MULTI-CENTRE HEDGE FUND WORLD
CHANGING MARKET DYNAMICS AND THE
European domiciles are increasing in importance but the traditional offshore centres continue to thrive, as George Sullivan explains.
The hedge fund space is experiencing signifi cant change and
innovation due to ongoing investor needs and the evolving post- crisis regulatory framework. This transformation has sparked debate about which hedge fund domiciles will emerge pre-eminent in the new environment. The renewed and urgent search for returns may drive a resurgence in traditional centres as hedge fund managers seek to develop more innovative products. Or, the rise of hedge fund-style funds within the Undertakings for Collective Investment in Transferable Securities (UCITS) and other onshore frameworks could drive growth in European distribution centres versus other traditional offshore centres, such as the Cayman Islands, that have typically held sway in the sector.
Ultimately, hedge funds are becoming increasingly multi-centred,
like the broader banking world. Investors will benefi t from the sheer variety of options available in this space, driven by the fl exibility provided by multiple jurisdictions and rapid innovation.
70 CAYMAN FUNDS | 2012
Interest in alternatives With the hedge fund industry’s growth comes investor interest.
In a survey of pension fund, endowment, foundation and insurance investors in North America, Europe, Japan and Australia, participants reported that they planned to boost their allocation to alternative investments proportionately by more than a third by the end of 2012, from 14 to 19 percent of their total portfolios. Another survey found that fully two-thirds of investors polled intend to increase their allocations to alternative assets—including hedge funds, private equity and commodities—over the next 12 to 24 months.
According to Hedge Fund Intelligence, UCITS alternative assets
were $113.3 billion at the end of 2011, up 25 percent from 90.5 billion in December 2010—underscoring the rate of growth in the European onshore sector. European centres such as Dublin and Luxembourg have benefi ted from the trend for regulated hedge fund-type funds,
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