Global Wealth Management has launched an offshore trust company that will facilitate hedge fund holdings within international pension schemes.
Tim Trudgeon, Managing Director of Global Wealth Management, a London-based structured finance firm, said: "Our clients have repeatedly told us that they wish to hold hedge fund shares and property within their International Pension Schemes, with access to a banking facility to leverage against the value of the shares. The fact that the Global Wealth Management Trust Company (Jersey) Limited is able to meet this demand will be of direct interest to City firms with foreign domiciles on their payroll and their financial advisors."
The launch of Global Wealth Management Trust Company (Jersey) Limited (GWMTCJ) sees the establishment of a concept known as the Managing Trustee for use with a new occupational international pension scheme trust.
Trudgeon, said: "The concept is straightforward. Global Wealth Management Trust Company (Jersey) Limited appoints counterparties on rolling six-month contracts. What makes the business model of the Global Wealth Management Trust Company (Jersey) Limited unique, and the implication of this launch so significant, is that this approach to counterparties also includes the actual trust company, hereafter referred to as the "Managing Trustee."
The key difference between the Global Wealth Management Trust Company (Jersey) Limited and existing trust companies is that existing trust companies only seek to replace traditional counterparties such as actuaries and brokers as part of their general management activities. Trudgeon said: "For obvious reasons, trustees don't tend to tell clients they will replace themselves if the client is unhappy. Our new approach changes that."
The target markets for GWM's Managing Trustee service are:
* New UK Inland Revenue approved International Pension Schemes
* Transfers of existing International Pension Schemes established by hedge funds and investment banks to dedicated international pension transfer trusts.
Trudgeon said: "We believe our "Managing Trustee" concept is a first for the pension sector, delivering exactly what our clients have told us they want. That means the ability for individual pension scheme members to hold hedge fund shares, obtain leverage and access a trading platform."
Trudgeon added: "For far too long many providers of offshore trust services have not been subject to regular scrutiny, meaning that clients have reluctantly been forced to accept trustee arrangements that are inflexible, lacked transparency and are expensive. Those days are coming to a close."
The International Pension Market, which is built on an approved offshore pension trust for non-UK domiciled UK tax resident staff is a huge market concentrated primarily in London. Annual member contributions are estimated at GBP 500 million per annum, with funds under management of many billions.
Trudgeon said: "Our entry into a market worth an estimated GBP 500m per annum and concentrated around the City of London with a pension trustee service designed specifically for the investment banks and hedge fund sector means it is inevitable that many existing pension trust providers will need to re-evaluate the quality of their service."
Transparency of fees is an area where Global Wealth Management Trust Company (Jersey) Limited believes it offers clients a distinct advantage. Trudgeon said: "There is a culture within many firms of implicit fees and soft commissions. We are adamant that there must be explicit fees with no soft commissions being applied by any counterparty. Non-disclosure of fees by any of our counterparties would certainly cause us to re-assess our on-going relationship with them."
The Global Wealth Management Trust Company (Jersey) Limited aims to have an entirely flexible approach to the appointment of counterparties such as banks, stockbrokers and custodians who will act on behalf of each client. A key point for scheme members who are usually senior City staff is that this new approach will allow the trustees to hold hedge fund shares, property and to permit leverage within individual accounts.
Trudgeon noted: "As most of the hedge funds are seeded with staff from the investment banks, those that are foreign domiciled have a deferred International Pension Scheme they will wish to transfer (often using the funds to invest in their start-up) and most will want a new International Pension Scheme at their firm for their own use and to attract/retain staff. The selection of a back office and trading platform means that we can accommodate that, which gives us a unique advantage."
In order to maintain its complete independence, directors of the London office of GWM will not accept positions within the offshore trust company. Director and non-executive director appointments will be announced shortly.