SOLUTIONS & MULTI-ASSET | AIP HEDGE FUND TEAM | INVESTMENT INSIGHT | 2019
CO-AUTHORS
PATRICK REID, CFA
®
Managing Director
Portfolio Advisor
MARK VAN DER ZWAN,
CFA
®
Chief Investment Officer
and Head of
AIP Hedge Fund Team
Alternatives investors have always been
focused on the possibility of achieving a
measure of downside protection, accessing
differentiated exposures and identifying truly
uncorrelated, complementary sources of return.
In addition to conventional ways to modify
multi-asset portfolios through incorporation
of liquid alternatives, such as hedge funds and
commodity trading advisors (“CTAs”), there has
been an increase in the number of investors
seeking newer ways to improve their portfolios.
In much the same way that long-only investors have considered
“passive” investing as a way to adjust their exposures efficiently
and to reduce cost, alternatives investors have begun to explore
systematic and index-based solutions—such as “alternative
risk premia”—as a way to achieve those same objectives. In
this paper, we seek to introduce the concept of alternative risk
premia, explain how investors can access them, and present the
potential benefits and drawbacks associated with them.
Overview
e concept underlying alternative risk premia is the potential
reward to an investor for taking on some form of risk. As the
name suggests, this risk is “alternative” to traditional market
risk or traditional beta in the sense that it is non-correlating and
tends to be structured in the form of a long/short investment.
Alternative risk premia tend to exhibit heterogeneous statistical
An Introduction to
Alternative Risk Premia
Please refer to important disclaimers at the end of this document.
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properties, making them potentially
diversifying building blocks to a broader
multi-asset portfolio.
Display 1 highlights commonly used
alternative risk premia, which often result
from market behaviors or structural
conditions. For example, herding
behavior and instances in which investors
“chase winners and sell losers” create
momentum. Mean reversion of asset
prices to fair-value anchors often leads to
opportunities classified as value. Investor
mispricing of asset yields may lead to
carr y opportunities. In commodities
markets, for example, carry is defined
as the price differential between futures
contracts of different maturities. is
figure may be positive or negative
because of supply and demand dynamics
and other factors. e large derivatives
market often provides opportunities to
design novel alternative risk premia, both
behavioral and structural, related to asset
volatility. For example, during market
crises, investors seek safer assets, and low
volatilit y stocks tend to outperform.
While the term “alternative risk premia”
is fairly new, investors have had exposure
to these sorts of returns through
hedge fund strategies like quantitative
equity, macro and managed futures
for many years. e key differences
today are the ways investors access and
implement them.
While having an understanding of
alternative risk premia is important, what is
attractive and compelling to investors is to
think about their utility. In our view, these
premia can be thought of as an extension
of factor-based investing and can serve as
building blocks for portfolio construction.
Original factor-based investing started
with the Capital Asset Pricing Model
(“CAPM”), which sought to explain
investment performance using a risk-
free rate and a single market risk factor
or premium.
1
Over the years, it became
increasingly apparent, through the
groundbreaking research of Eugene Fama,
Kenneth French and Mark Carhart,
among others, that a single market risk
premium was not the only driver of asset
returns and that investors could exploit
additional factors within or across asset
classes.
2
More recent research suggests
that investors can harvest “alternative”
risk premia that persist because of human
behavior and the structure of certain
investment markets. Alternative risk
premia are of interest to investors because,
unlike stocks and bonds, they are generally
unrelated to broader macro fundamentals.
erefore, they can provide diversification
benefits when included in portfolios
alongside traditional investments.
3
Points of Distinction
e terms “alternative risk premia” and
“smart beta” are often lumped together.
However, in our view, there are important
distinctions between the two: smart
beta is generally derived from long-only
investment strategies, whereas alternative
risk premia are generally derived from
long/short strategies with a number of
them attempting to be market-neutral.
1
William Sharpe, “A Theory of Market Equilibrium under Conditions of Risk,” The Journal of Finance, Volume 19, Issue 3 (1964).
2
Eugene F. Fama, Kenneth R. French, “Common Risk Factors in the Returns on Stocks and Bonds,” Journal of Financial Economics, Volume 33, Issue 1
(1993). Mark M. Carhart, “On Persistence in Mutual Fund Performance,” The Journal of Finance, Volume 52, Issue 1 (1997).
3
Clifford S. Asness, Tobias J. Moskowitz, Lasse Heje Pedersen, “Value and Momentum Everywhere,” The Journal of Finance, Volume 68, Issue 3 (2013).
DISPLAY 1
Commonly Used Risk Premia
MICRO
Individual
Equities
MACRO
Indices (Equity,
Fixed Income,
Commodities,
FX, Rates)
Momentum Momentum
Size Trend
Value
Quality
Value
Curve
Low
Volatility
Across Geographies
Carry
Volatility
Source: Morgan Stanley Investment Management. For illustrative purposes only. Not an exhaustive list.
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AN INTRODUCTION TO ALTERNATIVE RISK PREMIA
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DISPLAY 2
Drivers of Investment Returns
Source: Morgan Stanley Investment Management. For illustrative purposes only.
It is also important to note that alternative
risk premia should not be confused with
“alpha,” which reflects an idiosyncratic
component of return believed to be derived
from a manager’s security selection and
market-timing skill. Display 2 illustrates
this distinction, as we see it, and provides
a useful framework for considering the
return sources that may comprise an
absolute return portfolio solution.
Who Invests in Alternative
Risk Premia?
Some of the earliest adopters of
alternative risk premia strategies included
sophisticated institutions, such as the
Nordic and Scandinavian pension
funds. Over time, the level of interest in
these types of strategies—particularly
among institutional investors—has
grown. Today, investors are broadly
diversified by geography and type:
insurance companies, large institutions,
endowments, risk premia-specific asset
managers and hedge fund allocators.
We expect growth to continue, and recent
survey data seems to bear this out. Of
the 250 global institutional investors
who responded to J.P. Morgan Capital
Advisory Group’s “2019 Institutional
Investor Survey,” 36% reported investing
in or planning to invest in alternative risk
premia. As illustrated in Display 3, this
reflects the continuation of a multi-year
trend.
4
Echoing similar expectations
for continued growth, a report from
bFinance suggested that after a huge
“wave of activity” in 2016-2017, demand
for alternative risk premia continues and
seems to have settled at a “more gentle
pace.”
5
J.P. Morgan’s most recent survey
seems to illustrate this point.
