An emerging hub for the hedge fund services market
As hedge funds have become a growth area for the North American marketplace, Toronto has emerged as the Canadian hub for the industry, thanks to its stable business environment, supportive regulatory framework and favourable conditions for growth.
For its part, the Canadian government has been supportive toward the growth of the hedge fund industry, having done their due diligence to help ensure that investors are protected and that the right conditions remain in place to preserve the stability of the environment.
Toronto is benefiting in particular from the trend among institutional investors to adopt hedge fund or hedge fund-like strategies. Many of the market's leading service providers, including RBC Dexia Investor Services, have undertaken considerable investment in this area, demonstrating their commitment to new markets, investment structures and risk management capabilities. This type of investment and commitment will
continue to be vital as these providers seek to keep pace with the hedge fund community and service the needs of their clients - not only today but for years to come.
As the industry becomes more institutionalised, hedge funds will continue to look for providers who are willing to partner with them in terms of development. For example, many managers are not planning to develop a full risk management capability in-house. Instead, they might opt to outsource such functions to specialist service providers, who can offer the infrastructure necessary to manage their risks in the proper fashion. Many institutional investors these days see tremendous value in the additional comfort provided by a thirdparty compliance offering.
In addition to Toronto, RBC Dexia Investor Services provides hedge fund services in markets including rapidly developing offshore hubs such as Dublin, Luxembourg, Cayman and the Channel Islands. Each centre has some unique advantages for the clients they are looking to service. The key characteristics of Toronto are its regulatory framework, proximity to the U.S. and the requirements of the underlying investors - including a gradual shift as retail mutual funds move into the alternative investments field.
As regulators become more accommodating toward this move by retail asset managers, there will continue to be a blurring of the lines between what used to be quite distinct investment classes. This evolution of the client base is also likely to drive a high level of growth within the next five years, and together with the increased involvement of institutional investors, this is likely to fuel the development of larger and more institutional hedge fund managers. Retail and institutional investors alike are looking for the stability and infrastructure that only a large market player can bring to the table.
At the same time, investors such as trustee boards are looking for the reassurance of solid third-party service providers, particularly in critical areas such as risk management and compliance. They also want to be sure that their providers will be ready to undertake the kind of development and infrastructure build required to enable them to deliver as the market evolves and matures.
By Mark Fieldhouse Mark Fieldhouse is director of technical sales and relationship for global products with RBC Dexia Investor Services in Toronto
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