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Jonathan Shapiro, Senior Director of Business Development at Linedata Gravitas
With the proposed National Instrument 81-102 on liquid alternatives coming into force,what challenges do you foresee for managers?
Fundamentally, as fund managers are trading and looking at positions from a front-office perspective, and analysts are valuing companies. there's obviously going to be a change in the way that they are to trade in positions from a T+1 basis in hedge funds to a more liquid and transparent type of strategy.
They also have to be more efficient about how they use their infrastructure. From the change in requirements that we saw when this happened in the US, the type of infrastructure that they need to run is going to be much more robust. It's a challenge that managers will have to adapt to as time goes on, and they'll have to be judicious in deciding who will help them beef up their platforms and processes.
From a technology perspective, what do asset managers need to have in place for a successful transition?
I think they're going to need to put in place different types of systems to make the process run smoothly. The first thing is a more robust order-management system with capabilities for a good intraday trading view as opposed to T+1. They need to be more agile and fluid in looking at their positions in the marketplace and putting all of those positions together.
With the increased transparency in positions in the new environment, they also have to revisit how they reconcile positions with the various counter parties they're working with. Right now, managers have a chance to either upgrade their software internally or look for a provider with a solution balanced for a liquid-alts environment. as well as the way they operate as a traditional asset management firm. It could lead to disruption, but also some growth and expansion in the vendor space they're using currently.
Mackenzie Investments was the first to obtain an exemption to launch a mutual fund with alternative strategies. How significant is this first-mover advantage?
I think it's extremely significant and well-timed. I believe in the five years following the financial crisis in the US, the liquid-alts market grew from around US$83 billion to some US$200 billion. I think Mackenzie is set to get the first crack at investment dollars that'll come in from non-traditional, non-institutional investors; they'll see growth pretty quickly, which will spur on other firms to do the same. I'm already seeing some firms starting to get involved in the Canadian market. and having that early adopter position creates great positive news for them, but it will also drive business into that strategy for other entrants over the next one to two years of the regulations taking full effect.