By Mara Spencer (pictured) – The hedge fund industry is getting more bifurcated: whilst it’s true that the majority of investor capital is flowing into billion dollar hedge funds, who in turn are being administered by the big players – Citco, State Street – there’s definitely a lot of advantages to being niche, both on the fund side and the administration side.
Returns in 2011 from some of the larger hedge funds were not exceptional. Investors realise that there are plenty of compelling boutique funds out there worth investing in with the potential to outperform their larger peers. Being a small administrator, ACE Fund Services is in a good position to support new, emerging managers keen to minimise costs in the early stages of developing a track record.
ACE Fund Services was established in the BVI in 2008 and in many ways characterises the islands’ administration industry: reputable, diligent and independent. Our portfolio is small, yet diverse. In 2008 ACE was focused more on European managers. However, in light of Europe’s problems in 2011 we’ve seen increased interest from emerging markets in Asia, in addition to South America because of the links our parent group has there. A lot of the developing countries like India, South Africa etc, are looking at the advantages of investing through offshore fund structures – that’s where we see new growth coming from.
The first three years for, say, a USD20million fund are crucial. For larger administrators that’s probably too small. You have to be able to show a track record and keep costs contained to sell it to investors. ACE Fund Services can be cost flexible and that’s what managers, new and existing, are increasingly looking for in their administrator. Whilst we provide administration services to funds of all sizes, some of our recent mandates have been start-up funds.
Luckily, being a small administrator we’re not burdened with large overheads. This allows us to work closely with clients in terms of meeting their cost objectives and keeping their administration and back office costs down.
This has worked to our advantage, particularly in today’s global economic environment where people are more cost conscious. It’s also one of the BVI’s key benefits. We’re a cost-effective jurisdiction and to be honest I don’t think people know about the BVI as well as they should. Emerging managers today want to know where they can get good value without having to overpay and the BVI is the place.
ACE Fund Services is a cost-efficient administrator operating in a cost-efficient jurisdiction.
This year BVI has been actively promoting its fund products by presenting international forums and I’d like to see that continue in 2012. Against the current economic backdrop, with hedge fund managers and investors keeping a close eye on costs, now is the perfect time to promote the BVI. We have the legislation, the product and it’s cost effective.
Global transparency in the industry is far greater post-08, which we welcome. However, the key thing for the BVI, in my view, is to keep it practical. You have to make sure that transparency stays at a commercially practical level to meet international requirements.
Collectively, we have to champion the BVI to attract exciting new funds in 2012. For investors, big is not always beautiful: nimble funds with compelling strategies are just as important to the industry as the branded heavyweights. Equally, independent administrators are just as important as their tier one global peers.
Mara Spencer is the manging director of ACE Fund Services BVI
Please click here  to download a copy of the Hedgeweek Special Report: BVI Hedge Fund Services 2012