Our perspective on the hedge funds sector in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Jersey is perhaps different from those of most of our competitors. Standard Bank is an emerging markets bank, with offices and activities in many locations around the world, and is active in trading in areas such as commodities, energy and emerging market debt. These factors have prompted the establishment in Jersey of a number of funds that invest in these markets, commodities and instruments, many of them in recent months.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
These funds are active in a broad range of markets such as Eastern Europe, Africa, the Far East and Middle East. Hedge fund is often a misunderstood term, but many of Standard Bank's Jersey-based funds have performance fees, use leverage and deal with prime brokers, all characteristics of what are usually called hedge funds, while some of them also use short-selling.
Our alternative asset-based funds include, unusually, a trade finance fund that invests in short-term trade finance paper, backed by physical goods of which the fund can take control in the event of default. In total, Standard Bank has some eight funds that can genuinely be called hedge funds, with about USD500m in net assets.
This activity gives Standard Bank in Jersey an insight into the needs in particular of start-up managers who are coming to the island in increasing numbers. This trend is being encouraged by the attitude of many hedge fund administrators in Dublin, which already have well established and mature businesses and seem to prefer dealing with only the bigger and more established managers. By contrast, Jersey service providers prefer to grow along with their clients.
At the same time, Jersey benefits from its flexibility and willingness to accommodate a variety of business models. Some providers here, for example, outsource their administration activities to operations in Dublin. Standard Bank Fund Administration would be happy to deal with a fund whether it wanted the administration to be carried out on the spot in Jersey or preferred to have some aspects of its business outsourced elsewhere.
But equally, we can help a hedge fund manager starting from scratch to get its business underway, assist in integration with prime brokers, and provide aspects of a physical presence such as office space and administrative or payroll services. This is only one of the business models currently available in Jersey, but offering a one-stop shop is an important marketing tool for the island at the moment. Managers can obtain a full range of services from a single provider or pick and choose if they prefer.
It's important to remember that while hedge funds may be the buzzword today, both at Standard Bank and in Jersey we have experience of these types of investment going back many years. In this respect, one of the most important aspects of the launch of the Expert Funds Guide last year was in reminding people that you can in fact do hedge fund business here, and that some people have been doing so for quite a long time. It's not as though Jersey has suddenly leapt onto the bandwagon.
By Peter Hart and Andrew Bennett
Peter Hart, Managing Director,
Standard Bank Fund
Andrew Bennett, Director,
Standard Bank Fund