Growth in the hedge fund market continues to increase and Cayman remains the leading jurisdiction for fund registration.
Growth in the hedge fund market continues to increase and Cayman remains the leading jurisdiction for fund registration. The 25-30% growth per year we have seen over the last three to five years continues to present challenges in terms of staffing, infrastructure, and meeting additional demands from the institutional investors who are driving hedge fund growth.
The larger an administrator, the more scalable they are. A new mandate can require adding as many as 10 people to a team, which would present a great challenge to a small firm. Our size allows us to take on a mandate by moving some experienced people into new roles and growing a team from there.
This is an industry with high staff turnover. As accountants become more highly trained and sought after, they can move into the more lucrative world of the hedge funds themselves. Cayman also suffers, as do other offshore jurisdictions, from the additional pressures on ex-pat staff with families to move home. So clearly there is an issue in both growing the number of accountants and replacing those who leave.
Despite a global shortage of accountants, UBS continues to attract talented staff to Cayman and our retention rates are better than most in the industry. We are fortunate that our name helps us to attract talent. Our business model, with a single point of contact for clients, gives our accountants real ownership and allows them to build client relationships, giving them increased job satisfaction which in turn helps our staff retention rates.
Cash and position reconciliations can require large teams of people. We are currently in the process of opening an office in Krakow to take on more of this work, reducing the pressure to recruit so many qualified accountants and provide efficiency savings. This will further enable us to grow our Cayman business in a responsible and efficient manner.
We are seeing increasing demands from institutional investors in their reporting requirements as well as the need for fund administrators to demonstrate SAS70 compliance. We are also experiencing an increasing number of due diligence visits from investors and clients who are coming to Cayman to see the operation in practice.
In addition to increased demands from investors, the role of accountants is growing more complex. Fee calculations have always been complicated; dealing with various currencies and hedging techniques is another area of increasing complexity; and now, managers are looking into the darker corners for new ways of finding alpha and are trading ever more esoteric instruments.
Almost daily a new type of instrument is traded. Having to price these instruments and re-model portfolios is one of the biggest ongoing challenges for fund administrators.
Cayman remains the jurisdiction of choice for hedge funds, and UBS is well positioned to grow with the industry over the next few years.
Darren Stainrod is head of Fund Services for UBS Global Asset Management in the Cayman Islands and Jennifer Collins is head of business development and client relationships for Fund Services in Cayman.
