C LOSE D -E ND F UN D S E RV I C E S
Spectra
Professional Services
Spectra
Professional Services
Spectra Professional
Services is an advisory
firm providing a wide
spectrum of consulting
and project management
services to the investment
management industry.
Managing resources efficiently while having the right people to
execute projects effectively is a balancing act. Spectra Professional
Services (“Spectra”) can help. We bring the collective experience
of our partners, principals and associates to your business needs.
We help you ease the burden on your staff, allowing them to focus
on their day-to-day mandates. We provide a focused approach to
engagements with the objective of delivering value on day one.
Our closed-end fund services cover the full product cycle, from
initial public offerings to advanced strategies involving complex
capital transactions and activist investors. We offer component
or end-to-end services customized to meet your goals.
Spectra assists firms looking to establish a closed-end fund
(“CEF”) business as well as firms with an established CEF
business that are looking to strengthen their position within the
market or are in need of targeted services. We can provide an
introduction to the business model, review with you the current
state of the industry, and consult on specific CEF issues. Our goal
is to partner with you in the CEF sector, whether it is to help you
improve on product offerings, position you more effectively in
the secondary market, or create a product and market presence.
We invite you to discuss how Spectra Professional Services can
help your firm achieve your goals in the closed-end fund sector.
OVERV IEW OF CLOSED -E N D FU N D S
The actively managed closed-end fund sector provides an attractive business opportunity for
institutional and retail-focused investment advisors, both large and small. The structure offers
advantages to advisors and investors that cannot easily be replicated elsewhere within the
capital markets.
• A CEF is a pooled investment vehicle registered with the Securities and Exchange Commission
under the Investment Company Act of 1940.
• Assets are raised through an Initial Public Offering (“IPO”). Additional assets may be raised
through rights offerings or, though less commonly, through secondary market offerings.
• A CEF is typically listed on one of the national stock exchanges and its share price is determined
by supply and demand in the market. Like any other publicly traded security, the market price of
a CEF will fluctuate. Shares may trade at a discount or premium to its calculated Net Asset Value
per share, and investors cannot ordinarily buy or redeem their shares directly from a CEF.
• CEFs are commonly leveraged through one or more forms of borrowing, subject to regulatory
limits, which increases the managed assets of the fund.
• The CEF structure allows for investment strategies that typically are more diverse and flexible
than in open-end funds. Whereas open-end funds cannot invest more than 15% of assets in
illiquid securities, CEFs have a greater ability to invest in smaller and less liquid securities. And
since a CEF does not need to contend with redemptions or subscriptions, it is structurally more
suited to less liquid investments and strategies.
• As publicly traded companies, CEFs also have unique secondary market requirements –
regulatory, governance, compliance and investor relationship management – compared to other
registered investment products.
TH E CLOSED -END FU N D IN VE STOR
Sophisticated: Closed-end fund investors tend to hold a broad array of mutual funds,
equities, and variable annuities.
Affluent: Has the highest household income and financial assets versus U.S. households
owning mutual funds and/or individual equities.
Well educated: More likely to have a college or other higher degree.
Retired: More likely to be retired than either mutual fund or stock investors, consistent
with the focus on income.
Self-directed: Closed-end fund investors generally tend to make their own investment
decisions and often rely less on financial advisors.
Closed-End Fund Services • 1
TH E CLOSED -END FU ND MARK E T
The investment banking community as well as the investing public continue to have
a general appetite for well-articulated and vetted investment themes and structures.
Closed-End Fund Assets Totaled $289 Billion at Year-End 2014 *
$325B
312
297
279
276
$275B
289
264
253
238
242
223
$225B
184
$175B
$125B
04
05
06
07
08
09
10
11
12
13
14
• Assets under management increased
to $289 billion at year-end 2014,
demonstrating a continued rebound
from a low of $184 billion following
the financial crisis in 2008.
• New issuance has steadily picked up
since 2009 at levels of $6 billion, $10.4
billion and $10.1 billion in 2011, 2012
and 2013, respectively. In 2014, new
issuance totaled $4.1 billion.
Recent Years Have Seen Consolidation and Streamlining *
670
662
645
640
627
618
632
624
610
602
599
580
550
• At year-end 2014, there were 568
closed-end funds. This is below
the peak of 662 in 2007, as fund
sponsors have been streamlining their
offerings to provide clearer product
differentiation by consolidating
duplicative and smaller funds.
642
634
568
04
05
06
07
08
09
2 • Spectra Professional Services
10
11
12
13
14
• With a few notable exceptions in 2010
and 2012, closed-end fund liquidations
have been extremely rare since 2008.
Equity Funds Are a Growing Part of the Closed-End Fund Sector *
• Assets in closed-end bond funds totaled $170 billion (59%) of all
closed-end fund assets at year-end 2014.
