On Caribbean islands you can enable vacation and make money using certain products, the EU UCITS Directive, investors may reflect hedge fund strategies. What do you need.
by Christopher Platt, Euro am Sonntag
Crystal clear water, deep blue skies, fine sandy beach: Beach lovers will really be in the Cayman Islands at their expense. The archipelago, which is called in English Cayman Islands, is located in the Caribbean, 350 kilometers south of Cuba.
Although the islands are very popular with its picturesque beaches and unique coral reefs with travelers in the course, but other industry has a far more important than tourism: the capital Georgetown is one of the largest financial centers in the world. Many international banks have branches there. The attractiveness of the Cayman Islands as a financial center based on the favorable conditions existing there as the tax exemption.
For this reason, the island group has established itself as an important location for hedge funds.
These are mutual funds that have little or no investment restrictions. Their work is now controlled only weakly to regular reports, they are not required. To implement their strategy, they can use derivatives, among other things, to sell securities that they have not (short sales), or borrow. Hedge funds pursue very different concepts. Relatively well known is the long-short equity strategy. Here, the managers of both stocks to buy and profit from their capital gains and short sales, which he earned money in a falling market.
Another strategy, managed futures wants to make and market trends is to take advantage of investment instruments such as futures and options on different markets such as currencies, stocks, bonds and commodities. A prominent representative of this strategy is the AHL Diversified, the shining example in the crisis year of 2008 with an increase of 31 percent. To date, the hedge fund strategies were reserved for large investors. But for some time to come to the train, private investors: the EU UCITS Directive allows the exotic vehicles, their strategy is to offer to enter and private investors. The legislation provides specific requirements for funds, especially in terms of transparency, marketability and risk.
It also allows some freedom in the types of securities used. This makes it possible for many hedge funds, to copy their strategy and packed into a new fund that complies with the requirements of the Directive. Although UCITS exists in the current version since 2002, hedge funds take advantage of their opportunities, but only for about one and a half years. More and more vehicles overseas offer private investors so that their strategy in the form of a regulated product.
This trend is caused by the financial crisis and the Madoff scandal. Until the collapse of Lehman Brothers in September 2008 and the arrest of the investment swindler Bernard Madoff in December 2008, the hedge fund industry was living in their own world. To ensure transparency in the care of the vehicle driver barely. In the wake of the financial crisis, the industry suffered heavily losing the confidence of investors and had strong outflows. By now some subjects the requirements of the UCITS Directive, it increases the acceptance of their products to investors, thus gaining back lost trust. In addition, the hedge fund open to the new investor group of private investors.
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For this latter development has advantages, but also carries risks. An advantage is that they have offered an alternative system concepts. Private investors can take advantage of the strategies that were previously unavailable. In this way, the new products contribute to a higher diversification in the portfolio. Caution should be exercised with regard to the intelligibility of the new products. Even if the UCITS Directive requires transparency, that does not mean that the approach of the fund is easy to grasp. Depending on how you count, there are now 250-700 UCITS-H edge unit - depending on whether one is limited to products that follow the traditional hedge fund strategies, and expects all together funds that track in the broadest sense, an alternative system concept.
How big the crowd is, the number of funds is expected to increase further. Michael Sanders, head of the Luxembourg investment company Alceda calculated for 2011 with significant growth. "The development has just begun," he says. "For UCITS III product Coats gain due to high flexibility and transparency continue to decline." The crux of the new vehicles is a copy of the original strategy of the funds in the UCITS III clone. "There should be only those strategies in a UCITS are packed jacket that can be transmitted without compromise," says Sanders. Not getting this assumption may be fulfilled by the industry: "There will be hell-bent on pressed out into a UCITS-coat, which goes some way," he criticized.
