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ANNUAL OFFSHORE HEDGE FUNDS ADMINISTRATORS SURVEY
 

Largest Third Party Administrators of Offshore Hedge Funds

Market share by net assets

Market share by number of funds

# of fund administration offices (principal office)

Citco Fund Services

23.1%

16.5%

11 (Cura?ao)

Hemisphere Management

12.1%

10.7%

3 (Bermuda)

Fortis

10.2%

11.4%

6 (Cura?ao)

Bank of Bermuda

10.1%

8.5%

9 (Bermuda)

Goldman Sachs

8.7%

5.3%

3 (Cayman)

UBS (Cayman) Ltd.

5.4%

8.0%

1 (Cayman)

International Fund Services

5.4%

7.1%

1 (Dublin)

Olympia

3.1%

8.2%

4 (Bermuda)

International Fund Administration

2.5%

3.0%

3 (Bermuda)

Prime Management

2.1%

0.7%

1 (Bermuda)

Leeds Management

1.4%

1.4%

3 (Bermuda)

Daiwa Europe

0.9%

1.0%

1 (Dublin)

International Fund Managers

0.8%

1.3%

1 (Dublin)

Custom House

0.7%

5.1%

1 (Dublin)

Admiral

0.7%

1.7%

1 (Cayman)

Trident Trust Company

0.7%

0.8%

3 (Cayman)

PFPC

0.6%

1.8%

6 (Delaware)

SEI Investments

0.6%

1.3%

2 (Oaks, Pa)

Others

10.7%

5.0%

Source: HFN proprietary research on over 3,000 offshore hedge funds with total reported capital in excess of $340 billion.

In addition to our market share survey, the results of which are presented above, we asked offshore administrators to identify what they saw as the major changes in the offshore hedge fund business. They overwhelmingly pointed to the growing presence of institutional investors and their particular requirements in terms of information, standards and due diligence. At the same time, continued efforts by offshore jurisdictions to change their image of havens for money-launderers and tax evaders are also having an effect on offshore administration services (See Eric Andersen’s article in the HFN May 2001 issue available on our website).

Specifically, some administrators mentioned the increasing practice of having a majority of the Directors of offshore funds be independent of the underlying fund. They also underlined the trend toward weekly valuations. Finally, they stressed the growing U.S. presence of offshore administrators not just with representative offices but also with the capability to provide all the services required by offshore hedge funds except for shareholder registration. A growing U.S. presence is also warranted by the development of services to U.S. partnerships.

In the competition for offshore hedge fund domiciles, Caymans’ overwhelming popularity continues. The Caymans are now accounting for 58.9% of new offshore hedge fund incorporation up from 54.4% a year ago (based upon figures from the 2001 edition of The U.S. Offshore Funds Directory). Bermuda is holding its own with 10.6% of newly incorporated offshore hedge funds (vs. 9.1% a year ago) while the BVI, The Bahamas and the other jurisdictions are in serious decline. Recently, the Central Bank of Ireland adopted regulations which may pave the way to make Ireland a competitive domicile for offshore hedge funds by removing impediments in its regulations which had prevented prime brokers from acting as custodians of Irish-domiciled hedge funds. While still insignificant as an offshore hedge fund jurisdiction, Ireland could benefit from the institutionalization of the investor base just as its stock exchange did when it became the major listing venue for offshore hedge funds in the mid 1990s.

After several years of strong asset growth, the offshore hedge fund business has turned into an important sector of the financial services industry which can only continue to prosper if it applies standards in line with the most respected and regulated on-shore jurisdictions. While they are likely to stay primarily Caribbean-based, offshore hedge funds may gradually move many aspects of their operations closer to the institutional sources of capital. Ireland has already been the major beneficiary of this trend. As most financial institutions around the world develop their hedge fund product offerings, other European jurisdictions (Italy for now and others to follow) are also looking into ways to capitalize on their citizens’ lure toward hedge funds . A.B.

 
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