Offshore structures gather momentum
The funds business in Latin America is a high-growth area with many foreign entities taking a keen interest in opportunities available in the different countries throughout the region. The last year has been a difficult one for hedge funds as a whole, with funds having to restructure their portfolios and the terms of the offering of fund shares to investors to deal with the credit crunch. Some strategies have performed far better than the others particularly those in emerging markets. One of the key emerging markets is Latin America.
Latin American managers with onshore funds and proven track records have started using offshore fund structures to enhance investment opportunities for international investors and institutions. International investors have been attracted by the healthy returns from Latin America notwithstanding the global financial crisis.
Offshore mutual fund structures in fund domiciles such as the British Virgin Islands have become increasingly popular with the hedge fund industry in Latin America. Latin American managers have started using regulated offshore fund jurisdictions, such as the British Virgin Islands, as they have begun to appreciate the benefits of using these structures, attracted by the simplicity of the formation and licensing process, and the availability of high quality service by providers. Offshore fund structures in regulated domiciles tick all the boxes in terms of flexibility, transparency, and compliance. These structures comply with the promoter and manager's domestic legal requirements in their respective countries.
Latin America is in an excellent position to develop its fund business domestically and internationally. In recent years Argentina, Brazil and Mexico have taken advantage of blossoming opportunities in their markets and economies to appeal to both local and international investors alike. Latin American managers have raised both their profile and credibility as a result of solid returns to their investors. The stabilization of markets and regulation of stock exchanges in Latin America has played a crucial role in the development of fund business. The use of offshore funds has enabled Latin American managers to raise their profile by exposing them to a global audience of international investors.
Increasing competition has raised the bar across Latin America with successful domestic managers following the lead of their international peers into offshore fund structures in order to gain access to a broader international market.
Early forecasts for 2009 suggest that funds with strategies investing in Latin America will be better positioned for continued growth notwithstanding the global recession. Latin American countries which have not to date been active in the hedge fund business, will follow the example of managers from more progressive Latam jurisdictions exploring new opportunities and evaluating the advantages of offshore fund structures as a way to diversify their local investments and to take advantage of external capital for investments
Latin America has tremendous potential for growth and offers significant opportunities in funds that will appeal to international clients seeking long term investment.
Mara Alido Spencer, Managing Director, ACE Fund Services
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