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ANNUAL OFFSHORE HEDGE FUNDS ADMINISTRATORS SURVEY
 
The table below presents the results of our annual offshore administrators survey which encompasses over 2,000 single manager offshore hedge funds with $240 billion in capital vs

The table below presents the results of our annual offshore administrators survey which encompasses over 2,000 single manager offshore hedge funds with $240 billion in capital vs. $175 billion last year. Asset growth came primarily from very strong performance in 1999, positive capital inflows, and an increase in the number of funds, including an explosion in new ventures out of London. Offshore administrators have seen a parallel growth in their revenues and have also had to significantly boost their investment in people, technology and infrastructure to cope with the demand for increasingly sophisticated third party administration services. Offshore administrators have beefed up their on-shore presence, be it in New York, Boston, London or Toronto, to better service offshore hedge funds as well as to expand their growing business in servicing domestic funds. Factors behind the increased sophistication include the growing interest from institutional investors which require more timely and transparent information. Also adding to the administrators' work load is a trend toward multiple prime brokerage relationships which help diversify counter-party risk, permit the use of specialist prime broker boutiques and improve access to IPOs. Administrators have also had to cope with additional due diligence on the part of investors in the wake of a handful, but well publicized, number of cases of fraudulent hedge funds with audits getting more detailed and involved than in the past.

Largest Third Party Administrators of Offshore Hedge Funds

Market share by number of funds

Market share by net assets

Citco

25.7%

27.3%

Fortis

14.3%

8.0%

Hemisphere

13.0%

10.5%

Bank of Bermuda

11.1%

13.4%

Olympia

7.4%

2.5%

Goldman Sachs (Cayman)

5.3%

8.8%

Int'l Fund Services

4.9%

4.0%

Int'l Fund Administ.

2.7%

2.2%

Trident

1.7%

1.3%

Admiral

1.7%

0.6%

Prime

0.8%

1.5%

Others

11.4%

19.9%

Source: HFN proprietary research on over 2,000 offshore hedge funds with total reported capital of $240 billion.

As we noted in prior years, the Caymans have continued to strengthen their position as the preferred jurisdiction for incorporating offshore hedge funds. For the first time since we have been sampling this data, the Caymans have captured more than half of new offshore hedge fund incorporation activity. New concerns have arisen in the offshore hedge fund community after the release of a report last June by the Financial Action Task Force of the OECD identifying a 15 countries as "non cooperative" jurisdictions in the fight against money laundering. Following the publication of the report, Bermuda, the Cayman Islands and others agreed to cooperate in a global crackdown on tax evasion by the OECD. As a result, administrators have been more sensitive to existing anti-money laundering and "Know Your Customer" type regulations. When bank transfers do not originate from an acceptable jurisdiction, investors are routinely asked to provide additional documentation such as the identity of corporate directors and letters of comfort from banks which do operate in acceptable jurisdictions. A.B.

Jurisdictions of Incorporation

Overall Market Share as of 12/31/99

Market Share Among Newly Formed Funds

Cayman

42.3%

54.4%

BVI

34.6%

26.5%

Bermuda

11.0%

9.1%

Bahamas

6.1%

5.6%

Source: The US Offshore Funds Directory 2000 Edition.

 
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