IFSL research Hedge funds 2010

In partnership with:

IFSL RESEARCH

APRIL 2010

HEDGE FUNDS 2010

WWW.IFSL.ORG.UK

OVERVIEW

Global hedge fund assets under management posted strong gains for much of
2009 following sharp falls seen in the previous year due to conditions brought
about by the global economic downturn. This IFSL report provides an
overview of the global hedge funds industry with particular emphasis on
London’s role as the second largest global centre for hedge funds.

Assets under management of the hedge fund industry increased by 13% in
2009 to $1,700bn1 (Chart 1). This followed a 30% decline in the previous year.
Redemptions continued for the second year running, albeit at a slower pace.
The 19% return in 2009, the best hedge funds’ performance in a decade, more
than made up for the $85bn in net outflows. The number of hedge funds
totalled around 9,400 at the end of the year, a reduction of more than 1,000
from the peak seen two years earlier. New hedge fund launches however
exceeded the number of liquidations in the second half of 2009. Growth of
hedge fund industry assets is likely to continue in 2010 barring further
economic turbulence or major regulatory changes.

The fund of hedge funds industry has been particularly affected by the
economic downturn and the reputational damage following the revealing of the

Madoff fraud in 2008. Assets of fund of funds totalled around $500bn at the
end of 2009, down 17% from the previous year, and over 40% below the peak
seen two years earlier. The proportion of single manager hedge fund assets
originating from fund of funds fell to 30% in 2009 from 40% a year earlier.

Flow of funds The surge in redemptions which started in the latter part of 2008
continued in the first half of 2009. Some hedge funds were forced to suspend
redemptions because selling illiquid assets would have exposed the remaining
investors to bigger potential losses. Firms more oriented towards institutional
investors have fared better in this environment as institutional investors have
been less inclined to redeem assets. More than a half of impaired assets at the
end of 2008 were returned to standard liquidity terms by the end of 2009
(Chart 2). The asset raising environment slowly improved during 2009 with a
return to net asset inflows in the second half of the year (Chart 3).

Location of management The US was the largest management centre for
hedge funds with 68% of the total at the end of 2009, down from 82% a decade
earlier. Europe followed with 23% and Asia 6%.

New York is the world’s leading centre for hedge fund managers, followed by
London. IFSL estimates that around 41% of global hedge fund assets were
managed from New York in 2009, down from over 50% at the start of the
decade. London’s 20% share of the global total was unchanged from the
previous year. London is by far the largest centre in Europe for the management
of hedge funds. At the end of 2009, three-quarters of European hedge fund
assets totalling nearly $400bn were managed out of the UK, predominantly
from London. The UK is also a leading centre for hedge fund services such as
administration, prime brokerage, custody and auditing.
1 Estimates of the size of the hedge fund industry vary due to restrictions imposed on advertising and
reporting of performance by hedge funds. As there are no authoritative estimates this report is based on

commercial databases and index providers which rely on information provided voluntarily.

Chart 1 Global hedge funds
$bn assets (bars)
2,200

Number (line)
12,000

2,000
1,800
10,000

1,600
1,400
1,200

8,000

1,000
800
600

6,000

400
200
0

2000

2002
2004
2006
2008
2001
2003
2005
2007
2009
Source: IFSL estimates

4,000

Chart 2 Liquidation of impaired assets
$bn

Impaired assets

174

Assets returned to
standard liquidity terms

145

41%
54%
71%

116

86%
87
58

59%
46%

29

29%
14%

0

Q1 2009

Q2 2009

Q3 2009

Q4 2009

$174bn global assets estimated as impaired at end-2008
Source: Credit Suisse / Tremont Hedge Index

1

1

Hedge Funds

April 2010

THE GLOBAL HEDGE FUNDS Chart 3 Net asset flow
INDUSTRY
Assets under management of the hedge
fund industry increased by 13% in 2009
to $1,700bn (Chart 1). This follows a
30% decline in the previous year.
Redemptions continued for the second
year running, albeit at a slower pace.
Strong performance in 2009 however
more than made up for the $85bn in net
outflows.

