RBS 2008 Annual Report Download - page 145

Business review continued
RBS Group Annual Report and Accounts 2008144
Investment funds set up and managed by the Group (unaudited)
The Group’s investment funds are managed by RBS Asset Management
(RBSAM), which is an integrated asset management business, which
manages investments on behalf of third-party institutional and high net
worth investors, as well as for the Group. RBSAM is active in most
traditional asset classes and employs both fund of funds structures and
multi-manager strategies. Its offering includes money market funds, long
only funds and alternative investment funds.
Money market funds
The Group has established and manages a number of money market
funds for its customers. When a new fund is launched, RBSAM as fund
manager typically provides a limited amount of seed capital to the
funds. RBSAM does not have investments in these funds greater than
£25 million. As RBSAM does not have holdings in these funds of
significant size and as the risks and rewards of ownership are not with
the Group, these funds are not consolidated by the Group.
The funds have been authorised by the Irish Financial Services
Regulatory Authority as UCITS pursuant to the UCITS Regulations
(UCITS Regulations refer to the European Communities’ Undertakings
for Collective Investment in Transferable Securities Regulations) and are
therefore restricted in the types of investments and borrowings they can
make. The structure of the assets within the funds is designed to meet
the liabilities of the funds to their investors who have no recourse other
than to the assets of the funds. The risks to the Group as a result are
restricted to reputational damage if the funds were unable to meet
withdrawals when requested on a timely basis or in full.
Money market funds had total assets of £13.6 billion at 31 December
2008 (2007 – £11.2 billion). The sub categories of money market
funds are:
•£8.0 billion (2007 – £5.1 billion) in Money Funds denominated in
sterling, US dollars and euro, which invest in short-dated, highly rated
money market securities with the objective of providing security,
performance and liquidity.
•£4.9 billion (2007 – £5.5 billion) in multi-manager money market funds
denominated in sterling, US dollars and euro, which invest in short
dated, highly rated securities.
•£0.7 billion (2007 – £0.6 billion) in Money Funds Plus denominated in
sterling, US dollars and euro, which invest in longer-dated, highly
rated securities with the objective of providing security, enhanced
performance and liquidity.
Non-money market funds
RBSAM has also established a number of non-money market funds to
enable investors to invest in a range of assets including bonds, equities,
hedge funds, private equity and real estate. The Group does not have
investments in these funds greater than £200 million. As RBSAM does
not have holdings in these funds of significant size and as the risks and
rewards of ownership are not with the Group, these funds are not
consolidated by the Group.
The non-money market funds had total assets of £18.7 billion at 31
December 2008 (31 December 2007 – £19.4 billion). The sub
categories of non-money market funds are:
•£16.0 billion (2007 – £17.0 billion) in multi-manager funds, which offer
fund of funds products across bond, equity, hedge fund, private
equity and real estate asset classes.
•£1.6 billion (2007 – £1.3 billion) in committed capital to private equity
investments, which invests primarily in equity and debt securities of
private companies.
•£1.1 billion (2007 – £1.1 billion) in credit investments, which invests in
various financial instruments.
The structure of the assets within the funds is designed to meet the
liabilities of the funds to their investors who have no recourse other than
to the assets of the funds. The risks to the Group as a result are
restricted to reputational damage if the funds were unable to meet
withdrawals when requested on a timely basis or in full, and the Group’s
own investment in the funds.
The Group’s maximum exposure to non-money market funds is
represented by the investment in the shares of each fund and was
£200 million at 31 December 2008 (2007 – £171 million).