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Seeing the fruits of the Approved Manager regime

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According to the Q3 statistical bulletin published by the BVI Financial Services Commission (FSC), the islands’ financial regulator, a total of 27 limited partnerships were recorded in Q2 2014 compared to 16 in Q2 2013. That figure rose in Q3 to 36. 

This is good news for the jurisdiction as it suggests that demand for GP/LP structures among private equity managers remains strong. Indeed, the BVI remains highly favoured among asset managers in emerging markets, not least Chinese asset managers looking to incorporate special purpose acquisition companies (SPACs) in the BVI. 

Drake Fund Advisors is a specialist emerging markets fund administrator. Over the last 12 months, the firm has enjoyed considerable growth. According to Executive Director Nicolaas Faure (pictured), Drake’s AUA grew from USD900m at the end of 2013 to approximately USD1.3bn currently, breaking through the all-important USD1bn barrier.

“The BVI GP/LP structure is popular with Chinese managers. We hope to increase the level of business we do with them this year. We are currently visiting Shanghai on a quarterly basis and plan to be one of the first administrators to market our BVI fund administration services in China. With the recent listing of Ali Baba in the US we have seen listing activity gathering momentum,” says Faure.

Drake has seen its fund numbers climb some 40 per cent year-on-year: from 55 at the start of 2014 to the mid-70s as of today. 

“According to the regulator’s numbers, Drake has about a 20 per cent of the Approved Manager market,” says Faure. “As an administrator, we have always focused on the start-up market. The BVI as a jurisdiction is still a very good all rounder for new managers. It is a well-regulated jurisdiction available at an affordable price and we’ve taken on 18 new fund clients over the last 12 months. We are certainly beginning to see the benefits of the Approved Manager regime as an excellent tool for drawing fund business into the jurisdiction.”

Another aspect that has helped Drake to attract new managers is the fact that it runs its own Segregated Portfolio Company (SPC). The Drake BVI Platform gives start-ups the opportunity to run a segregated portfolio without the cost burden of establishing their own full-blown fund structure.

“We had a couple of sterling performers in 2014 and a couple of large sign-ons. One client alone brought with them USD250m. The client is primarily focused on Europe and runs a series of segregated portfolios spanning fixed income, equities and long-only strategies,” states Faure. 

Strategically, Drake Advisors has also been able to build its reputation by entering into quasi-joint venture relationships with other administrators looking to get a foothold in the BVI but for whom the timing is not quite right; perhaps due to licensing costs and the costs of setting up a physical presence on the islands, or because the funds they are working with are too small. 

“We spent a number of years concentrating on internal systems and controls, allowing us to operate at similar levels to our competitors in jurisdictions within the EU, but doing so from a cost-efficient base. We are now able to operate alongside the very large administrators, offering an identical service, but with the benefit of actually being in the jurisdiction where the majority of their funds are domiciled,” concludes Faure. 

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