$bn

Net asset flow

250
200
150

100

100

50

50

0

0
-50

Returns

150

-50

-100
-150
-200

-100

Flow of funds The surge in redemptions -300
-200
q3
q4
q1
q2
q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
which started in the latter part of 2008
2009
2008

continued in the first half of 2009. Source: IFSL estimates
Hedge funds more oriented towards
institutional investors have fared better in this environment as they have been
Chart 4 Hedge fund launches and
liquidations
less inclined to redeem assets. Some hedge funds were forced to suspend
redemptions towards the end of 2008 because selling illiquid assets would have Number
exposed remaining investors to bigger potential losses. More than a half of 2,500
Launched
Liquidated
these impaired assets were returned to standard liquidity terms by the end of 2,000
2009 (Chart 2). The asset raising environment slowly improved during 2009
1,500
with a return to net asset inflows in the second half of the year (Chart 3).
-250

Number of hedge funds The number of hedge funds totalled around 9,400 at
the end of 2009. Three-quarters of these were single manager hedge funds and
the remainder fund of hedge funds. This 2009 total represents a reduction of
more than 1,000 from the peak seen two years earlier (Chart 4). The fall was
caused by funds closing due to losses, lack of liquidity and redemptions as
investors looked for safer investments. New hedge fund launches however
exceeded the number of liquidations in the second half of 2009.

Employment According to the Alternative Investment Management
Association (AIMA), the UK hedge fund industry employs around 40,000
people. Around 10,000 of these are directly employed by hedge funds and the
remainder among the industry’s advisers and service providers. The hedge fund
industry employs some 150,000 people worldwide.

Geographical distribution of hedge funds

Domicile of fund Hedge funds can be registered in onshore or offshore
locations. Around 60% of the number of hedge funds in 2009 were registered
in offshore locations. The Cayman Islands was the most popular registration
location and accounted for 39% of the number of global hedge funds. It was
followed by Delaware (US) 27%, British Virgin Islands 7% and Bermuda 5%.
Around 5% of global hedge funds are registered in the EU, primarily in Ireland
and Luxembourg.

Location of management Hedge funds are predominantly managed from
onshore locations. The US is by far the leading location for management of
2

-150

q4

1,000
500
0
-500
-1,000
-1,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: IFSL estimates

Chart 5 Management location of global

hedge fund assets
% share of assets under management
1%
100
5%

3%
6%

12%
80

23%

60

40

82%

68%

20

0

2002 2003 2004 2005 2006 2007 2008 2009
US

Source: IFSL estimates

Europe

Asia

Other


Hedge Funds

April 2010

hedge fund assets with over two-thirds of the Chart 6 Top hedge fund cities
total. Its share, however, was well below its
80% share at the start of the decade. Europe % share of total hedge
assets by location of
doubled its share during this period (Chart 5). fund
manager

New York is the world’s leading centre for
managers of hedge funds, followed by
London. IFSL estimates that 41% of global
hedge fund assets were managed from New
York in 2009, down from over 50% at the
start of the decade (Chart 6). London’s
20% share of the global total was unchanged
from the previous year. A breakdown by
management location of the largest 100
hedge funds shows that New York
accounted for 47% of assets in 2009,

followed by London 21%, Boston 7% and
Greenwich 6%.
London is much the largest centre in Europe
for the management of hedge funds.
According to Eurohedge data, at the end of
2009, 76% of European single manager
hedge fund assets totalling $382bn were
managed out of the UK, the vast majority
from London (Chart 7). London’s share was
up slightly from 75% in the previous year. If
fund of funds’ assets are taken into account,
London probably accounts for close to 90%
of hedge funds assets managed in Europe.
There were nearly 1,400 European-based
hedge funds in 2009, of which two-thirds
were located in London. Other important
locations for hedge fund managers in
Europe include France, Switzerland and
Sweden.