DISPLAY 3
Continued Interest in Alternative Risk Premia
40%
30%
20%
0%
2015
■ Yes, already invested ■ No, but plan to do so next year
2016 2017
10%
5%
20%
8%
22%
7%
29%
2018
12%
24%
Source: J.P. Morgan Capital Advisory Group. February 2019.
4
“2019 Institutional Investor Survey,” J.P. Morgan Capital Advisory Group (2019).
5
“Manager Intelligence and Market Trends,” bFinance (August 2018).
High Value
Added
Low Value
Added
• Opportunistic and dynamic decisions made by
fund managers
Identifying returns from systematic exposure to alternative
sources of return harvested through long/short strategies
• Restructuring of index return sources to provide
differentiated exposures
Market Risks: Beta
Market Timing
Alternative Risk
Premia
Strategy Returns
Skill-Driven: Alpha
Return
Sources
Security Selection
• Identifying out/underperforming differentiated return
sources through manager skill
• Fundamental factors, supply and demand
• Risk, rewards and correlations in major asset classes
are well understood
Market Returns
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As investor interest in alternative risk
premia has grown, so has recognition
about the many ways these strategies
can be used in portfolios. Once mainly
considered vehicles for constructing
specific hedges, they are now regarded
as a valuable asset allocation tool. In
fact, respondents to J.P. Morgan’s survey
indicated that common reasons for
investing in risk premia strategies include
isolating risk premia exposures, low costs
and liquidity.
6
Implementing Alternative
Risk Premia
Investors tend to implement alternative
risk premia in three different ways:
7
1.
Purchasing them individually or in
packages from banks in the form of
bank swaps linked to bank-designed
alternative risk premia indices.
2.
Investing in a manager who designs
its own risk premia and runs them
within a typical hedge fund or mutual
fund construct.
3.
Working with an asset manager who
serves as a “fiduciary”, providing
structuring, risk management
and selection techniques on a
customized basis.
Investors must weigh the relative merits
of each implementation method.
BANK SWAP
When investors access alternative risk
premia through a bank swap, they
generally receive the return of an
alternative risk premia index. For example,
if the index return is positive then the
investor receives the index return less a
set index fee. e bank swap is typically
short maturity (e.g., one year) and it
can roll, so the investor often has the
option to increase or decrease the time
horizon or the notional value of the
swap. With an excess return index, the
corresponding excess return swap requires
no upfront cash funding from the investor.
Depending on the International Swaps
and Derivatives Association (“ISDA”)
agreement, the investor may post collateral
to the swap counterparty, the bank,
between coupon payments as the swap’s
mark-to-market value varies. e main
benefits of this implementation include
liquidity, transparency and not having to
fully fund the position. e drawbacks
relate to the need to focus heavily on
provider selection, premia selection,
portfolio oversight (which cannot be done
by the bank as its role is counterparty,
not portfolio manager), potential
cost dispersion, and the operational
inconvenience of implementation. Setting
up an ISDA and monitoring risk takes
time and resources. Display 4 illustrates a
typical bank swap transaction.
FUND
If an investor chooses to invest in
a dedicated alternative risk premia
fund, all investment selection and risk
management decisions are outsourced to
a fund manager. In this case, the investor
commits 100% of the cash upfront and
is subject to the same fund terms as other
investors. e main advantage here is ease
of implementation; the drawbacks include
the requirement to be fully funded, fund
fees and the lack of ability to customize
or have transparency.
FIDUCIARY
Outsourcing to a fiduciary or asset
manager seems to be a popular
model among institutional investors.
e fiduciary is often able to use its
buying power to implement the bank
swaps, potentially eliminating the
requirement for an investor to fully
fund, to obtain optimal pricing and to
create a customized format. However,
the fiduciary is required to provide the
operational and oversight benefits of a
fund manager.
DISPLAY 4
Bank Swap Transaction
Source: Morgan Stanley Investment Management. For illustrative purposes only.
Index Price
Provided
Through
Cusip/Ticker
Available
on Services
Such as
Bloomberg
INVESTOR
BANK
(RISK PREMIA
PROVIDER)
INDEX
CALCULATION
AGENT
Risk Premia
Index
Returns
ISDA SWAP
Risk Premia Returns
Pays Explicit Fee
FROM BANK’S
TRADING BUSINESS
BUYERS
SELLERS
6
“2019 Institutional Investor Survey,” J.P. Morgan Capital Advisory Group (2019).
7
In limited circumstances, investors may determine to build alternative risk premia themselves. This requires extensive trading and investment capabilities.
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AN INTRODUCTION TO ALTERNATIVE RISK PREMIA
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What Are the Potential Benefits of
Investing in Alternative Risk Premia?
RETURN DIVERSIFICATION
e most obvious benefit is the potential
return an investor could receive in
exchange for taking on a specific
exposure; from a portfolio perspective,
there would be the potentially attractive
risk/return properties. Many alternative
risk premia exhibit low correlations
to traditional portfolio investments.
If incorporated into a portfolio
appropriately, these strategies could
complement traditional exposures in
much the same way investments in hedge
funds and CTAs purport to do.
LIQUIDITY
When provided in the form of bank
swaps, alternative risk premia are
generally created using conventional
instruments that have daily pricing.
Prices are usually published daily in the
form of indices whose tickers are available
for review online through services, such
as Bloomberg. Depending on the terms
of the swap, the premia can usually be
exited quickly, thus providing potentially
greater liquidity than more conventional
fund structures. However, it should be
noted that dedicated alternative risk
premia funds can offer attractive liquidity
terms as well.
TRANSPARENCY
If using bank swaps, the banks are
required to document the universe of
investments and metrics around how
the index is constructed and trades (e.g.,
frequency, time of day, amount, universe
of securities). ese are available in
published “rule books” and provide a good
degree of transparency for those willing to
conduct thorough due diligence.
EFFICIENCY
Alternative risk premia can be cost
efficient and potentially capital efficient:
1.
Bank swap products and some of the
newer risk premia funds typically do
not have performance fees and may be
cheaper than other sources of alternative
exposure, such as hedge funds and
CTAs. Of course, an investor would
need to conduct full due diligence on
each premium and compare that to
options in order to fully evaluate cost.
As discussed later, cost is not consistent
across providers. We believe thorough
due diligence and knowledge of peer
pricing can lead to significant benefits
and a difference in results.
2.
