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Phillip Chapple Hedge Fund advisory UK phillip Chapple

Phillip has been involved in the financial services industry since 1997. He has held senior positions in the global custody, prime brokerage and hedge fund industries. He has been responsible for the establishment of numerous hedge fund and private equity structures.

Currently at KB Associates he helps start-up hedge fund managers to build the appropriate infrastructure

about KB associates

KB Associates is a boutique operational consulting firm with offices in Cayman, Dublin, London, Luxembourg and New York. KB Associates advises managers on operational and compliance issues relevant to the establishment and ongoing management of offshore investment funds.

KB Associates offers a range of advisory and project management services to: • UCITS Funds • Traditional Non-UCITS Funds • Hedge Funds • Funds of Hedge Funds

KB Associates also offers a range of advisory and thoughts for 2013

The hedge fund industry of 2012 bears little resemblance to the same industry five years ago. The institutionalisation of the industry has seen increased focus on operational and counterparty risk and the development of “investor friendly” risk weighted returns, rather than a general quest for “alpha” as seen previously.

We expect investors to continue to put more money to work in the hedge fund space in 2013 into opportunities where the strategy risks are transparent and understandable, plus all the risks are in the strategy and not the infrastructure.

We do see continued investment into smaller and start-up managers, as long as they can demonstrate their unique selling points and show clearly what they offer. If investors see the benefit of investing in them and can see that the opportunity is not available at larger established funds then the capital raising environment is good.

2012 saw many investors widen their mandate appetite. In 2011 we saw “systematic” funds gain most attention in the small and start-up space as investors searched for the combination of real alpha plus liquidity. In 2012 we saw Global Macro

added to the list for investors, plus in Q1 2012 “idiosyncratic” strategies came into vogue.

The main blockage I currently see for the market is the lack of clarity on investor expectations around due diligence. Most investors do not like to give feedback to managers after due diligence, in many cases not even admitting the manager has failed.

Due to changes in conduit investors’ investment models, there is a need for them to review a large number of managers as due diligence is now more likely to be performed before an investment decision rather than subsequent. Therefore the investors cannot afford to perform a full due diligence process on all reviewed, the review will stop on the identification of the first set of major issues. This is a reality of investing in the current environment when a complete due diligence process can take 6 months. Investors cannot afford to complete that process for all managers.

Organisations such as the Hedge Fund Standards Board and AIMA try to build this gap, but we still see many managers who are unaware of how the investors due diligence standards have developed. My hope in 2013 is that more managers realise that they may be failing due diligence and need to

proactively do something about it. The easiest way is to speak to current investors, plus to take a look at the HFSB standards and AIMA materials.

We have performed a number of reviews for managers in 2012 to bring them up to speed on this area. Most of the areas managers can fail on are simply rectified, but the lack of understanding of investors requirements is holding back a large number of managers.

This problem is magnified for start-up managers. Investors may forgive established managers some things as they may have been put in place at a time when standards were different , some investors may even highlight an area of concern if it is one of only a few issues. But with start-up managers most investors feel that the setup should be to current market standards – so they can gain comfort that the risks are controlled and understandable.

The bars have been raised for investment increasingly over the last few years, but the flow of investment is there. This should continue into 2013, the difficulty for managers in 2013 will continue to be finding where the bar is.

project management services directly to managers to support their internal operations and to address investor due diligence requirements.

By availing of these services, clients are free to focus critical management resources on the investment decision making process secure in the knowledge that all supporting activities are professionally managed.

KB Associates' activities are underpinned by adherence to its three core values: • Independence • Commitment • Expertise

to meet potential investors’ needs, plus assists established managers to prepare for investor due diligence.

Prior to joining KB Associates, Phillip was CFO/COO of Ironshield Capital Management LLP, a European distressed debt investment management company. As a founding partner.

Phillip created the firm’s operational, finance and compliance infrastructure. Previously he was COO at IBIS Asset Management, a US$10bn family office. Phillip commenced his career in the global custody industry before spending a number of years in prime brokerage at Merrill Lynch.

Phillip holds a Bachelor of Laws with Honours (LLB) from Exeter University.

Contact:

Phillip Chapple KB Associates

Offshore Fund Consulting

42 Brook Street London, W1K 5DB United Kingdom

Main: +44 203 170 8811 Direct: +44 203 170 8815 Mobile: +44 7717 772 512 Fax: +44 203 170 8812 Email: phillip.chapple@kbassociates.co.uk Website: www.kbassociates.ie

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