New York

55
50

Other

45

San Francisco

Wesport 3%
4%

40
35

New York

11%

Greenwich 6%

30

47%

25
Boston 7%

20
15

21%

10
5
0

London
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: IFSL estimates

Chart 7 European based hedge funds market
$bn

Number
2,000

Assets $bn
Number of funds

600

% share, 2009

400

Other
US
Netherlands 2% 9%
1,500
France 2%
2%
Switzerland 4%

300

1,000

500

Sweden 5%

UK

76%

200
500
100
0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

Total: $382bn

Source: Eurohedge

Many hedge funds in Europe have recently launched UCITS III compliant
stand-alone onshore fund vehicles which are allowed to be distributed
throughout the EU to institutional and retail clients. These funds employ a
range of strategies that use derivatives and limited leverage within a regulated
framework. A Deutsche Bank survey recorded a 50% growth in 2009 of UCITS
assets under management and
found that 35% of investors in its Table 1 UCITS Absolute Return Funds
survey plan to allocate to such
Number $bn, assets

funds in 2010. The UK is the end-2009
UK
72
14.4
dominant centre in this area and France
21
4.6
accounts for about a half of Luxembourg
9
4.4
Sweden
3
2.3
assets under management and
Italy
3
1.1
number of funds (Table 1).
Others
38
3.5
Despite the global economic

% share of largest 100 hedge
funds assets by location of
manager

London

Total

Source: Hedgefund Intelligence

146

30.3

Chart 8 Global hedge fund returns
average annual return, %
30
25
20
15
10
5
0
-5
-10
-15

1998
2000
2002
2004
2006
2008
1999
2001
2003
2005

2007
2009

Source: Hedgefund Intelligence

3


Hedge Funds

April 2010

slowdown, London retains its structural advantages which make it an attractive
location for hedge fund management. These include its local expertise, the
proximity of clients and markets and a strong asset management industry.
London is also a leading centre for hedge fund services such as administration,
prime brokerage, custody and auditing. With around a half of European
investment banking activity conducted through London, it is a natural location
for prime brokerage services.

Asia, and more particularly China, is taking on a more important role in the
global hedge fund industry more as a source of funds than a location for
management. The UK and the US are leading locations for management of
Asian hedge funds’ assets with around a quarter of the total each. Other
important centres include Hong Kong, Australia, Singapore and Japan.

Chart 9 Asset flows by sector
$bn
Convertible Arbitrage

H1-2009

Dedicated Short Bias

H2-2009

2.2
6.7
-6.1

-1.3

-6.5

1.8

-20.6

7.1
0.2
2.9

Managed Futures
Multi-Strategy

-19.5

-1.7
-30 -25 -20 -15 -10 -5
0

Source: Credit Suisse/Tremont Hedge Fund Index

5

10

Chart 10 Global hedge funds by source
of capital
% share
100

Hedge funds investment strategies vary enormously. Strategies may be
designed to be directional (which try to anticipate market movements) or
market-neutral (which have low correlation to the market movements). Equity
long/short strategies typically account for the leading share of strategies. While
nine out of ten of the most common investments strategies saw a net outflow
of funds in the first half of 2009, only four experienced outflows in the second
half of the year. Long/short equity, event driven, managed futures saw the
biggest inflows in the second half of the year (Chart 9).

8%
10%

8%

8%

90

9%

9%

80

10%

15%

15%

70
60

7%
7%

12%

14%

12%

12%

12%

14%

18%

20%

31%

40
30

54%

48%

20

1999

2001

2003

29%

44%

44%

10
0

19%

30%

24%

50

SOURCES OF FUNDS

4

0.7

-26.5

Global Macro
Long/Short Equity

0.1

-0.4

Fixed Income Arbitrage

Hedge funds’ 2009 return globally averaged 19%, the highest for a decade
(Chart 8). This comes just one year after hedge funds posted the worst
annual loss in history brought about by the falls in equity markets, a ban on
short-selling and pressure to liquidate positions to meet margin and redemption
calls. As market conditions improved in 2009 and equity markets recovered,
hedge funds saw positive performance across most strategies. The 2009 return

was lower than the 27% return on the MSCI World Index but much higher than
the 6.9% of the Barclays Capital Global Aggregate Bond Index.

