Low-cost solutions for emerging managers
By Phil Griffiths – JP Fund Services was launched in 2007 as the first company in the JP Fund Group and is focused on assisting investment managers to create their own funds. We identified a niche in a market where smaller players were not well catered for, if at all – larger, higher profile service providers weren’t interested in funds of less than USD40m to USD50m.
We saw an opportunity to establish alternative investment funds using segregated portfolio companies in the Cayman Islands, which we create together with a Cayman law firm. Each segregated portfolio is a fund in its own right, but the economies of scale of SPC structures allow managers to get started with as little as USD3m in assets. The first such fund was launched in 2008, and today the total launched is around 100.
The time when JP Fund Services was established turned out to be a very good point to start the business, paradoxically given that the past four years have been extremely tough for the investment industry and that hedge funds lost a significant portion of their assets under management in 2008-09.
In this environment, without low-cost opportunities to set up in business, many managers would not have started. We identified the potential of a number of very good traders who wanted to start their own funds, and while we didn’t make much money setting up structures for these managers, as they have grown, developed track records and attracted more assets, we have also benefited. Obviously not all are successful, but enough of them are to vindicate our business model. Some managers who started out with us running a few million dollars now have several hundred millions under management.
It also helps that investors have noted recent studies confirming the view that as a rule, new managers tend to outperform longer-established ones. Funds with lower assets under management have proved more nimble, especially in the recent volatile and turbulent markets, because they can unload their positions and reverse direction quickly if necessary, whereas larger funds are less flexible and potentially may move the market against themselves.
JP Fund Administration (Cayman) Ltd carries out all fund administration and accounting work, including NAV calculation, fund accounting, audit preparation and shareholder services, while JP Fund Services SA is the group’s sales and marketing arm operating out of Nyon in Switzerland. JP Funds Foundations, another Cayman-based company, establishes cost-effective fund structures, with legal compliance assured by external counsel including Ogier in Cayman, Morgan & Lewis in Chicago and Macfarlanes in London.
In addition to SPCs, we also establish stand-alone funds and master-feeder structures to accommodate US investors. The group offers services for investment managers including foreign exchange hedging facilities, cash management, and promotional functions to keep funds in the spotlight, for example ensuring they are registered with Bloomberg and providing up to date information to platforms like BarclayHedge.
Over the past few years the group’s clientele has expanded significantly from its initial concentration in Switzerland to other countries including the UK, Germany, France and Slovenia, the US, Brazil, Mexico and Canada, and most recently Singapore. The majority trade assets such as long and short equities, equity derivatives, futures or foreign exchange, but an increasing proportion of the business is private equity. We also have property funds and more innovative strategies such as legal financing in the UK.
Phil Griffiths is director of JP Fund Administration (Cayman) and chairman of the JP Funds Group
Please click here to download a copy of the Hedgeweek Special Report: Cayman Islands Hedge Fund Services 2012
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