SEC, FCA Sign Brexit Cooperation Arrangements

US and UK regulators have signed two updated memoranda of understanding (MOUs) aimed at ensuring their ability to cooperate and consult with each after the UK leaves the European Union (EU).

SEC Chairman Jay Clayton met with FCA Chief Executive Officer Andrew Bailey in London for the MOU signing, and discussed the risks posed by jurisdictional share trading obligations, which they said could increase market fragmentation and impose unnecessary costs on investors.

“The SEC and the FCA have a long history of effective cooperation on supervisory and other matters,” Clayton said in a release. “The amended MOUs we entered into today reaffirm this commitment and collaboration with respect to the oversight of our respective registrants for the benefit of each of our markets and investors.”

The first MOU, which was first signed in 2006, is a comprehensive supervisory arrangement that covers regulated entities operating across national borders. The MOU was updated to include firms that conduct derivatives, credit rating, and derivatives trade repository businesses to incorporate post-financial crisis reforms related to derivatives. It was also updated to reflect the FCA’s assumption of responsibility from the European Securities and Markets Authority for overseeing credit rating agencies and trade repositories if the UK withdraws from the EU.

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The second MOU, which is required under the UK Alternative Investment Fund Managers Regulations, was originally signed in 2013 and provides a framework for supervisory cooperation and exchange of information relating to the supervision of covered entities in the alternative investment fund industry.

The updated MOU is intended to ensure that investment advisers, fund managers, and other covered entities in the alternative investment fund industry regulated by the SEC and the FCA will be able to continue to operate on a cross-border basis without interruption, regardless of the outcome of the UK’s withdrawal from the EU.

The MOUs will come into force when EU legislation ceases to have direct effect in the UK. Earlier in April, the EU agreed to extend the date for the UK’s withdrawal from the EU until Oct. 31 to help the country avoid leaving without a deal.

According to the Organization for Economic Co-operation and Development (OECD), if the UK leaves the EU without a deal, the country will be plunged into a recession, and growth would fall to below 1%. The UK hasn’t registered growth of less than 1% since the financial crisis.

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Tags: Alternatives, Brexit, Financial Conduct Authority, SEC

Caisse de dépôt du Québec (CDPQ) maintained its resilience in the late 2018 market dip and stood on track of its internal targets across the board, according to its 2018 annual report.

Its strategies in real assets produced the most profound returns for the $309.5 billion institutional investor, generating a cool 9.0%, significantly higher than its fixed income and equities portfolios, which generated 2.1% and 3.5% in the period, respectively.

CDPQ’s overall return totaled 4.2%, higher than the benchmark and representing $5.3 billion in added value compared to the previous period. Respective five- and 10-year performance figures chalked up to 8.4% and 9.2%, a reflection of the distraught period markets went through at the end of 2018.

It’s a clear shift that exposes the effect of derogatory markets on their strategies, whereas equities was the highest performer in CDPQ’s portfolio at the halfway mark of the year.

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“We generate sustained returns through key transactions in major asset classes,” CDPQ said in the report. One of the most significant of these is its $1 billion investment in the Réseau express métropolitain rapid transit system in its home province, as well as more than $5.8 billion in infrastructure investments, $9 billion in private equity, and $16.6 billion in real estate.

The California Public Employees’ Retirement System (CalPERS) also witnessed real assets rise to the top of its return profile, generating more than 20% in its latest report, significantly higher than any other asset class in the $350+ billion portfolio.

With regards to its climate change initiatives, CDPQ outperformed its target with the addition of $10 billion in low-carbon assets in 2018, prompting it to raise the target in 2020. It also managed to reduce the carbon output of investments in its portfolio by 10%, with 25% scheduled for 2025.

The general theme that can be construed from the report is long, continuous growth for one of the country’s largest institutional investors. Since 2009, its net assets grew from $120.1 billion in the beginning of 2009 to $309.5 billion in 2018. The progress is illustrated below:

Soource: Caisse de dépôt du Québec

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Tags: Caisse de dépôt et placement du Québec (CDPQ), Pension, Real Assets, Returns