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Q&A: 3 things you should know about unitisation

June 9, 2021
clock 4 MIN READ

Institutional investors continually look for ways to bring efficiency and accuracy to their investment portfolios. One way to do this can be through the use of unitisation.

Here are three things you should know about unitisation.

Q: What is unitisation?

A: Unitisation is the process of creating an unregistered ‘fund’ (similar to a mutual fund) for an investor allowing for easier support of sub-accounts — smaller, affiliated entities that are part of a larger, main pool of assets). Assets of the main investment pool are aggregated together and valued daily, striking a daily unit value (NAV) for the fund. Each sub-account then holds units of that larger fund.

A unitised fund acts like a pooled investment fund but is not legally registered; no prospectus, no board of directors, etc. It can only be used for assets that are part of the same pool.

Q: What are different uses for unitisation?

A: By unitising assets, multiple sub-accounts can aggregate their funds to create larger investments. One reason to unitise is for managed accounts with high minimums, with complex implementations, and/or for security screening, which is not easily applied to smaller asset pools. Aggregating assets allows for meeting higher required minimums, and is especially helpful when screening, as managers are able to screen on fewer accounts that have higher balances. Also, it is not efficient to implement complex mandates on small accounts.

Another reason to unitise is for alternatives. As the required paperwork for these investments is typically complex, it can be beneficial to have multiple affiliated investors aggregate their balances and complete one set of documents, as opposed to each individual investor completing a set of documents.

Q: What are the benefits of SEI for unitisation?

A: There are many benefits.

  1. Standardised allocations – Each sub-account owns a single fund, so there is no deviation of investment strategy and performance. It's as though each fund is a discrete model.
  2. Operational efficiency – We manage the asset allocation for one entity (investment portfolio) and not multiple sub-accounts.
  3. Trade automation – We obtain a SEDOL for the unitised product and automate trading between the sub-accounts and the transfer agency (leveraging EuroCCP). EuroCPP is a leading provider of pan-European centralised clearing, risk management, information and settlement services to the financial industry.
  4. Data integration/reporting – We administer the unitised asset exactly like any other UCITS fund. We automatically deliver position information to our internal investment team, allowing our analysts to monitor the unitised funds via Aladdin, FactSet and other portfolio management systems. Also, we can produce a monthly accounting report from FIS to show how the fund operates, including recording buys, sells, income, etc.

Summary

Investment teams and those responsible for managing institutional portfolios have a lot on their plates. Taking advantage of the right technologies and resources can bring efficiency and help ensure accuracy that you can't otherwise achieve.

If you would like to discuss your organisation's specific challenges or find out more about our solutions for investment offices, contact Kris Shergold for an introductory meeting. 

Important information


This material is not directed to any persons where (by reason of that person’s nationality, residence or otherwise) the publication or availability of this material is prohibited. Persons in respect of whom such prohibitions apply must not rely on this information in any respect whatsoever. Investment in the funds or products that are described herein are available only to intended recipients and this communication must not be relied upon or acted upon by anyone who is not an intended recipient. While considerable care has been taken to ensure the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information. Investments in SEI Funds are generally medium- to long-term investments. The value of an investment and any income from it can go down as well as up. Returns may increase or decrease as a result of currency fluctuations. Investors may get back less than the original amount invested. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. This document is not intended for and does not constitute investment advice. The opinions and views contained in this document are solely those of SEI and are subject to change. This document is issued by SEI Investments (Europe) Ltd (SIEL), 1st Floor, Alphabeta, 14-18 Finsbury Square, London, EC2A 1BR. SIEL is authorised and regulated by the Financial Conduct Authority (FRN 191713). This document and its contents are directed only at persons who have been categorised by SIEL as a Professional Client for the purposes of the FCA Conduct of Business Sourcebook.

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