• Equity closed-end fund assets totaled $119 billion (41%) of
closed-end fund assets.
10%
31%
31%
• A decade ago, two-thirds (67%) of all closed-end fund assets were
held in bond funds while only a third (33%) were in equity funds.
• Income oriented, but not necessarily fixed income: In 2014, over
$4.0 billion in new closed-end fund assets was raised. While master
limited partnership funds continued to be the most popular asset
class, approximately $1.3 billion was raised in funds with other
investment strategies such as equity income.
8%
20%
Global / International Bond
Municipal Bond
Taxable Bond
US Equity
Global / International Equity
Closed-End Fund Sponsorship Is Broadly Diversified *
• Closed-end fund sponsorship is broader than ever, with greater
diversity among investment sponsors than prior years. In fact,
no single sponsor or group of sponsors has dominance over the
closed-end fund market.
• Studies show that nearly 90% of closed-end fund sponsors have
between one and ten funds. The largest sponsors actually compose
only 11% of the market.
• Recent years have seen a host of new sponsors enter the closedend fund market with new investment mandates and structures.
6%
5%
10%
41%
38%
Only 1 fund
2-5 Funds
6-10 Funds
11-15 Funds
15+ Funds
* Data Source: Antoniewicz, Rochelle and Erin Short. 2015. “The Closed-End Fund Market, 2014.” ICI Research Perspective 21, no.2 (April).
Available at www.ici.org/pdf/perf21-02.pdf. Data shown is as of calendar year end unless otherwise noted.
Closed-End Fund Services • 3
S P EC T R A :
MEETING THE FULL RANGE OF YOUR CLOSED-END FUND NEEDS
Spectra’s closed-end fund business services cover the full product scope. From initial public offerings to fund
administration to strategies involving tenders, mergers and liquidations, Spectra offers both component and
end-to-end support services.
Business and Infrastructure Services:
• Gap analysis: A detailed review of investment,
operational and governance capabilities.
• Review and analysis of investment capabilities
and market demand.
• Prepare a multi-year business plan, pro-forma
business budgets, break-even analysis at both
product and business level.
• Address unique financial, tax and accounting
implications for specific products, as necessary,
and vet with accounting firms involved.
4 • Spectra Professional Services
• Work with and lead or assist the internal
compliance teams in designing and
implementing a comprehensive compliance
program.
•Provide board construction support and
build a ‘40 Act governance and compliance
infrastructure.
• Evaluate and select the right service providers,
including the design and implementation
of RFPs as well as creating the right vendor
oversight model.
The IPO Process:
Post IPO Secondary Market Support:
• Product development: Work with the investment
team to design and develop viable CEF products.
• Develop an effective strategy to support the
closed-end funds in the secondary market.
• Lead and coordinate the initial public offering
process, including registration statements,
underwriters’ due diligence process, and exchangerelated issues.
• Consult on ongoing best-practice issues related
to closed-end funds, including distribution
strategies, discount management, regulatory
issues, communications.
• Assist management in getting product approval
and investment management contracts approved
by fund boards.
• Work with market makers and exchanges to
ensure orderly trading patterns.
• Develop IPO marketing and sales strategy and
materials, which may include working with
underwriters and wholesalers.
• Provide regular industry updates and board
education.
• Assist in negotiating the most favorable forms of
leverage at the most advantageous terms; coordinate
all work with the rating agencies, if applicable.
• Design a comprehensive pre-IPO communication
plan and establish the foundation for an effective
post-IPO program.
• Consult on risk and crisis management.
• Develop strategies for, and provide support in,
managing activist shareholder relationships.
• Support your CEF infrastructure by providing
component or end-to-end services.
K E Y CO NSID ERATIONS FOR N E W S P ON S ORS
Investment capabilities: Do you have expertise and a demonstrated track record in a specific investment
mandate? CEFs may be a good way for you to access retail investors. Investment need: Is there a demand in the investor community for your investment capabilities
that can be quantified and targeted? Can you design a product around your
capabilities that is innovative and can be differentiated from the competition?
Distribution: The IPO market for closed-end funds operates in an advisor-sold distribution
model. Do you have access to, and have the relationships with, major
investment banks, underwriters, selling syndicates, wholesalers? How do
you go about establishing and maintaining those relationships to achieve
“critical mass”?
Infrastructure: Do you have an existing infrastructure that can support all aspects of a CEF
business, including its unique demands? What is the optimal model for your
organization: building a CEF infrastructure within your organization or
getting professional help outside of your organization?
Closed-End Fund Services • 5
ABO UT OU R PRINCIPALS AN D T H E IR E XP E RIE N C E
Closed-end funds have become increasingly complex and sophisticated over the past years, and our
principals have been at the forefront of the trend. Our principals have over 80 years of combined experience
in the asset management industry and have been instrumental in launching some of the most innovative,
complex and groundbreaking funds in the industry. We have experience in virtually all aspects of the
closed-end fund business, from conception to implementation, administration and oversight.
