Growth in start-ups spinning out of prop desks
Interview with Thomas Granger – Product planning continues to be of significant importance to hedge funds, according to Thomas Granger (pictured) – a partner with law firm Walkers, Hong Kong – and, along with strategic support, has been in high demand recently.
“Leading managers are being creative with structures and terms in order to differentiate themselves from their competitors. With Walkers acting for many of the world’s largest and most successful managers, we are able to advise on these trends as they emerge,” says Granger, who has extensive experience of the hedge funds and private equity markets in Japan.
Walkers’ Hong Kong office has been running since 2003 and is headed up by Managing Partner, Guy Locke. It is able to provide legal counsel to BVI/Cayman funds during Asian business hours and prides itself on its accessibility and responsiveness, in addition to being on the cutting-edge of market developments. Its Hong Kong general funds team advises clients running mutuals, joint ventures, unit trusts and private equity funds as well as hedge funds. Twenty lawyers work out of its Hong Kong office.
“We have a large team of hedge fund specialists operating from Hong Kong and also have significant litigation and restructuring capabilities on the ground here. This enables us to react and deal with urgent contentious issues which are relevant on a time-sensitive basis to fund managers based in Asia without having to refer back to our Cayman office,” explains Granger.
Hong Kong’s robust regulatory framework is globally recognised and supports the regulatory environment in the Cayman Islands, says Granger. Moreover, the turnaround times for licensing activity have significantly improved. “The general perception is that Hong Kong is overtaking other regional centres as the jurisdiction of choice for Asia-based investment managers,” he adds.
This perhaps explains the increased start-up numbers in Hong Kong. Currently the city owns approximately 25 per cent market share of Asian hedge fund assets and with the size and quality of start-ups improving, that percentage is likely to grow in 2011. Granger notes that managers spinning out of proprietary trading desks has meant that Walkers has experienced a “noticeable uptick in start-up fund activity” from such managers. He expects the trend to continue throughout 2011.
“The wave of high profile moves to Hong Kong in recent months by international fund managers and other well known names clearly demonstrates the importance of having a local presence here,” comments Granger, citing the recent trading licenses granted to Soros Fund Management and Paulson & Co.
Nevertheless, Hong Kong has room to improve. Although traditionally a base for managers with an Asian focus, the city hasn’t had a significant number of managers trading on a global basis in Granger’s view. This, he says, has made Hong Kong’s hedge fund market susceptible to swings in regional economies and markets.
“In order to better compete with New York and London, Hong Kong needs to ensure that it is an attractive location for hedge fund managers to base their global operations, perhaps through a combination of regulatory and tax incentives,” opines Granger.
As to what the rest of 2011 holds, Granger says that with most of the restructuring work that arose out of the financial crisis complete it’s been a busy start to the year, particularly regarding fund formation. “We expect the rest of 2011 to continue on the same track,” he concludes.
Thomas Granger is a partner with Walkers, Hong Kong
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