Favorite Vehicle of Japanese Investors Expands to New Markets, Says Walkers
GEORGE TOWN, Grand Cayman, Oct. 31 /PRNewswire/ — Walkers, the global offshore law firm of choice for investment managers, financial organizations, and international law firms, said today that hedge fund managers are increasing their use of unit trusts in structuring hedge funds. While these vehicles have been favoured by Japanese investors for years, fund managers in other markets are now incorporating them into new funds to attract Asian investors.
“As the number of hedge funds continues to break records, fund managers are looking for innovative ways to structure funds, and unit trusts are becoming an increasingly popular option,” Ingrid Pierce, head of Walkers’ Commercial Trusts Group, said. “We are seeing more applications for hedge funds — from use by pension funds to convergence with private equity and mutual funds. The unit trust structure is extremely flexible and can be tailored to suit the client’s demands. The overall increase in the use of unit trusts is indicative of the maturity of the hedge fund market, which now has a much broader investor base as Japanese investors becoming increasingly active in global markets. Unit trusts are a great vehicle to encourage these investors.”
According to a recent survey by the Daiwa Institute of Research, almost two-thirds of Japanese pension funds are investing in hedge funds. Japan saw an almost 13 percent jump in the number of pension funds using alternative asset managers over the last year. The Daiwa report stated that Japanese pension fund managers liked the diversification that hedge funds allowed in their investment portfolios. Given the appeal of the unit trust for Japanese investors, the use of these trusts in fund structures signals further growth in this area. According to analysts, Japanese investors have about $USD 50billion in hedge fund assets.
“While we continue to see our Japanese clients using unit trusts, we are also seeing more complex structures. We fully expect this trend to continue,” Carol Hall, a partner in Walkers’ Hong Kong office, said. “Arrangements such as the ‘master feeder’ structure, continue to be popular and are a flexible means of adding on to existing structures to accommodate other investor groups. With these multi-level funds, it’s critical that investors and trustees are working with attorneys who understand the issues and ramifications of these types of structures.”
Compared to the numbers in the Cayman Islands, there are only a small group of administrators in Asia that are prepared to act as trustee in a unit trust structure because of the attendant fiduciary obligations. In recent years there have been a number of high profile hedge fund collapses which have highlighted the concern for service providers who provide trustee services, said Walkers.
“We predict that we will see more changes being requested to unit trust structures to address the concerns of trustees in particular. It remains to be seen how the courts will interpret the role of the manager who is party to a bilateral trust deed under which it assumes obligations that traditionally were assumed by a trustee. However, it is clear that the safeguards being sought by trustees and their affiliated administrators are a commercial fact of doing business using a unit trust structure in Asia,” said Ms. Hall.
About Walkers and Walkers SPV
Based in the Cayman Islands with offices in the British Virgin Islands, Dubai, Hong Kong, Jersey, and London, Walkers offers high-level skills across the legal spectrum. Walkers was named by HedgeWorld Limited as the top law firm for hedge funds by total assets of funds and assets of non-U.S. funds, as well as the 2006 Who’s Who Legal Law Firm of the Year: Cayman Islands, the PLC Which Lawyer? Yearbook 2006 Leading Cayman Islands Law Firm, The Lawyer’s 2006 Offshore Law Firm of the Year, and one of two firms honored as “Offshore Legal Team of the Year” by the Society of Trust and Estate Practitioners (STEP) in 2006.
Walkers acts for a wide range of clients including major financial institutions, investment banks, leading law and accounting firms, major corporations of all kinds, partnerships, trust companies and other fiduciaries representing almost every country in the world. The firm’s aim is to provide clear, concise and practical advice based on an in-depth knowledge of the legal, regulatory and commercial environment in the Cayman Islands, the BVI, and Jersey. Walkers is experienced in all types of international and cross- border transactions and welcomes a close working relationship with clients and other professional advisers.
Walkers SPV Limited is a licensed trust company and mutual fund administrator, wholly-owned by Walkers, with a branch office in Tokyo. It provides experienced and expert management and administration of Special Purpose Vehicles (SPVs), Directorship and Trustee services to Cayman-domiciled investment funds, as well as registered office and secretarial services for many companies and partnerships of all types.
For more information on Walkers or Walkers SPV, visit us on the Web at www.walkersglobal.com or contact us by e-mail at info@walkersglobal.com. To contact Walkers by phone, call our Cayman Islands office at +345-949-0100 or our Hong Kong office at +852 2284 4566.
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