Fund of hedge funds’ assets totalled around $500bn
or some 30% of global hedge fund assets. This was

-0.7

Equity Market Neutral
Event Driven

-0.9

-6.0

Emerging Markets

HEDGE FUNDS’ RETURNS AND INVESTMENT STRATEGIES

Institutional investors are the biggest source of
capital for hedge funds, having overtaken high net
worth individuals in 2008. Funds with a higher
proportion of institutional investors fared better in
market conditions of falling liquidity in 2008 and
the early part of 2009. A breakdown of institutional
investors by type of investor shows that fund of
hedge funds accounted for 24% of assets, followed
by public pension funds 17%, endowment plans
14% and private pension funds 14% (Charts 10 and
11). The geographical breakdown of institutional

investors shows that more than a half originate in
the US, followed by the UK 14% and Switzerland
5%.

-4.8

2005

31%

26%

2007

2009

Individuals

Fund of funds

Corporations

Endowments and foundations

Pension funds

Source: Hennessee Group LLC

Chart 11 Institutional investors in hedge funds
% share, 2009

by originating country

by type of investor
Other
12%

Asset managers

20%

24%

6%
Family offices

Other

Fund of hedge
funds

US

Germany

2%
Canada 3%
Australia 3%

13%
17%

Switzerland

5%

14%
14%
Private pension funds
Endowment plans

Source: Preqin

Public pension
funds

52%

14%
UK


Hedge Funds

April 2010

down 17% from the previous Table 2 Largest hedge funds
year and nearly a half below the
peak seen two years earlier Largest hedge funds ( January 2010)
$bn
(Charts 12 and 13). The value of 1. JP Morgan

50.4
43.6
the industry’s assets began to fall 2. Bridgewater Associates
3. Paulson & Co.
32.0
in mid-2008 as investors began 4. Brevan Howard Asset Management LLP
27.9
27.0
converting their investments into 5. Soros Fund Management
6. D.E. Shaw Group
23.6
cash due to widespread losses in 7. Och-Ziff Capital Management Group
23.5
the hedge funds industry. The 8. Baupost Group
21.8
9.
Man
AHL
21.7
fall in reputation of the industry
10. Angelo, Gordon & Co.
20.8
following the revealing of the Source: Hedgefund Intelligence
Bernard Madoff fraud in 2008
also contributed to the decline. Adding to this, fund of hedge funds
significantly underperformed hedge funds in 2009 with around 10% in returns
in 2009, much less than the 19% made by the hedge funds industry.

The breakdown of hedge funds of funds by manager location shows that around
a quarter of assets were managed from the UK. The US was the most popular

location with around 30% of the market. Switzerland, France and Hong Kong
were also important centres. To deal with the decline in assets many fund of
funds were forced to reduce management and performance fees in order to
attract new investments and retain existing customers. The number of
publicly quoted hedge fund of funds has increased over the past decade. Most
of these listings are on the London and Zurich exchanges. The London Stock
Exchange overtook Zurich in 2006 to become the location of choice for funds
of hedge funds listings.