For many institutional investors, the
daily pricing and liquidity of these
investments could be beneficial from
the perspective of regulatory reporting
requirements. For example, alternative
risk premia may not be classified in
the same category as other alternatives.
ey may be categorized on balance
sheets as more liquid investments,
which could offer the significant
benefit of freeing up capital for
investors with capital constraints.
3.
When implemented in the form of
bank swaps, they require less capital
commitment for leverage purposes.
Swap investors do not commit all
capital upfront, as is required for
investments in funds.
SYSTEMATIC EXPOSURE
Finally, as alternative risk premia
are systematic and rules-based, once
designed they are not subject to human
intervention—either prudent judgment
or imprudent emotional overreaction.
us, these strategies could help prevent
style drift and the potentially negative
consequences of exposure to a manager’s
unintended market timing.
How Can Investors Use
Alternative Risk Premia?
We believe there are multiple ways
in which alternative risk premia
could be used:
1. DIRECT HEDGE FUND/CTA
REPLACEMENT:
With the potential
for comparatively lower cost, greater
liquidity and greater transparency
than traditional hedge fund and CTA
structures, alternative risk premia
could be an attractive option for an
investor seeking to replace a portion of
his hedge fund allocation. However,
we believe this option does not fully
address an investor’s needs in the
absolute return space. ere is the risk
that this approach would remove all
alpha opportunities, something we
see as a key component of a successful
absolute return portfolio solution.
2. HEDGE FUND PORTFOLIO COMPLETION:
By addressing gaps and concentrations
in existing factors, inclusion of
alternative risk premia in a hedge fund
portfolio could make that portfolio
more balanced, better diversified, more
cost effective and better able to adapt to
market regime changes.
3. HEDGE FUND PORTFOLIO EFFICIENCY:
Dedicated alternatives portfolios are
often subject to cash drag because
they need to hold high levels of
cash to manage redemptions from,
and commitments to, less liquid
investments. An allocation to risk
premia, if designed appropriately,
could provide the opportunity for
“cash-plus” returns, an improvement
over idle cash.
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4. COMPLEMENT TO A MULTI-ASSET
PORTFOLIO:
Introducing alternative
risk premia to a broader portfolio of
traditional market betas may provide
greater diversification and drawdown
protection during periods in which
traditional asset classes exhibit high
correlations.
5. ALPHA/BETA/FACTOR SEPARATION:
Having efficient and liquid exposure
to alternative systematic premia
or beta at low cost could allow the
manager selection process to focus
more specifically on identifying true
alpha, which in turn could facilitate
replacement of non-alpha generating
strategies.
6. PERFORMANCE MEASUREMENT:
Sophisticated investors can use
alternative risk premia as “benchmarks”
or factors for evaluating the composition
of individual hedge funds or portfolios,
potentially gaining greater insight
into their investment exposures. For
example, if a manager is not generating
alpha but is actually making most of its
returns from alternative risk premia and
market beta, then it may find it difficult
to justify performance fees. Further,
being able to monitor one’s exposure
in a more refined manner could help
prevent unintended overexposure to a
certain factor or premium.
Investment Considerations
As is the case with all investments,
alternative risk premia come with inherent
risks. In our view, these risks include, but
are not limited to, the following:
1. RETURNS ARE NOT NORMALLY
DISTRIBUTED AND CORRELATIONS
MAY CHANGE OVER TIME.
While this
behavior may be viewed as an attractive
quality of alternative risk premia, it
does make it more difficult to apply
conventional asset allocation methods.
Basic optimization techniques may not
adequately identify risk or correlations,
which would make it more challenging
to identify the risk of tail events during
periods of highly correlated returns.
Display 5 shows the distribution of
two examples of alternative risk premia
and highlights their “non-normal”
distribution patterns. Alongside these,
the diagram presents traditional
investments, which tend to exhibit
a “normal,” bell-curved distribution
pattern. e difference in distribution
of alternative risk premia returns
is important because it means they
can potentially provide differing and
complementary returns to those of the
traditional markets, thus providing
hedging and diversification benefits.
DISPLAY 5
Distribution of Returns for Two Alternative Risk Premia Strategies vs. Traditional Assets
Trend Premia
Value Premia
Traditional Assets
0%
% Return
0%
% Return
0%
% Return
Frequency
Mean
Median
Mode
Mean
Median
Mode
Mean
Median
Mode
Frequency
Frequency
Source: Morgan Stanley Investment Management. For illustrative purposes only. The illustration above does not represent a specific investment. Actual
performance may vary significantly.
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AN INTRODUCTION TO ALTERNATIVE RISK PREMIA
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deterioration between backtested and
live data.
However, on a more positive note, time
is providing an increasingly robust set
of live data from which to evaluate
these strategies.
3. NO SET RULES GOVERNING HOW
ALTERNATIVE RISK PREMIA ARE
DESIGNED.
Bank providers and
risk premia providers may operate
differently in the design process.
is leads to a situation in which risk
premia with similar names have been
designed differently and may have
dramatically varying return profiles.
