Krygier will be responsible for assessing, coordinating and
communicating the economic, capital markets, investment strategy and management
outlook of the Arlington, Virginia-based firm. He will work closely with
investment, research and analytical staff in developing, integrating,
implementing and communicating investment policy for the firm’s clients.
“We are very happy to welcome Markus Krygier, who joins us
with formidable experience as a global economist and strategist,” says Hilda
Ochoa-Brillembourg, Strategic’s founder and CEO.
Krygier joins Strategic from Amundi Asset Management, where
he was deputy chief investment officer in its London office. Prior to that,
Krygier was at Dresdner Kleinwort as a managing director, chief debt strategist
and global head of FX Strategy, also located in London. He has also worked for
the IMF in Washington, D.C. as an economist and at Credit Agricole Asset
Management as head of strategy.
Krygier has a Ph.D. and an M.A. in economics from Wayne
State University. He completed his undergraduate studies at the University of
Freiburg, Germany. He also has the Advanced Studies Certificate in international
economics from the Kiel Institute for the World Economy, Germany.
Strategic
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Financial
advisers who propose alternative investments to their clients can expect
increased, ongoing scrutiny from the Securities and Exchange Commission (SEC).
In a recent Risk Alert issued by the SEC’s Office of
Compliance Inspections and Examinations, which is tasked with operating the
SEC’s National Exam Program (NEP), regulators remind financial advisers that
their fiduciary duty to clients still applies when it comes to alternative
investments. The complex nature of alternative investments puts an even greater
demand on advisers to ensure they are appropriate and suitable for clients, the
SEC warns, and that due diligence processes are completed effectively.
As fiduciaries, advisers who propose alternatives must
ensure those investments are in the client’s best interest, meet the client’s
stated investment objectives, and are actually managed consistent with the
investment principles disclosed by the managers to whom advisers cede control
of client assets. As the regulators point out, that’s no easy task when it
comes to alternatives, due to the characteristics of private offerings, venture
capital, real estate trusts and the complexity of leveraged investment
strategies typically roped into the alternatives category.
In developing the Risk Alert, SEC examiners conducted a
series of reviews of registered investment advisory firms, pursuant to Section
204 of the Investment Advisers Act of 1940. The staff’s examinations focused on
advisers that invested in or recommended private funds or funds-of-funds
classifiable as alternatives.
At the industry level, the assets under management for
global alternative investments have grown to a record $6.5 trillion, showing a
five-year growth rate of more than seven times that of traditional asset
classes. But as advisers push more of their clients’ dollars into alternatives,
they are only meeting partial success in seeking broader performance and risk
information directly from managers of alternatives.
That’s partially because, while some alternative managers
are willing to provide additional transparency required for unaccredited
investors, others are reluctant to share detail information about their
strategies. In particular, the SEC found alternatives managers were sensitive
to sharing position-level information, which they felt may compromise their
ability to execute proprietary strategies.
The
Risk Alert points out that position-level transparency should be pursued by
advisers to fine-tune analyses of market sector exposures, to identify position
concentrations across their clients’ entire portfolios, and to pick out
individual positions that may present risks that are inconsistent with a
managers’ stated investment strategy.
The SEC found that the position-level transparency
ultimately provided to advisers by alternative investment managers tends to be
the result of a process of negotiation between the advisers and managers, and
depends on several factors, including the relative influence of the investors
and whether the manager viewed position-level transparency as proprietary
information.
To ensure they are meeting the due diligence standards required
of fiduciaries, regulators suggest advisers should push for separate account
management for clients assets placed in alternatives. By securing separate
accounts, advisers can provide greater transparency on how client assets are
invested. Advisers can also use the strategy to reduce the ability of a manger
to misappropriate client money or charge unauthorized fees and expenses.
SEC staff also found that more advisers are utilizing third
parties to supplement analyses and validate information regarding alternative
investments—which they deemed an encouraging trend. These third-party aggregators
are generally service providers that compile detailed portfolio-level
information from private alternative investment funds and transmit the data to
advisers conducting due diligence. In many cases, the use of an aggregator
comes as a compromise between the adviser and the alternatives manager to
resolve differing preferences for position-level transparency.
Advisory firms are also turning more and more to third-party
service providers to conduct independent background checks on managers and key
custodial personnel, as well as to enact regulatory history reviews for
broker/dealers and registered representatives. Again, the SEC sees these as
important steps in ensuring fiduciary advisers are meeting their obligations
when proposing alternatives.
Other important steps for advisers as outlined by the SEC
include the use of quantitative analyses and risk measures to detect
aberrations in investment returns. Specifically, advisers should be on the lookout
for such things as bias ratios, serial correlation and “skewness” of return
distributions.
In closing its Risk Alert, the SEC reminds advisers of their
responsibilities under Rule 206(4)-(7) of the Advisers Act to adopt and
implement written policies and procedures reasonably designed to prevent
violations of the Advisers Act—and to annually review the adequacy of those
policies. The SEC found advisers tend to be weak in terms of annual Rule 206
reviews, the comprehensiveness of disclosures made to clients, and the
prevalence of misleading marketing claims and materials.