• We have built and managed one of the most
successful closed-end fund businesses in the
industry, encompassing firms such as Salomon
Brothers, Smith Barney, Travelers Group,
Citigroup Asset Management and, most recently,
Legg Mason, Inc.
• Collectively, Spectra principals were responsible
for the successful launch of nearly $6 billion
in closed-end assets covering a wide range of
complex product offerings, including domestic,
international and emerging markets taxable
fixed income funds, real estate investment
funds, MLP funds, limited-term municipals,
and corporate loan funds.
• We understand and have a demonstrated ability to
design complex accounting, compliance and tax
structures to support new and innovative products.
6 • Spectra Professional Services
• We have designed, implemented and managed
some of the most effective secondary market
and investor communication programs in the
industry. We have built and managed an effective
analyst program that resulted in increased
visibility and funds under rated coverage.
•Spectra principals have built and executed
custom, complex compliance programs for
sophisticated products, including guideline
monitoring, tax compliance, loan covenant
compliance monitoring and SEC Regulation
Fair Disclosure policies.
• We have extensive experience in dealing with
regulators, exchanges, legal counsels, accounting
firms, fund boards and virtually all other
participants in the closed-end fund market.
B R E N DA G R A N D E L L
GEORGE BETZIOS
KAPREL OZSOLAK
Brenda Grandell is a principal at
Spectra. Prior to joining Spectra,
Ms. Grandell was the Director of
Closed-End Fund Administration
at Legg Mason, Inc. Ms. Grandell
has developed and managed two
of the largest and most successful
closed-end fund complexes in
the U.S. She developed Legg
Mason’s closed-end fund business
following the firm’s acquisition
of Citigroup Asset Management.
Prior to joining Legg Mason,
Ms. Grandell built and managed
Citigroup Asset Management’s
closed-end fund business, which
included well-known brands such
as Salomon Brothers, Travelers
and Smith Barney.
George Betzios is a founding
partner at Spectra. Mr. Betzios
began his career in the fund
industry with National Securities
and
Research
Corporation
(National Funds) as a systems
programmer. He acted as Head
of Information Technology and
then Head of Operations. Mr.
Betzios subsequently accepted a
position as Head of Mutual Fund
Operations for Salomon Brothers
Asset Management. Through
various mergers and acquisitions
he continued as Director of
Mutual Fund Services and
Transfer Agency Operations for
both domestic and international
operations at Smith Barney Asset
Management, Citigroup Asset
Management and most recently
at Legg Mason, Inc.
Kaprel Ozsolak is a founding
partner at Spectra. Prior to
Spectra, Mr. Ozsolak was the
Chief Financial Officer of all 1940Act registered products for Legg
Mason, Inc. Mr. Ozsolak oversaw
all open-end and closed-end fund
administration and related product
and business functions for Legg
Mason. Mr. Ozsolak performed
substantially similar functions at
predecessor firms, Citigroup Asset
Management, Travelers Group and
Smith Barney Asset Management
since 1996. Mr. Ozsolak was
instrumental in and responsible for
the design, launch and oversight
of complex and innovative closedend products during his tenure at
Legg Mason. Prior to joining Legg
Mason and its predecessor firms,
Mr. Ozsolak was with Ernst and
Young, a global, top-tier accounting
firm providing assurance services to
clients in a wide range of industries,
since 1992.
In addition to building and
managing
closed-end
fund
businesses, Ms. Grandell has
experience in strategic planning,
marketing,
communications,
investor and board relations,
and relationship management.
Ms. Grandell has served on the
Investment Company Institute’s
Closed-End Fund Committee.
Ms. Grandell holds an MBA in
Finance from Stern School of
Business and an MA in English
from the University of Chicago.
She earned her BA from New York
University and has done additional
course work at Stockholm School
of Economics.
Ms. Grandell currently serves on
three non-profit health care boards
in New York City.
Mr.
Betzios
has
extensive
experience in vendor selection,
consolidation of shareholderservicing functions for both
onshore and offshore mutual funds
as well as the conversions and
oversight of multiple Section 529
programs. He has developed and
implemented several vendor and
service-level oversight programs
focusing on areas of risk with a
track record of reducing errors
while increasing performance and
service levels.
Mr. Betzios has served on the
Investment Company Institute’s
Operations and International
Operations Committees.
Mr. Ozsolak has extensive
experience in the areas of complex
investments, securities valuation,
service provider oversight, product
design, fund governance and
regulatory compliance.
He has been a member of the
ICI’s Treasurer’s Committee and
has been an active speaker and
panelist at several ICI and other
industry conferences in the asset
management field.
Mr. Ozsolak holds a BA from
Bosphorus University in Accounting
and Finance.
