. Currently updating what is already one of the most detailed investor
interfaces in the sector.

06 Lighthouse Partners $3.5bn

Perhaps the best example of a FoF-structured platform, Lighthouse offers managed accounts via 13 commingled products: four equity, three managed futures, two credit, one Asia-focused and three
multi-strategy. Segregated options are now available for large, strategic investors. One of the first US firms to champion managed accounts, native investors currently account for approximately 60%
of the platform's investor base.

05 Goldman Sachs $4bn

Keeping a particularly low profile, Goldman Sachs remains a big player, but is thought to have experienced more growth in other products, such as index-type vehicles and Ucits funds. As well as the
platform itself, Goldman also has managed accounts options available via a replicator product, and two CTA vehicles. The bank, which part-owns many of its funds, offers both commingled and
segregated options.

04 AlphaMetrix $6.3bn

Traditionally a CTA specialist, Chicago-based AlphaMetrix moved into the equity long/short space early last year and has since flourished. The biggest mover in the top ten, with asset growth of
200% in a year, the platform also made headlines with the purchase of global administrator Spectrum. The firm, which has a strong technological offering, expects to add a further $5bn in AuM in the
next 12 months.

03 Man Group $8.9bn

Enjoying growth of over 20% in the last 12 months as it is, the Man platform announced in February that it had secured a ¤1.2bn ($1.69bn) managed account mandate from Bayerische
Versorgungskammer (BVK), Germany's largest public pension fund. Not included as part of its $8.9bn AuM total, the BVK allocation is to be on-boarded throughout 2011 and may yet rise. Other
big mandates, including an advisory one from UK pension scheme USS, have also been won. Another platform to implement a FoFs structure, Man offers both commingled and, via its advisory business,
bespoke options, with the latter attracting "increased interest since this time last year," a Man spokesperson said. In terms of new funds, Man looks to add 2-3 every month.

02 Deutsche Bank $10.5bn

Deutsche Bank's two managed account platforms have both enjoyed a strong year: X-markets, the traditional offering, grew 40%, from $4.5bn to $6.3bn; and db select, the CTA/FX specialist, 20%,
from $3.5bn to $4.2bn. Though technically separate, the two offerings can be considered subsets of a whole and, for simplicity's sake, have been combined here. As well as expansion, there
have been several fresh initiates during 2010, most noticeably at X-markets, which recently begun offering weekly liquidity and last summer followed its counterpart in opening up to US investors.
Multi-prime has also been added. EIM's sizeable mandate is up and running, and has "positively impacted the overall AuM," a Deutsche Bank spokesperson said.

01 Lyxor Asset Management $10.7bn

It's been a mixed year for Lyxor Asset Management's Managed Account Platform (Map). Hit hard during the height of last summer's European debt crisis, AuM dropped as low as $8.7bn
at the end July 2010. That it has since recovered $2bn, and its number one spot, in the months since is testament to the strength of an offering that, despite the troubles, is still widely regarded
as the market leader.

Demonstrating the flexibility necessary at a time when most managed account business is coming from institutional investors, Lyxor's revival can, in part, be credited to its recent wholesale
shift towards offering segregated accounts alongside its traditional commingled option. Big allocations have been won, including from Japanese institutions, and big names from the hedge fund space
have been added - Traxis, BlackRock, Pioneer and Kaiser among them. Elsewhere, Lyxor has had significant success in its advisory and consultancy business, most prominently winning a mandate
from $100bn Dutch pensions manager PGGM to oversee construction of its own, exclusive managed accounts platform.

With the summer lull restricting 12-month growth to 2%, Lyxor's lead at the top of this list has been cut significantly. However, a further 20 funds are due to be added in the first half of
2011 alone, and with growth since July standing at 23%, the chances of Lyxor holding on to its crown in 2012 are, once again, looking strong.