DISPLAY 6
Correlations Between Alternative Risk Premia
Trad’l-
Equity
Trad’l-
Bond
Trad’l-
Curncy
Trad’l-
Comdty
Carry-
Equity
Carry-
Bond
Carry-
Curncy
Carry-
Comdty
MoM-
Equity
MoM-
Bond
MoM-
Curncy
MoM-
Comdty
Value-
Equity
Value-
Bond
Value-
Curncy
Value-
Comdty
Vol-
Equity
Vol-
Bond
Vol-
Curncy
Vol-
Comdty
Trad’l-Equity
33 18 18 -5 16 54 9 14 26 -18 -22 -8 -14 -23 7 52 7 31 33
Trad’l-Bond
13 28 -24 -5 -6 -4 -5 7 48 12 -1 -7 -15 0 -1 14 -56 -48 29
Trad’l-Curncy
12 17 19 6 11 39 -10 -7 -6 8 6 1 -16 -20 -15 35 -31 2 22
Trad’l-Comdty
10 -18 20 3 10 41 26 1 -11 -22 35 18 -8 -33 -24 31 4 48 -17
Carry-Equity
-14 1 11 2 9 10 -4 -7 -3 3 1 8 10 -10 -10 9 -3 -1 -21
Carry-Bond
-6 -15 -7 0 3 28 -3 -6 -20 -2 -7 -5 13 -10 -2 10 12 12 19
Carry-Curncy
22 -14 8 23 0 11 13 20 -1 -12 1 14 -4 -56 0 38 28 33 28
Carry-Comdty
-3 -5 2 16 -2 -1 2 13 -13 -7 18 14 -11 -14 -50 30 -11 17 -18
MoM-Equity
-12 3 1 8 4 -2 5 12 24 3 9 -6 -33 -10 14 5 23 12 -17
MoM-Bond
8 12 -9 1 0 16 -1 -2 0 18 15 10 -26 -14 15 -14 -7 -51 8
MoM-Curncy
0 1 5 -4 -7 9 -4 1 12 8 5 -7 -27 -30 -11 -35 -26 -48 -12
MoM-Comdty
-2 6 3 16 2 -1 2 27 9 7 5 -6 -15 -12 -46 -19 1 -19 -12
Value-Equity
-29 3 -3 2 1 6 2 -2 -7 3 0 0 4 -4 -9 -5 32 23 6
Value-Bond
-9 -7 3 0 1 19 1 -10 -10 -23 -11 -5 7 0 5 -10 9 29 -30
Value-Curncy
1 -9 -20 -9 -8 5 -2 2 -5 9 -32 -10 -7 2 11 -19 21 -13 -6
Value-Comdty
6 -9 -7 -23 1 4 5 -34 -8 2 -6 -58 -5 2 8 -16 37 15 20
Vol-Equity
28 -10 4 23 -4 5 21 9 -5 4 -8 -7 5 -2 8 -7 -14 55 14
Vol-Bond
12 -35 -13 6 -5 -9 8 8 1 -1 -6 3 12 4 7 4 5 30 17
Vol-Curncy
18 -34 3 30 -12 12 29 4 -2 -16 -4 0 15 10 -14 -2 23 25 -2
Vol-Comdty
17 3 7 -1 -7 10 25 -11 -12 1 -11 -9 8 -8 -6 8 12 3 9
Full Sample Ave
4 -5 2 5 -2 3 7 1 0 1 -3 -1 1 -2 -4 -6 6 1 5 2
Crisis Average
12 0 5 6 -1 4 14 0 3 0 -11 -3 4 -8 -13 -3 9 4 6 3
Ave During GFC
19 -6 15 16 5 12 22 6 2 -7 -14 -2 6 -12 -19 -8 13 5 4 5
Less Than -30% -30% to -10% -10% to +10% +10% to +30% Greater than +30%
Source: Marko Kolanovic and Zhen Wei, “Systematic Strategies Across Asset Classes: Risk Factor Approach to Investing and Portfolio Management,” J.P.
Morgan Quantitative and Derivatives Strategy Group, p. 50 (December 2013).
Display 6 presents a correlation matrix
of alternative risk premia, which shows
that these strategies shift over time
and that this variance is significant. Of
particular note is the highly correlated
behavior of the premia during market
downturns. is might suggest there
is a risk that these strategies won’t
work as expected and could move in
tandem when you least want them
to. It is therefore crucial to be able
to evaluate and understand them
in order to attempt to address these
risks. A further point of consideration
with regard to time is that alternative
risk premia returns can be persistent,
episodic or structural. For example, our
research has shown that value premia
tend to be persistent; commodity
carry and equity index skew are more
episodic; and equity dividend premia
are structural, characterized by the risk
of decay over time.
2. HISTORICAL PERFORMANCE IS
SUBJECT TO BACKTEST BIAS.
Investors
must bear in mind that alternative risk
premia trading strategies are vulnerable
to overfitting of backtest data and lack
of robustness during “live” periods.
In fact, our proprietary analysis of
over 2,600 alternative risk premia
strategies has identified a number of
instances and patterns of potential for
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To illustrate this point, Display 7
shows the variance among risk premia
categorized as “U.S. Equity Value”
by different bank providers evaluated
by Morgan Stanley Investment
Management in recent years. While
the names of these premia are similar,
the methods providers use to harvest
the same risk premia are very different.
As a consequence, we see wide
dispersion in their results.
e variables that can meaningfully
impact the returns of alternative risk
premia include index construction—
using different sets of investments (e.g.,
top 20 investments versus top 50),
hedging approach (i.e., single stocks
versus indices), re-balancing frequency
(e.g., daily versus weekly), timeframe for
look-back (e.g., momentum measured
over different time periods)—and
construction of execution costs. As
mentioned previously, the cost efficiency
of these can be highly advantageous.
However, Display 8 shows how widely
execution costs can vary by provider
in the case of the bank swap products.
You can see that the cost is made up
of two core components: explicit and
implicit costs. How the premia is
designed and how the fees are applied
can result in very different overall
costs. In this case, while the explicit
“sticker” price for Vendor 2 is the
cheapest overall, that is not the case
when all costs are evaluated.
DISPLAY 7
Variance in Return of “U.S. Equity Value” Risk Premia Strategies Across
Bank Providers
40
30
20
-30
9/02
3/19
5th 25th Median 75th 95th HFRI Equity Hedge (Total) Index
1/107/04 3/085/06
10
0
-10
-20
Annualized Return (%)
7/159/1311/11 5/17
Source: Bloomberg and Morgan Stanley Investment Management as of July 30, 2019.
DISPLAY 8
Comparison of Execution Costs for Swaps Among Providers
All costs in basis points
CRITERIA EXPLICIT COST* IMPLICIT COST TOTAL COST
Description • Swap maintenance fee
• Index maintenance fee
• Management fee
* In certain cases, a dealer’s
explicit costs will include
implicit costs as well
• Rebalancing on long/short legs
• Financing costs on long leg
• Borrow costs on short leg
• Trade commissions
• Bid/Offer spreads
• Explicit +
Implicit
Vendor 1 1.00 0.00 1.00
Vendor 2 0.20 1.33 1.53
Vendor 3 0.25 1.45 1.70
CRITERIA POSITIONS
NOTIONAL
LONG/SHORT
MONTHLY
TURNOVER COST ASSUMPTIONS
Vendor 1 470 115% long/
110% short
264% No implicit cost
Vendor 2 270 108% long/
108% short
130% Bid/Offer: 3bps/3bps. Financing cost
on long is 45bps; borrow cost on
short is 35bps.
Vendor 3 300 100% long/
88% short
183% Rebalancing cost: 4bps. Financing
cost on long is 35bps; borrow cost on
short is 25bps.