Secondary market for hedge funds is a market where investors can buy into
some hedge funds at a discount to net asset value. This is an OTC market where
each deal is individually priced and structured. The secondary hedge funds
market allows investors to sell stakes in funds that have lockups or have
limited redemptions. It also lets others into funds that aren't accepting new
investors. As record investor redemptions swept over the industry in late 2008
and restrictions on redemptions imposed by some hedge funds increased, many
investors turned to the secondary market to try to sell their stakes. In December
2009, Hedgebay, one of the leading players in secondary market-making for
hedge funds, saw its global hedge funds secondary market index drop to a
record low, to just under 80% of the average net asset value.
LARGEST HEDGE FUNDS

The hedge fund industry has become more concentrated at the top end over the
past decade. With fund closures on the rise and new launches on the decline for
much of 2008 and 2009 consolidation intensified. The industry will probably
be characterised by a greater concentration of assets in the large funds in the
next few years. The top 100 hedge funds accounted for around 70% of total
industry assets in 2009, up from 54% in 2003 (Chart 14). JP Morgan was the
largest hedge fund with $50bn under management in January 2010 (Table 2). It
was followed by Bridgewater Associates $44bn and Paulson & Co $32bn. The

8% hedge fund attrition rate in 2009 was down on the previous year but much
higher than the 3% to 5% range seen over the previous 10 years (Chart 15).

Chart 12 Global Fund of Hedge Funds
industry
$bn, assets under
management
900

Number of
funds
3,500

800
3,000

700
600

2,500

500
400

2,000

300
200

1,500

100
0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1,000

Sources: IFSL estimates

Chart 13 Single-manager hedge fund capital
provided by funds of hedge funds
% share
40
35
30
25
20
15
10
5
0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sources: IFSL estimates

Chart 14 Concentration of hedge fund
assets
% share, 2009

100

30%
80

60

99%

40

70%

20

0

1%

Funds

Assets

Source: IFSL estimates

5


Hedge Funds

April 2010

PROVIDERS OF SERVICES TO HEDGE FUNDS

Prime brokers offer brokerage and other professional services to hedge funds
and other large institutional customers. Rather than providing particular niche
services, prime brokers offer a diverse range of services including: financing,
clearing and settlement of trades, custodial services, risk management and
operational support facilities (Chart 16). The bulk of prime brokers’ income
comes from cash lending to support leverage and stock lending to facilitate
short selling, both areas that have been affected to a large extent in 2008 and
early part of 2009 by redemptions and a general decline in hedge funds’
leverage levels. London is Europe’s leading centre for prime brokerage
services and accounts for more than 90% of its activity, as the largest
investment banks that provide these services are either headquartered or have
a major office there.

Major restructuring occurred amongst prime brokers in 2008 and 2009
such as the acquisition of Bear Stearns by JP Morgan, the takeover of Lehman
Brothers by Barclays Capital and the acquisition of Merrill Lynch by Bank of
America. This resulted in a shift in market share from some former investment
banks to commercial banks. Goldman Sachs and JP Morgan were the largest
prime brokers in 2009 each with around a fifth of the market. Morgan Stanley
saw the biggest decline in its market share, dropping to 13.5% in 2009 from
20% in 2008 (Table 3). According to the Financial Services Authority, the
average margin requirement of prime brokers increased from around 25% in
2007 to nearly 40% in October 2009 (Chart 18). This is likely to drop in 2010
as liquidity continues to return to the industry. Hedge funds leverage increased
to an average of around 1.50 in 2009 from 1.10 in 2008, almost back to levels
in the years preceding the credit crisis (Chart 19).

Chart 15 Hedge fund attrition rates
% share
14
12
10
8
6
4
2
0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sources: Hennessee Group; IFSL estimates

Chart 16 Types of services provided to
hedge funds by prime brokers
% share of banks surveyed
providing a service, 2004
Securities lending

70%
55%

Cash lending
Trade execution
Clearance & settl.

