In the context of increasing regulations for investments funds, the largely unregulated performance fee area crystallises the concerns of investors: the payoff to the manager is often compared to a free-option, incentivising him to take too much risk at the expense of investors. Nevertheless, performance fees tend to better align the interests of the manager with the interest of investors. In order to ensure a fair performance fee system, investment funds have to focus on best practices.
For now 10 years, Deloitte’s performance measurement team provides services in performance analysis, and controls the fairness and correctness of methodologies employed, from the performance fee area to the multiclass performance analysis and performance attribution.
Regarding the share class forex hedging, currently the number of queries from investors is increasing. Therefore it is crucial to clearly identify the sources of the factors impacting the currency hedging performance.
In addition to using internal resources to identify the best market practices regarding share class FX hedging processes, an independent view of the market may help to avoid any bias in the analysis.
Moreover Deloitte provides companies with a broad range of services to respond to a fast and ever-changing environment:
Deloitte provides companies with a broad range of services to respond to a fast and ever-changing environment:
Set-up of performance fees
Methodology review of the performance fees calculation already used
Recurrent controls of the calculated performance fees before payment
Automated performance fees calculations
Training of staff on performance fee calculations
Multi-classes of shares
We offer a wide range of services regarding the analysis of a fund with a multi-classes of shares structure:
Re-definition of the share class hedging process
Regarding the detailed analysis of the share class hedging process, Deloitte can offer the full service described hereunder, but can also propose an offer tailored to your requirements with the best suited modules among those described.
|Analysis of the environment|
|Review of the current hedging process in place|
|Comparison with the best market practices|
|Identification of the sources of impacts through the backtesting of the fund's hedging performance|
|Definition of a new hedging strategy|
|Set-up of an optimisation program|
|Design of a new target operating model|
Limitation of operational risk through:
Control, monitoring and reporting of the potential risks:
Benchmark hedging analysis
|1||Review of the fund's hedging performance|
|2||Review of the index benchmark hedging methodology|
|3||Comparison between the performance of the hedging done by the fund and by the benchmark|
|4||As-if scenarios: What if the fund had the same hedging methodology than the benchmark?|
|5||Targeted recommendations to limit the deviation of performance with the benchmark|
|6||Implementation of a daily monitoring of the deviations with the benchmark|