A Morley Fund Management derivatives specialist asked sales professionals to stop offering it tax efficient products without knowing its tax structure and to only knock on his door with products specifically designed for active fund management. Among the list of instruments on the 'do' list, were equity options, convertible bond arbitrage, hedge funds and funds of hedge funds, explained Tom Wills, derivatives specialist in London. The 'don't' list includes basket trades, capital protected products, listed notes and warrants and exotic options such as knock outs or cliquets. "Many of the trades we are shown are far more suited to a high-net-worth client," Wills said. In addition, he is frequently pitched products that Morley already offers, such as baskets of other institutions' funds, CDOs, investment trusts or fund of hedge funds.
Morley has GBP106 billion (USD165 billion) under management and a GBP15 billion (notional) derivatives portfolio, 75% of which is over-the-counter, according to Wills. The firm's OTC equity derivatives book includes contracts for difference, total return swaps, capital guaranteed and income products for the retail market. Morley uses interest rate swaps for hedging its guaranteed annuities as well as managing duration exposure on corporate debt portfolios. The firm uses foreign exchange forwards to manage currency views across all portfolios.