JP Morgan hedge funds

JP Morgan hedge funds

July 7, 2016
Current Opportunities in Hedge

Growth of the European hedge investment industryGiven that both hedge investment supervisors and investors have accepted the concept of supplying absolute return products in a UCITS format, the question facing market individuals is whether or not the introduction of AIFMD will have exactly the same good impact on a. The solution to this question may help supervisors determine their strategic way of increasing assets in European countries.

So as to make this determination, supervisors should:

  • Assess development to date in use of the frameworks and increasing assets
  • Compare the AIFMD and UCITS regimes and determine any crucial success elements
  • Think about the perspective for future development
  • Measure the feasibility of these techniques under the two regimes (AIFMD and UCITS)
  • Meanings

    UCITS resources: resources domiciled in European countries and was able in line with the terms of the UCITS Directive

    AIFMD resources: Funds domiciled in Europe and at the mercy of the terms of the AIFMD

    Offshore resources: resources domiciled in a non-European offshore jurisdiction, generally Cayman isles, BVI, Bermuda, Jersey or Guernsey

    New hedge investment releases by U.S. managers 2010 to 2014Summary and considerations for supervisors

    The landscape for hedge funds that are increasing capital in European countries has changed significantly since the financial meltdown. A once one-dimensional industry now has actually a wider number of regulating structures and a wider buyer base. The AIFMD and UCITS Directives have actually a significant impact on the way supervisors seek to improve assets while the people which they target.

    Resource development from European countries because the economic crisis has come predominantly through the adoption by supervisors of UCITS framework. Applying this set up regulating model, supervisors have already been capable broaden their particular clientele to incorporate a sizable share of investors accessed through private-wealth station.

    The development of AIFMD has brought the potential for greater transparency and disclosure but doesn't seem to took hold with people however. These funds continue to be bought predominantly by an investor base already more comfortable with offshore hedge resources. But without the emergence of a trigger for either the development of AIFMD resources by supervisors, or a corresponding increase in need for resources of the kind, we anticipate the adoption of AIFMD because of the market become sluggish.

    By contrast, resources set up as UCITS have enjoyed better momentum in terms of both adoption by managers and increasing assets. Inside our view, particular catalysts surfaced following the economic crisis, which encouraged hedge investment supervisors to determine UCITS funds. Simultaneously, this offer happy a hitherto unmet demand from investors. Moreover, UCITS was already a well founded and generally recognized brand in its very own right.

    Cumulative assets raised for hedge resources established between 2010 and 2014 by Europe based supervisorsGiven this backdrop, there is much to think about for managers seeking to Europe for distribution.

    Structural needs

    Essential variations separate offshore/AIFMD and UCITS funds in terms of the financial investment guidelines, meaning that not all the strategies can be easily replicated into a UCITS wrapper. Managers have different options based on whether it's possible to create a UCITS or AIFMD investment.

  • Re-domiciling of existing overseas to AIFMD certified funds—Managers typically elect to re-domicile to Ireland or Luxembourg. Re-domiciliation may be accomplished in three straight ways:
  • Transfer of authorized office
  • Move the assets and liabilities of this overseas fund to a Luxembourg or Irish entity in return for share inside entity
  • Cross border merger/amalgamation
  • Managers have to think about the taxation ramifications of the various choices
  • Creating a UCITS fund to target the retail trader base
  • Circulation

    The use of AIFMD and UCITS may start new markets for managers to market their particular funds. They should consider:

  • That are their crucial target markets and what's the cost of access—Managers have seen interest in UCITS funds from people in countries such as for example Germany, Italy, France and Spain—jurisdictions which do not typically spend money on offshore hedge funds. Managers consequently want to broaden their marketing effort to target these new investors
  • Tend to be their current advertising and marketing resources enough or suitable for the opportunity—Targeting brand new distribution channels that will rely more on marketing and advertising to many other intermediaries may require different product sales resources, for example, sales people with brand new relationships, and might involve an alternative means of interacting the marketing and advertising message
  • Just what commitment from portfolio managers is required to market successfully via these brand-new trader stations?
  • Operational resources

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