Total Cost Calculation: Swap Fee + Implicit fees (Turnover Cost, Financing Cost)
Turnover cost = Monthly turnover x 12 x bid / offer
Financing / borrow = (Long notional x financing) + (Short notional x borrow)
Vendor 1 Total Cost: 100 bps + 0 bps = 100 bps
Vendor 2 Total Cost: 20 bps + (1.30 x 12 x 3 bps) + (1.08 x 45 bps) + (1.08 x 35 bps) = 153 bps
Vendor 3 Total Cost: 25 bps + (1.83 x 12 x 4 bps) + (1.00 x 35 bps) + (0.88 x 25 bps) = 170 bps
We must also consider our portfolio construction approach. Entry/exit fees can build up with frequent
rebalancing.
Source: Morgan Stanley Investment Management. The above data is for illustrative purposes only and
does not represent the performance of any specific investment. The above reflects the opinions and views
of Morgan Stanley Investment Management as of the date hereof and not as of any future date and will
not be updated or supplemented.
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AN INTRODUCTION TO ALTERNATIVE RISK PREMIA
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4. WITH INCREASING POPULARITY
COMES THE RISK OF CROWDING.
In
theoretical terms, if the risk premium
is “pure” then it should always be
there. However, there are capacity
considerations for alternative risk
premia strategies. As articulated by
AQR’s Cliff Asness, “e price of risk
(how much you’re rewarded in extra
expected return) can vary through time,
and perhaps fall as the risk premium is
more popularized.”
8
ere have been
cases in which this has occurred, and
it is something of which investors must
be mindful.
As we hope the above points make clear,
it is essential for an investor to have a
thorough and methodical due diligence
process in place to evaluate alternative
risk premia.
Conclusion
We see alternative risk premia as an
interesting, evolving and dynamic space
with a wide variety of applications.
8
“How Can a Strategy Still Work if Everyone Knows About It?”, AQR-Cliff’s Perspective (October 2015) https://www.aqr.com/Insights/Research/Trade-
Publication/How-Can-a-Strategy-Still-Work-If-Everyone-Knows-About-It
10
INVESTMENT INSIGHT
MORGAN STANLEY INVESTMENT MANAGEMENT | SOLUTIONS & MULTI-ASSET
DISCLAIMERS
The views expressed herein are solely those of the Morgan Stanley
AIP Hedge Fund team and are subject to change at any time due to
changes in market and economic conditions. The views and opinions
expressed herein are based on matters as they exist as of the date
of preparation of this piece and not as of any future date, and will
not be updated or otherwise revised to reflect information that
subsequently becomes available or circumstances existing, or changes
occurring, after the date hereof. The data used has been obtained
from sources generally believed to be reliable. No representation
or warranty is made as to its accuracy or completeness.
Information regarding expected market returns and market outlooks
is based on the research, analysis, and opinions of the investment
team. These views do not represent views of other investment
teams at Morgan Stanley Investment Management (MSIM) or those
of Morgan Stanley as a whole. These conclusions are speculative in
nature, may not come to pass, and are not intended to predict the
future of any specific investment.
Certain information contained herein constitutes forward-looking
statements, which can be identified by the use of forward-looking
terminology such as “may,” “will,” “should,” “expect,” “anticipate,”
“project,” “estimate,” “intend,” “continue” or “believe” or the negatives
thereof or other variations thereon or other comparable terminology.
Due to various risks and uncertainties, actual events or results may
differ materially from those reflected or contemplated in such
forward-looking statements. No representation or warranty is made
as to future performance or such forward-looking statements.
Past performance is not indicative of nor does it guarantee
comparable future results.
This piece is a general communication, which is not impartial, and
has been prepared solely for informational purposes and is not
a recommendation, offer, or a solicitation of an offer, to buy or
sell any security or instrument or to participate in any trading or
other investment strategy. This communication is not a product of
Morgan Stanley’s Research Department and should not be regarded
as a research recommendation. The information contained herein has
not been prepared in accordance with legal requirements designed
to promote the independence of investment research and is not
subject to any prohibition on dealing ahead of the dissemination
of investment research.
Persons considering an alternative investment should refer to the
specific fund’s offering documentation, which will fully describe
the specific risks and considerations associated with a specific
alternative investment.
Alternative investments are speculative and include a high degree
of risk. Investors could lose all, or a substantial amount of, their
investment. Alternative investments are suitable only for long-
term investors willing to forgo liquidity and put capital at risk for
an indefinite period of time. Alternative investments are typically
highly illiquid—there is no secondary market for private funds, and
there may be restrictions on redemptions or the assignment or other
transfer of investments in private funds. Alternative investments
often engage in leverage and other speculative practices that may
increase volatility and risk of loss. Alternative investments typically
have higher fees and expenses than other investment vehicles, and
such fees and expenses will lower returns achieved by investors.
This is a summary of various risks associated with investing in
alternative risk premia. This summary is not, and is not intended to
be, a complete enumeration or explanation of the risks involved.
The recipient should consult with its own advisors before deciding
whether to invest in these strategies. In addition, to the extent that
the investment program of such a portfolio changes and develops
over time, additional risk factors not described here may apply.
Only a recipient who understands the nature of the investment,
does not require more than limited liquidity in the investment, and
has sufficient resources to sustain the loss of its entire investment
should consider making the kind of investments described herein.
MSIM, its affiliates and its and their respective directors, officers,
members, partners, employees, agents, advisors, representatives,
heirs, successors and assigns shall have no liability whatsoever in
connection with any person’s or entity’s receipt or use of or access
to any information contained herein.
General Risks of Derivatives. An alternative risk premia portfolio
could use various derivatives and related investment strategies, as
described below. Derivatives may be used for a variety of purposes
including hedging, risk management, portfolio management or to earn
income. Any or all of the investment techniques described herein
may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as the use
of any derivative by a portfolio is a function of numerous variables,
including market conditions.
A derivative is a financial instrument the value of which depends
upon (or derives from) the value of another asset, security, interest
rate or index. Derivatives may relate to a wide variety of underlying
instruments, including equity and debt securities, indices, interest
rates, currencies and other assets. Certain derivative instruments
which a portfolio may use and the risks of those instruments are
described in further detail below. A portfolio may also utilize
derivatives techniques, instruments and strategies that may be newly
developed or permitted as a result of regulatory changes, to the
extent such techniques, instruments and strategies are consistent
with a portfolio’s investment objective and policies. Such newly
developed techniques, instruments and strategies may involve risks
different than or in addition to those described herein. No assurance
can be given that any derivatives strategy employed by a portfolio
will be successful.