50%

45%

Fund administrators The extent to which hedge fund managers outsource
Custody services
40%
administrative functions such as accounting, investor services or risk analysis
30%
varies widely. Assets under administration by third-party hedge fund Risk Management
25%
administrators fell by around 2% in the first half of 2009 following a 30% fall Capital introduct.
in 2008. Citco Fund Services retained its position as the largest hedge fund
Credit lines
20%
0
10 20 30 40 50
administrator despite a 9% fall in assets under management in the second half
of 2009 to $340bn. It was followed by State Street Alternative Investment Source: Banking Supervision Comittee, ECB
Solutions and The Bank of New York Mellon (Table 4). There may be an
increase in the outsourcing of administrative functions in the coming years as
hedge funds will be looking to reassure their clients due to the fall in reputation
of the industry following the Madoff fraud and the
Chart 17 Structure of a typical hedge fund
suspension of redemptions by a number of funds in the
latter part of 2008.
Fund administ.

Managers of offshore hedge funds typically rely on offshore
administrators for various types of services and operational
support. In addition to helping set up the offshore fund,
offshore administrators may also provide accounting and

reporting services; offer advice on an ongoing basis with
reference to complying with applicable laws; or offer
independent pricing of a fund’s portfolio of securities. Some
offshore locations may subject the administrators to
licensing and auditing requirements.
6

40%

60

70

Investors

Fund
Administrator

Hedge fund

Hedge Fund Manager
Dashed lines indicate optional relationships
Sources: AIMA and ASSIRT Hedge Fund Booklet
1

Custodian

Prime broker/dealer

80

Hedge Funds

April 2010

Custody Hedge fund assets are Table 3 Largest hedge fund prime brokers
generally held with a custodian,
Jan-2009
Jan-2008
including cash in the fund as well
% share
% share
as the actual securities. The flow Goldman Sachs
19.1
18.5
18.8
of capital capital to meet margin JP Morgan
Stanley
13.5
20.0
calls may also be controlled by Morgan
UBS
6.9
7.8
custodians.
Deutsche Bank
6.6
5.9

Auditing Most hedge funds are
set up in a way that does not
require them to have their
Source: Eurekahedge
financial statements audited.
Some hedge funds however, may undergo annual audits if this is a part of the
contract between the hedge fund and its investors. This may however change if
regulation of hedge funds is tightened. Some offshore locations require hedge
funds to have their accounts audited.
Citigroup
Credit Suisse
Newedge Financial
Merrill Lynch
Others

5.5
5.5
2.8
2.7
18.6

4.2
4.0
2.9
36.7

REGULATION OF HEDGE FUNDS

The hedge fund industry has faced calls for stricter regulation in recent years.
Although hedge funds did not play a major role in the emergence of the credit

crisis it is alleged that they contributed to volatility through short-selling
transactions and selling shares as a result of deleveraging and redemptions. The
Financial Stability Board, successor to the Financial Stability Forum, was
established in April 2009 following the G-20 London summit. The oversight of
the new body was extended to all financial institutions important to global
financial stability including for the first time large hedge funds.

In the US, hedge fund managers have not been subject to regular SEC
(Securities and Exchange Commission) oversight. Rule changes introduced by
the SEC in February 2006 that required hedge fund managers to register under
the Investment Advisers Act were overturned by the federal court in the same
year. Since then US hedge fund managers who registered with the SEC have
done so voluntarily. The Private Fund Investment Advisers Registration Act
2009 will make the registration of hedge fund managers in the US mandatory.
It will also subject hedge funds to new reporting and record keeping
requirements. In October 2009 the House Financial Services Committee voted
in favour of the Bill. The Bill will be presented to the House of Representatives
in 2010 and if it passes it will move onto the Senate and eventually to the
President to sign into law.