Closed-End Fund Services • 7
MO R E ABOU T SPECTRA
Spectra Professional Services, LLC (Spectra) was established in 2012 by Kaprel Ozsolak and George
Betzios. Kaprel Ozsolak was previously the chief financial and principal accounting officer of all registered
investment companies sponsored by Legg Mason, Inc. George Betzios was previously in charge of all
investor servicing and transfer agency functions at Legg Mason. Since its beginning Spectra has partnered
with senior consultants with extensive experience in the asset management industry who are available to
be deployed on projects as the needs arise.
Spectra provides a wide range of front, middle and back office consulting, project management and
staff augmentation services to various pooled investment vehicles, such as mutual funds, hedge funds,
unit investment trusts, exchange traded funds (ETFs), closed-end funds (CEFs) and Section 529
college savings plans.
Unlike larger “corporate” consulting firms, Spectra is narrowly focused on a sector where the principals
have over 80 years of combined experience. We understand the “big picture” and yet are equally well
versed in the details. This allows Spectra to be nimble and step in quickly to meet the needs of its clients.
We differentiate ourselves by being able to “hit the ground running” on any project or assignment, without
the need for retraining or orientation. This unique ability resonates with our clients very strongly, as it
substantially cuts the lead-time a typical consultant requires before they start adding value.
Our business is built on our extensive industry knowledge and contacts, knowledge of systems and platforms
servicing the asset management industry, and our ability to deliver to our clients’ highest standards. From
the very start, our reputation and industry contacts have provided us with a growing roster of distinguished
clients in the investment management industry.
8 • Spectra Professional Services
SP EC TR A :
SELECT EN GAGE ME N TS
• Large institutional adviser:
• Large global investment adviser:
Oversight of six institutional funds, including
ongoing oversight of the service provider and all
administrative functions. We also worked to find a
liquidity solution for these funds, allowing significant
savings in the cost of maintaining these funds.
We assisted the treasury department in modifying
its fund distribution policies to a more manageable
“pay as you go” model from the then-current
estimation process.
• Mid-size full-service adviser/third party service provider:
We provided assistance with shareholder reporting
and communications, board reporting and
governance support over multiple reporting cycles.
We provided business development services to a
client that resulted in them winning the program
management services for a state 529 college savings
plan. We currently provide client relationship
management, board reporting and governance
support, project management for accounting and
investor record-keeping conversions as well as
design and implementation of an ongoing oversight
plan for all their services.
• Mid-size closed-end fund and institutional adviser:
• Leading global investment adviser: Retained to conduct an analysis and provide a
written recommendation of current and comparably
available 529 plan recordkeeping systems. Scope
of project included an RFI, vendor analysis, and
capability matrix of systems relative to plan sizes.
• Leading global investment adviser: • Large global investment adviser: Support and coordination of shareholder letters:
We oversee the professional writer retained by the
firm and coordinate all efforts from reviewing the
letters, aggregating and addressing of all comments
and running the letters through compliance approval.
Retained to provide support and coordination
of closed-end fund IPO. Consulted on product
development, listing, underwriters, due diligence,
marketing and roadshow materials, and sales training.
• Highly rated Section 529 college savings plan:
Conducted studies for boards of directors focusing
on institutional use of closed-end funds and
asset allocation models of major broker-dealers.
Presented results of institutional usage study to
boards of directors at due diligence meeting.
We provided various consulting services including
NAV calculations, performance reporting,
operational design and change management,
organizational review and workflow management.
After our initial engagement, we were selected and
retained for an eight-year term as the operational
consultants to the plan.
• Leading global investment adviser: We designed the oversight model for a new and
highly complex registered commodities fund. In this
complex project, we worked with all stakeholders,
including legal, portfolio management, middle/
front-office, trading operations, compliance and
the third-party administrator.
• Large global investment adviser:
• Large global investment adviser:
Retained to develop relationship management
role with global institutional shareholder base and
domestic broker-dealer community, including
research analysts. Scope of project included analysis
of shareholder base and expanded use of client
relationship management tools to provide seamless
global relationship management coverage.
Closed-End Fund Services • 9
Spectra
Professional Services
BRENDA GRANDELL
G EO RG E B ETZIO S
K A PREL OZSOLAK
[email protected]
347.662.2408
[email protected]
347.662.3055
[email protected]
347.662.3050
Closed-End Fund Services
Product Development
Investor Relations
Relationship Management
Communications
Business Development
Investor Servicing
Transfer Agency
Recordkeeping
Section 529 Plans
Sales Reporting
Business Development
Fund Administration
Treasury
Financial Reporting
Closed-End Fund Services
Section 529 Plans
Business Development
Principal
Partner
Photo Credits: © Necati Ufuk Baskir Photography • www.baskir.com
Partner