The risks associated with the use of derivatives are different from,
and possibly greater than, the risks associated with investing directly
in the instruments underlying such derivatives. Derivatives are
highly specialized instruments that require investment techniques
and risk analyses different from other portfolio investments. The
use of derivative instruments requires an understanding not only of
the underlying instrument but also of the derivative itself. Certain
risk factors generally applicable to derivative transactions are
described below.
Derivatives are subject to the risk that the market value of the
derivative itself or the market value of underlying instruments will
change in a way adverse to a portfolio’s interests. A portfolio bears
the risk that the adviser may incorrectly forecast future market
trends and other financial or economic factors or the value of the
underlying security, index, interest rate or currency when establishing
a derivatives position for a portfolio.
Derivatives may be subject to pricing (or mispricing) risk. For example,
a derivative may become extraordinarily expensive (or inexpensive)
relative to historical prices or corresponding instruments. Under such
market conditions, it may not be economically feasible to initiate a
transaction or liquidate a position at an advantageous time or price.
Many derivatives are complex and may be valued subjectively. The
pricing models used by a portfolio to value derivatives may not
produce valuations that are consistent with the values a portfolio
realizes when it closes or sells an over-the-counter (“OTC”) derivative.
Valuation risk is more pronounced when a portfolio enters into OTC
derivatives with specialized terms because the market value of those
derivatives in some cases is determined in part by reference to similar
derivatives with more standardized terms. Improper valuations can
11
AN INTRODUCTION TO ALTERNATIVE RISK PREMIA
SOLUTIONS & MULTI-ASSET | MORGAN STANLEY INVESTMENT MANAGEMENT
result in increased payment requirements to counterparties, over-
and/or under-collateralization, and/or a loss of value to a portfolio.
Using derivatives as a hedge against a portfolio investment subjects
a portfolio to the risk that the derivative will have imperfect
correlation with the portfolio investment, which could result in a
portfolio incurring substantial losses. This correlation risk may be
greater in the case of derivatives based on an index or other basket
of securities, as the portfolio securities being hedged may not
duplicate the components of the underlying index or the basket may
not be of exactly the same type of obligation as those underlying
the derivative. The use of derivatives for “cross hedging” purposes
(using a derivative based on one instrument as a hedge on a different
instrument) may also involve greater correlation risks.
While using derivatives for hedging purposes can reduce a portfolio’s
risk of loss, it may also limit a portfolio’s opportunity for gains
or result in losses by offsetting or limiting a portfolio’s ability to
participate in favorable price movements in portfolio investments.
Use of derivatives for non-hedging purposes may result in losses
which would not be offset by increases in the value of portfolio
securities or declines in the cost of securities to be acquired. In the
event that a portfolio enters into a derivatives transaction as an
alternative to purchasing or selling the underlying instrument or in
order to obtain desired exposure to an index or market, a portfolio
will be exposed to the same risks as are incurred in purchasing or
selling the underlying instruments directly as well as additional
risks associated with derivatives transactions, such as counterparty
credit risk.
The use of certain derivatives transactions, including OTC derivatives,
involves the risk of loss resulting from the insolvency or bankruptcy
of the counterparty to the contract or the failure by the counterparty
to make required payments or otherwise comply with the terms of
the contract. In the event of default by a counterparty, a portfolio
may have contractual remedies pursuant to the agreements related
to the transaction, but there is no guarantee that the Portfolio will
be able to enforce such contractual remedies in a timely manner,
or at all.
While some derivatives are cleared through a regulated central
clearinghouse, many derivatives transactions are not entered into
or traded on exchanges or in markets regulated by the CFTC or the
SEC. Instead, such bi-lateral OTC derivatives are entered into directly
by a portfolio and a counterparty. OTC derivatives transactions can
only be entered into with a willing counterparty that is approved
by the adviser. Where no such counterparty is available, a portfolio
will be unable to enter into a desired OTC transaction.
A portfolio may be required to make physical delivery of portfolio
securities underlying a derivative in order to close out a derivatives
position or to sell portfolio securities at a time or price at which it
may be disadvantageous to do so in order to obtain cash to close
out or to maintain a derivatives position.
As a result of the structure of certain derivatives, adverse changes
in, among other things, interest rates, volatility or the value of the
underlying instrument can result in losses substantially greater
than the amount invested in the derivative itself. Certain derivatives
have the potential for unlimited loss, regardless of the size of the
initial investment.
Certain derivatives may be considered illiquid and therefore subject
to a portfolio’s limitation on investments in illiquid securities.
Derivatives transactions conducted outside the United States may
not be conducted in the same manner as those entered into on
U.S. exchanges, and may be subject to different margin, exercise,
settlement or expiration procedures. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign
exchanges. Many of the risks of OTC derivatives transactions are
also applicable to derivatives transactions conducted outside the
United States. Derivatives transactions conducted outside the United
States are subject to the risk of governmental action affecting the
trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions could be adversely affected
by foreign political and economic factors; lesser availability of data
on which to make trading decisions; delays in a portfolio’s ability
to act upon economic events occurring in foreign markets; and less
liquidity than U.S. markets.
Currency derivatives are subject to additional risks. Currency
derivatives transactions may be negatively affected by government
exchange controls, blockages, and manipulations. Currency exchange
rates may be influenced by factors extrinsic to a country’s economy.
There is no systematic reporting of last sale information with respect
to foreign currencies. As a result, the available information on which
trading in currency derivatives will be based may not be as complete
as comparable data for other transactions. Events could occur in
the foreign currency market which will not be reflected in currency
derivatives until the following day, making it more difficult for a
portfolio to respond to such events in a timely manner.
OTC Options. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract
size and strike price, the terms of OTC options generally are
established through negotiation between the parties to the options
contract. Unless the counterparties provide for it, there is no central
clearing or guaranty function for an OTC option. Therefore, OTC
options are subject to the risk of default or non-performance by
the counterparty to a greater extent than exchange-traded options.
Additional Risks of Options Transactions. The risks associated
with options transactions are different from, and possibly greater
than, the risks associated with investing directly in the underlying
instruments. Options are highly specialized instruments that require
investment techniques and risk analyses different from those
associated with other portfolio investments. Options may be subject
to the risk factors generally applicable to derivatives transactions
described herein, and may also be subject to certain additional risk
factors, including:
• The exercise of options written or purchased by a portfolio could
cause a portfolio to sell portfolio securities, thus increasing a
portfolio’s portfolio turnover.
