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By Ben Watford, Eversheds Sutherland – Selecting the fund domicile which best suits an emerging hedge fund strategy is one of the key decisions facing investment managers ahead of launch. The choice they make at the outset will have far reaching regulatory and tax consequences throughout the life of the fund.
Law firm Eversheds Sutherland notes that in making this choice, a manager needs to take into account the preferences and location of the fund’s seed and target investors. Historically, hedge fund managers have favoured offshore, low tax jurisdictions like the Cayman Islands, but more recently the dedicated fund vehicles
In the current challenging capital raising environment, emerging hedge funds need to juggle a number of priorities, including having a clear business plan and building a strong track record. But a key element in determining a start-up hedge fund’s fate is keeping a close eye on expenses.
“You want to keep your expenses under control, because if these are too high, then your performance comes under pressure,” explains Joris Groot, Business Development Manager Europe, Circle Partners.
He says cost needs to be considered in several crucial decisions start-up hedge funds need to make, for example choosing their service providers. “They can
Emerging hedge funds risk getting lost in the melee as large investment banks streamline their service offerings. Banks are tightening their fees and raising restrictions on clients which is leading to smaller and start-up hedge funds being left in the lurch.
In response to this quandary, the market is seeing a shift towards firms leveraging the services of specialist third party administrators who enable emerging hedge funds to cost-effectively scale their back-office functions while maintaining operational agility.
“We are seeing the emergence of an increasingly underserved sector of the market; start-up entities or those with assets of less than EUR150
Hedge funds looking to launch in Europe should be selective in their infrastructure investment, identify credible target client groups and understand the importance of concise marketing material which clearly outlines their unique selling point.
Cowen’s London-based prime brokerage and cap intro team outline some of the challenges emerging hedge funds may face. Colin Bridges, Director, suggests that “funds often try to do too much too soon. They can spend many thousands of dollars on an institutional grade setup for Day One, but if they’re just managing friends and family money, that may not necessarily be needed up front. Having the ability
By A Paris – The European hedge fund industry ended the year with USD486 billion in assets under management. The largest portion of these funds were domiciled in the Cayman Islands. Luxembourg was the next most prevalent jurisdiction, which highlights one of the key decisions start-up hedge funds need to make ahead of launch – that of domiciliation.
Despite experiencing outflows over the course of 2019 and navigating a challenging capital raising environment, last year saw the number of launches in the European hedge fund market outpace the number of closures for the first time since 2014, according to data from Eurekahedge.
By Mike Cumming Bruce, Senior Associate, and Andrew Flynn, Associate, both at law firm Cooke, Young and Keidan – Imagine that you are the boss of a hedge fund that has outsourced all of its core analytical functions to a highly sophisticated AI-driven system and, in doing so, have generated market-beating returns for a number of years.
Extreme market movements, in all directions, are driving market participants to use high speed strategies to keep pace. Demand for Avelacom’s low latency network has seen unprecedented growth, with a 35 per cent increase in volume of data transferred between exchanges in March. Demand from FX and cryptocurrency trading clients is particularly significant.
High speed strategies from banks, hedge funds, asset managers, broker dealers and proprietary trading firms all require high speed price discovery and immediate execution to take advantage of any price movement. Low latency global networks with best-in-breed hardware and sophisticated routes, such as provided by Avelacom on
H2O Asset Management, Bruno Crastes’ discretionary macro hedge fund firm, has written to investors to offer its “sincere apologies” for “significant” risk-adjusted losses this past week.
“If 2008 was a liquidity crisis, 2011, a volatility crisis, and 2016, a convexity crisis, 2020 is a combination of the three previous shocks,” H2O said in a client letter this week following the recent stock market collapse.
Its flagship fund H2O Adagio, which invests in sovereign bonds, credit and currencies, has shed more than 15 per cent since the start of the year, reversing last year’s 7.6 per cent annual gain.
Meanwhile, H2O
Exchange Data International (EDI)m a provider of global security corporate actions, pricing and reference data services, has launched a flexible volatility dataset series. The buy-side, sell-side and their service providers have been prompted to take advantage of opportunities in the markets and recalibrate pricing and risk models in order to properly value and hedge portfolios due to last week’s significant volatility across the global financial markets.
Jonathan Bloch, CEO of EDI, says: ”We have pulled together volatility data from across asset classes so that professional investors can receive a holistic view of what is happening in the financial markets. Volatile markets
Rhenman & Partners Asset Management, the Stockholm-based hedge fund firm which invests in global healthcare stocks, says the industry has not been shielded from the impact of Covid-19 – though different sub-sectors have been impacted in markedly different ways.
The Rhenman Healthcare Equity Long/Short Fund – which trades a range of small, medium and large pharmaceuticals, biotechnology, medical technology and service company stocks – fell more than 3 per cent during February, as the market reversal on the back of the Coronavirus outbreak began to bite. The USD700 million strategy, which launched in 2009, returned an eye-catching 40 per cent
