The American private fund industry is a significant representative of Wall Street’s interests and regulating hedge funds was a politically sensitive undertaking since the inception of the industry
On 11 November 2010, after nearly two years of lobbying and debate, the European Parliament adopted the final text of the Alternative Investment Fund Managers Directive.
In a market traditionally focused on funds and banks, the Cayman Islands Stock Exchange (CSX) has recently expanded its services to support new issues and start-ups. The principal reason for seeking a listing is to raise new funds for establishing or growing a business.
The Cayman Islands has for decades been one of the world’s leading banking and financial centers, currently ranking as the fifth largest banking centre worldwide, with over 200 banks, including 40 of the world’s 50 largest banks, and over US$1.5 trillion in assets.
The world has become global and this not only on business and private sides, but also family offices are seeking increasingly to get the most out of this international playing field at their hand.
Legislative changes introduced director registration or licensing requirements and new regulations. In addition, law firms started to spin off their administration divisions and private equity and other buyers entered the market.
In the current competitive hedge fund marketplace the use of side letters between investors and funds has become commonplace. Side letters are used by funds and fund managers to draw in investors who jockey for the most favourable terms possible.
The recently court appointed principal liquidators of a Cayman Islands registered Madoff feeder fund, Herald Fund SPC (In Official Liquidation), immediately began a ‘hearts and minds’ campaign aimed at establishing trust with the trustee.
All investment management firms need to pay very careful attention to a recent paper issued by the UK’s Financial Services Authority (FSA) concerning the management of conflicts of interest between asset management firms and their customers.
This industry trend is being driven by investors who consider that the challenges of such a model are far outweighed by the benefits provided to them by a board that will be more effective in all situations.
It is universally accepted that it is not possible for such large amounts of money to be mobilized by efforts of the public sector alone. A step change in the current state of climate finance with the inclusion of the private sector is essential to achieving this. A metaphorical revolution in climate finance is needed.
We have identified certain red flags that we have seen in more than one situation and provide some practical guidance that investors may wish to consider to mitigate the risk of being victims of a fraud.