Tuesday 30th June 2015
NEWS TICKER, TUESDAY JUNE 30TH 2015: Pamplona Capital Management (“Pamplona”) has acquired Precyse, a health information manager in services, education and technology founded in 1999. Also, earlier this month, Pamplona sold the majority of its controlling stake in Alvogen, a high growth generic drugs company, to a consortium of investors. The Precyse investment has been made from Pamplona’s fourth private equity fund, Pamplona Capital Partners and was advised by Deutsche Bank Securities and received legal advice from Simpson Thacher & Bartlett. Pamplona is a London and New York based specialist investment manager established in 2005. In addition to Precyse, Pamplona’s healthcare investment portfolio currently includes Spreemo, a company that is bringing to the workers compensation specialty benefits management industry with a focus on radiology; Intralign, which helps hospital and surgeons achieve a rep-less, optimised surgical episode by combining assessment with clinical support and operational tools; Magnacare, a healthcare administrative services company focused on self-insured employers and workers complains in the New York and New Jersey regions; and Privia Health, a physician practice management and population health technology company. - In line with its strategy to focus on packaging solutions for its pharmaceutical customers, Gerresheimer today announced that it will sell its glass tubing business to Corning Incorporated. The €196m ($219m) deal was advised by McDermott Will & Emery - GVQ Investment Management Limited (GVQIM), a specialist fund manager that applies private equity investment techniques to the public markets, has announced the appointment of Jane Tufnell as non-executive chairman. Tufnell co-founded Ruffer Investment Management Limited, a privately owned fund management group in 1994. She is an Independent Non-Executive Director of the Diverse Income Trust and of the JP Morgan Claverhouse Investment Trust. - Insurance broker and risk advisory firm Willis Group Holdings and professional services group Towers Watson on Tuesday said they had agreed to an all-stock merger that values the combined company at $18bn. Under the deal, which has been approved by both boards, Towers Watson shareholders will get 2.6490 Willis shares for each share held as well as a one-time cash dividend of $4.87 a share. Willis Group shareholders will own 50.1% of the combined group and Towers Watson shareholders will own the rest. The combined company, to be named Willis Towers Watson, will have 39,000 employees in more than 120 countries and revenue of about $8.2bn. Willis Chairman James McCann will be chairman of the combined company and Towers Watson Chairman and Chief Executive John Haley will be its CEO. Willis CEO Dominic Casserley will be president and deputy CEO of the combined company. Its board will consist of six directors from each company. Towers Watson’s chief financial officer, Roger Millay, will be CFO - According to BankingLaw 360, the US Supreme Court has granted an appeal from Merrill Lynch, UBS Securities LLC and other financial institutions over a shareholder suit alleging they engaged in illegal and manipulative “naked” short selling - Roxi Petroleum has reported progress at its flagship BNG asset as it posted an operational update. The Central Asian oil and gas company with a focus on Kazakhstan says that a gross oil-bearing interval of at least 105 metres, from 4,332 metres to 4,437 metres, was found at its Deep Well A5. The well, which was spudded in July 2013, will require specialist equipment for a more comprehensive 30-day core sampling test, but has already began preparatory extraction work Elsewhere, Deep Well 801, spudded in December 2014, is in the production test phase. "Progress at the BNG deep wells can best be described as steady," says chairman Clive Carver. "We look forward to reporting the results of our ongoing work in the near future – Advisory firm Hargreaves Landsdown has reportedly acquired a client book of 7,000 investors with a combined £370m of assets from JP Morgan Asset Management. The book accounts for 6% of JP Morgan’s direct client business and represents clients that hold or plan to continue to invest in non-JP Morgan funds or investment trusts in wrappers other than the JP Morgan ISA. This includes clients with direct equities, gilts or exchange-traded funds, who will be moved the brokers Vantage platform. The sale follows JP Morgan's announcement in January 2014 that it would no longer offer direct clients anything other than JP Morgan funds and investment trusts and that it would close its cash ISA and Sipp. There will be no transfer charge for clients moving to Hargreaves. The terms of the deal have not been disclosed - The OECD will publish Government at a Glance 2015 on Monday July 6th. The biannual report, now in its fourth edition, presents more than 50 indicators to compare governments’ performance in everything from public finances (including government spending per person), cuts to staffing and pay in central government and the level of private asset disclosure by government officials to access to and satisfaction with the healthcare, education and the justice systems This year’s report covers non-OECD countries for some indicators including Brazil, China, Egypt, India, Russia, South Africa and Ukraine and 36 country factsheets with infographics will be published alongside it. OECD Deputy Secretary-General Mari Kiviniemi will present the report at OECD Headquarters in Paris at 09:00am - Queensland diversified property group WA Stockwell has closed its $35m bond issue oversubscribed following a strong investor response to the offer, sole lead arranger FIIG Securities has announced. The six year senior secured amortising note issue will pay a fixed rate of interest of 7.75% pa. FIIG CEO Mark Paton says the success of the Stockwell issue confirmed the market appetite, especially among wholesale investors, for credit exposure to quality Australian companies. The Stockwell issue is the fourth that FIIG has sole-arranged for a company in the property and infrastructure sector, following successful issues by ASX-listed property developer Payce Consolidated, infrastructure operator Plenary Group, and ASX-listed property funds manager 360 Capital.