Domestic regulation of hedge funds varies across Europe. In April 2009, the
European Commission published its proposal for a Directive on Alternative
Investment Fund Managers (AIFMD) to establish EU-level regulation. It is
now being considered by both the European Parliament and the Council of
Ministers. The impetus for the Directive came from the G20 summit in London
which set the path for hedge fund regulation, with G20 leaders agreeing that
hedge fund managers should be registered by their national regulators and
should report systemically relevant data to those regulators. While the industry,
led by the global hedge fund body AIMA, is supportive of those goals,
international concern has been expressed by the marketing provisions of the

Directive which could effectively prevent non-EU funds and managers from
accessing the EU market and thus prevent EU investors from investing outside

Table 4 Largest hedge fund administrators
end-June 2009
Citco Fund Services
State Street Altern. Invest. Solutions
The Bank of New York Mellon
Goldman Sachs Admin. Services
Citi
HSBC Securities Services
SS&C Fund Services
CACEIS Investor Services
GlobeOp Financial Services
Fortis Prime Fund Solutions

$bn
340
208
159
156
129
123
100
84
81
81

Growth from
2008 (%)

-9
-14
7
-14
-14
-16
0
-8
-8
-27

Source: HFN - Hedge Fund Administrator Survey

Chart 18 Average margin requirement
% margin requirement

45
40
35
30
25
20
15
10
5
0

Apr-05
Apr-06
Apr-07

Apr-08
Apr-09
Oct-05 Oct-06 Oct-07 Oct-08 Oct-09

Sources: Financial Services Authority

Chart 19 Hedge funds use of leverage
Gross market exposure as a
% of assets under management, end-year
170
160
150
140
130
120
110
100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Hennessee Group LLC, Financial Services Authority,
IFSL estimates

7


Hedge Funds

April 2010

the EU. The Directive could be agreed this summer, although it would take
several years to implement.

UK hedge fund managers and advisors are typically required to seek
authorisation from the Financial Services Authority (FSA). The regime for
hedge fund managers in the UK is similar to that which applies to other
investment managers. They are able to take advantage of the Investment
Services Directive which allows them to offer their investment services to
clients in other countries within the EEA. The FSA oversees a group of the
largest hedge fund managers from within a specialist supervisory team. The
FSA also specifies restrictions on sales and marketing of hedge fund
products. Hedge fund products for example, cannot be marketed to the
general public but UK investors can deal directly with offshore funds.

Offshore hedge funds are registered in tax neutral jurisdictions allowing
investors to minimise their tax liabilities. Offshore hedge funds are usually
structured as corporations although may sometimes be limited partnerships.
Generally the number of investors is not restricted. Onshore hedge funds
often set up a complementary offshore fund to attract additional capital
without exceeding limits on the number of investors. The vast majority of
offshore funds are registered in the Cayman Islands followed by the British
Virgin Islands and Bermuda (Chart 17).
-------------------------------------------------------------------------------------------LINKS TO OTHER SOURCES OF INFORMATION:
www.absolutereturn.net
www.eurekahedge.com
www.hedgefundsreview.com
www.hedgeweek.com
www.hedgeworld.com
www.hedgefund.com
www.hedgefund-index.com

www.hedgefundnews.com
www.thehedgefundjournal.com
www.investhedge.com
www.thehfa.org

www.aima.org
www.eurohedge.co.uk
www.hedgefundsworld.com
www.hedgeco.net
www.hedgefund.net
www.hedgefundcenter.com
www.hedgefundintelligence.com
www.hedgefunds.net
www.institutionalinvestor.com
www.mfainfo.org
www.vanhedge.com

IFSL Research:

Report author: Marko Maslakovic

Director of Economics: Duncan McKenzie
+44 (0)20 7213 9124

Senior Economist: Marko Maslakovic
+44 (0)20 7213 9123

International Financial Services London
29-30 Cornhill, London, EC3V 3NF

www.ifsl.org.uk
------------------------------------------------------

International Financial Services London (IFSL) is a private
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successfully promoting the exports and expertise of UKbased financial services industry throughout the world.
This report on Hedge Funds is one of 16 financial sector
reports in IFSL’s City Business Series. All IFSL’s reports can
be downloaded at www.ifsl.org.uk.

© Copyright April 2010, IFSL

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International Financial Services,
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nearly 40 years experience of promoting the
UK-based financial services industry throughout the world.
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