• A portfolio pays brokerage commissions each time it writes
or purchases an option or buys or sells an underlying security
in connection with the exercise of an option. Such brokerage
commissions could be higher relative to the commissions for
direct purchases of sales of the underlying securities.
• A portfolio’s options transactions may be limited by limitations
on options positions established by the SEC, the CFTC or the
exchanges on which such options are traded.
• The hours of trading for exchange listed options may not coincide
with the hours during which the underlying securities are traded.
To the extent that the options markets close before the markets
for the underlying securities, significant price and rate movements
can take place in the underlying securities that cannot be reflected
in the options markets.
• Index options based upon a narrower index of securities or other
assets may present greater risks than options based on broad
market indexes, as narrower indices are more susceptible to rapid
and extreme fluctuations as a result of changes in the values of
a small number of securities or other assets.
• A portfolio is subject to the risk of market movements between
the time that an option is exercised and the time of performance
12
INVESTMENT INSIGHT
MORGAN STANLEY INVESTMENT MANAGEMENT | SOLUTIONS & MULTI-ASSET
thereunder, which could increase the extent of any losses suffered
by a portfolio in connection with options transactions.
Foreign Currency Forward Exchange Contracts and Currency
Futures. A portfolio may enter into foreign currency forward
exchange contracts. Unanticipated changes in currency prices may
result in losses to a portfolio and poorer overall performance for
a portfolio than if it had not entered into foreign currency forward
exchange contracts. At times, a portfolio may also enter into
“cross-currency” hedging transactions involving currencies other
than those in which securities are held or proposed to be purchased
are denominated. Forward contracts may limit gains on portfolio
securities that could otherwise be realized had they not been
utilized and could result in losses. The contracts also may increase
a portfolio’s volatility and may involve a significant amount of risk
relative to the investment of cash. While a portfolio seeks to hedge
against its currency exposures, there may be occasions where it is
not viable or possible to ensure that the hedge will be sufficient
to cover a portfolio’s total exposure.
Additional Risk of Futures Transactions. The risks associated
with futures contract transactions are different from, and possibly
greater than, the risks associated with investing directly in the
underlying instruments. Futures are highly specialized instruments
that require investment techniques and risk analyses different from
those associated with other portfolio investments. Futures may
be subject to the risk factors generally applicable to derivatives
transactions described herein, and may also be subject to certain
additional risk factors, including:
The risk of loss in buying and selling futures contracts can be
substantial. Small price movements in the commodity underlying
a futures position may result in immediate and substantial loss (or
gain) to a portfolio.
Buying and selling futures contracts may result in losses in excess of
the amount invested in the position in the form of initial margin. In
the event of adverse price movements in the underlying commodity,
security, index, currency or instrument, a portfolio would be required
to make daily cash payments to maintain its required margin. A
portfolio may be required to sell portfolio securities, or make or
take delivery of the underlying securities in order to meet daily
margin requirements at a time when it may be disadvantageous to
do so. A portfolio could lose margin payments deposited with a
futures commodities merchant if the futures commodities merchant
breaches its agreement with a portfolio, becomes insolvent or
declares bankruptcy.
Most exchanges limit the amount of fluctuation permitted in futures
contract prices during any single trading day. Once the daily limit
has been reached in a particular futures contract, no trades may
be made on that day at prices beyond that limit. If futures contract
prices were to move to the daily limit for several trading days with
little or no trading, a portfolio could be prevented from prompt
liquidation of a futures position and subject to substantial losses.
The daily limit governs only price movements during a single trading
day and therefore does not limit a portfolio’s potential losses.
Index futures based upon a narrower index of securities may present
greater risks than futures based on broad market indexes, as narrower
indexes are more susceptible to rapid and extreme fluctuations as
a result of changes in value of a small number of securities.
Warrants. Warrants are equity securities in the form of options
issued by a corporation which give the holder the right, but not
the obligation, to purchase stock, usually at a price that is higher
than the market price at the time the warrant is issued. A purchaser
takes the risk that the warrant may expire worthless because the
market price of the common stock fails to rise above the price set
by the warrant.
Rights. A portfolio may purchase rights for equity securities. If a
portfolio purchases a right, it takes the risk that the right might
expire worthless because the market value of the common stock
falls below the price fixed by the right.
General Risks of Swaps. A portfolio may enter into swaps directly
or indirectly (including through Risk Premia Investments). The risks
associated with swap transactions are different from, and possibly
greater than, the risks associated with investing directly in the
underlying instruments. Swaps are highly specialized instruments
that require investment techniques and risk analyses different from
those associated with other portfolio investments. The use of swaps
requires an understanding not only of the underlying instrument but
also of the swap contract itself. Swap transactions may be subject
to the risk factors generally applicable to derivatives transactions
described above, and may also be subject to certain additional risk
factors. In addition to the risk of default by the counterparty, if the
creditworthiness of a counterparty to a swap agreement declines, the
value of the swap agreement would be likely to decline, potentially
resulting in losses.
In addition, the U.S. government has enacted legislation that provides
for new regulation of the derivatives market, including clearing,
margin, reporting, and registration requirements, which could
restrict a portfolio’s ability to engage in derivatives transactions
or increase the cost or uncertainty involved in such transactions.
The European Union (and some other countries) are implementing
similar requirements, which will affect a portfolio when it enters
into a derivatives transaction with a counterparty organized in that
country or otherwise subject to that country’s derivatives regulations.
For example, the U.S. government and the European Union have
adopted mandatory minimum margin requirements for OTC
derivatives. The AIP Hedge Fund team expects that a portfolio’s
transactions will become subject to variation margin requirements
under such rules in 2017 and initial margin requirements under such
rules in 2020. Such requirements could increase the amount of
margin a portfolio needs to provide in connection with its derivatives
transactions and, therefore, make derivatives transactions more
expensive.