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Positioning your firm with investors

Wednesday, 06 June 2012 Written by 
Positioning your firm with investors The evidence keeps mounting that operational risks can lead to poor returns on investment and even cause a firm’s failure. A new study to this effect has just been published in the Journal of Financial Economics (February 2012, Trust and Delegation by Stephen Brown et al.). Based on data from 444 hedge funds’ due diligence reports from 2003 to 2008, Brown and his team conclude that “high operational risk can potentially destroy investor value.” They write, “operational risk as we define it leads to direct and indirect losses that can be measured in terms of diminished performance. In extreme circumstances, operational failures can lead to fund failure.” http://www.ftseglobalmarkets.com/

The evidence keeps mounting that operational risks can lead to poor returns on investment and even cause a firm’s failure. A new study to this effect has just been published in the Journal of Financial Economics (February 2012, Trust and Delegation by Stephen Brown et al.). Based on data from 444 hedge funds’ due diligence reports from 2003 to 2008, Brown and his team conclude that “high operational risk can potentially destroy investor value.” They write, “operational risk as we define it leads to direct and indirect losses that can be measured in terms of diminished performance. In extreme circumstances, operational failures can lead to fund failure.”

Interestingly, during the pre-financial crisis time period reviewed in the study, there appears to have been no correlation between investor behavior and an awareness of operational risk.  However, in light of recent high-visibility blow-ups reflecting inadequate internal processes investor behavior has changed considerably. 

In fact, a recent study by Citi Prime Finance focusing on more current investor behavior concludes that day one and early stage allocators to hedge funds are acutely aware of operational risk. In that study, the investors’ top three concerns – track record, previous experience working together and investment team stability – were followed by a concern with the fund's operational infrastructure. (See Day One and Early Stage Investor Allocations to Hedge Funds, Citi Prime Finance, February 2012.)  The study notes, “[t]here is growing sentiment that managers need to be more ‘institutional’ at launch to reflect a changing investor base.”



Given the results of these studies, an important way to set your firm apart from the rest is to highlight the quality of your firm’s governance structure and its related business functions and operational processes. Despite the concerns of potential clients, many managers mistakenly shy away from discussing operational risks, including compliance and regulatory issues. Instead, this calls for a proactive approach that differentiates the manager from the pack and allays concerns, which would otherwise delay an initial allocation, reduce its size, or prevent it altogether. Address this in an early page in your pitchbook. From then on, an investor should be primed to focus on your performance, your unique strategy, and your investment personnel. 

Deborah Prutzman

Deborah Prutzman is the founder and CEO of The Regulatory Fundamentals Group (RFG), a New York-based firm that designs and implements business and risk solutions for alternative asset managers and institutional investors. RFG's senior-led team employs a robust suite of tools, including practical alerts on new and potential industry developments and its powerful RFG Pathfinder® knowledge management platform which simplifies the challenges of operating in a regulated environment.  To learn more about The Regulatory Fundamentals Group call (212) 537-4058, email a representative at Information@RegFG.com or visit RegFG.com

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