These and other new rules and regulations could, among other
things, further restrict a portfolio’s ability to engage in, or increase
the cost to a portfolio of, derivatives transactions, for example, by
making some types of derivatives no longer available to a portfolio or
otherwise limiting liquidity. A portfolio may be unable to execute its
investment strategy as a result. The costs of derivatives transactions
are expected to increase as clearing members raise their fees to cover
the costs of additional capital requirements and other regulatory
changes applicable to the clearing members become effective. These
rules and regulations are new and evolving, so their potential impact
on a portfolio and the financial system are not yet known. While the
new rules and regulations and central clearing of some derivatives
transactions are designed to reduce systemic risk (i.e., the risk that
the interdependence of large derivatives dealers could cause them
to suffer liquidity, solvency or other challenges simultaneously),
there is no assurance that they will achieve that result, and in the
meantime, as noted above, central clearing and related requirements
expose a portfolio to new kinds of costs and risks.
Interest Rate Swaps, Caps, Floors and Collars. A portfolio may
enter into interest rate swaps, which do not involve the delivery of
securities, other underlying assets, or principal. Accordingly, the risk
of loss with respect to interest rate and total rate of return swaps
includes the net amount of interest payments that a portfolio is
contractually obligated to make. A portfolio may also buy or sell
interest rate caps, floors and collars, which may be less liquid than
other types of swaps.
13
AN INTRODUCTION TO ALTERNATIVE RISK PREMIA
SOLUTIONS & MULTI-ASSET | MORGAN STANLEY INVESTMENT MANAGEMENT
Currency Swaps. Currency swap agreements may be entered into on
a net basis or may involve the delivery of the entire principal value
of one designated currency in exchange for the entire principal value
of another designated currency. In such cases, the entire principal
value of a currency swap is subject to the risk that the counterparty
will default on its contractual delivery obligations.
Credit Default Swaps. A portfolio may be either the buyer or seller
in a credit default swap. As the buyer in a credit default swap,
a portfolio would pay to the counterparty the periodic stream
of payments. If no default occurs, a portfolio would receive no
benefit from the contract. As the seller in a credit default swap,
a portfolio would receive the stream of payments but would be
subject to exposure on the notional amount of the swap, which it
would be required to pay in the event of default. The use of credit
default swaps could result in losses to a portfolio if the Adviser
fails to correctly evaluate the creditworthiness of the issuer of the
referenced debt obligation.
Combined Transactions. Combined transactions involve entering
into multiple derivatives transactions instead of a single derivatives
transaction in order to customize the risk and return characteristics of
the overall position. Combined transactions typically contain elements
of risk that are present in each of the component transactions.
Because combined transactions involve multiple transactions, they
may result in higher transaction costs and may be more difficult
to close out.
Other Instruments and Future Developments. A portfolio may
take advantage of opportunities in the area of swaps, options on
various underlying instruments and swaptions and certain other
customized “synthetic” or derivative investments in the future. In
addition, a portfolio may take advantage of opportunities with
respect to certain other “synthetic” or derivative instruments which
are not presently available, but which may be developed to the
extent such opportunities are both consistent with a portfolio’s
investment objective and legally permissible for a portfolio.
Morgan Stanley does not render tax advice on tax accounting
matters to clients. This material was not intended or written to be
used, and it cannot be used with any taxpayer, for the purpose of
avoiding penalties which may be imposed on the taxpayer under
U.S. federal tax laws. Federal and state tax laws are complex and
constantly changing. Clients should always consult with a legal or
tax advisor for information concerning their individual situation.
The information contained herein may not be reproduced or
distributed. This communication is only intended for and will only be
distributed to persons resident in jurisdictions where such distribution
or availability would not be contrary to local laws or regulations.
Index data is provided for illustrative purposes only. Indices do not
include any expenses, fees or sales charges, which would lower
performance. Indices are unmanaged and should not be considered
an investment. It is not possible to invest directly in an index. Any
index referred to herein is the intellectual property (including
registered trademarks) of the applicable licensor. Any product based
on an index is in no way sponsored, endorsed, sold or promoted
by the applicable licensor and it shall not have any liability with
respect thereto.
MSIM has not authorised financial intermediaries to use and to
distribute this document, unless such use and distribution is made
in accordance with applicable law and regulation. Additionally,
financial intermediaries are required to satisfy themselves that the
information in this document is suitable for any person to whom they
provide this document in view of that person’s circumstances and
purpose. MSIM shall not be liable for, and accepts no liability for, the
use or misuse of this document by any such financial intermediary.
This document may be translated into other languages. Where such
a translation is made this English version remains definitive. If there
are any discrepancies between the English version and any version of
this document in another language, the English version shall prevail.
All information contained herein is proprietary and is protected
under copyright and other applicable laws.
INDEX DESCRIPTIONS
Note: While the HFRI Indices are frequently used, they have limitations
(some of which are typical of other widely used indices). These limitations
include survivorship bias (the returns of the indices may not be representative
of all the hedge funds in the universe because of the tendency of lower
performing funds to leave the index); heterogeneity (not all hedge funds
are alike or comparable to one another, and the index may not accurately
reflect the performance of a described style); and limited data (many
hedge funds do not report to indices, and the index may omit funds, the
inclusion of which might significantly affect the performance shown.
The HFRI Indices are based on information self-reported by hedge fund
managers that decide on their own, at any time, whether or not they want
to provide, or continue to provide, information to HFR Asset Management,
L.L.C. Results for funds that go out of business are included in the index
until the date that they cease operations. Therefore, these indices may not
be complete or accurate representations of the hedge fund universe, and
may be biased in several ways.
Hedge Fund Research, Inc. (HFRI) Equity Hedge Index. The HFRI Equity
Hedge Index consists of managers who maintain positions both long and
short in primarily equity and equity derivative securities. A wide variety of
investment processes can be employed to arrive at an investment decision,
including both quantitative and fundamental techniques; strategies can be
broadly diversified or narrowly focused on specific sectors and can range
broadly in terms of levels of net exposure and leverage employed.
Dubai: Morgan Stanley Investment Management Limited (Representative
Office, Unit Precinct 3-7th Floor-Unit 701 and 702, Level 7, Gate Precinct
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Emirates. Telephone: +97 (0)14 709 7158)
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Swiss investors are advised that copies of the Prospectus, Key Investor
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free of charge from the representative in Switzerland. The representative
in Switzerland is Carnegie Fund Services S.A., 11, rue du Général-Dufour,
1204 Geneva. The paying agent in Switzerland is Banque Cantonale de
Genève, 17, quai de l’Ile, 1204 Geneva.
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Authority. Registered in England. Registered No. 1981121. Registered Office:
25 Cabot Square, Canary Wharf, London E14 4QA, authorised and regulated
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