11. March 2010 01:24
Just back from attending the GAIM Ops Cayman conference and there were a couple of interesting observations. While the purpose of this posting is not to provide a review of the conference, in general, attendance was up over the prior year and the mood was generally brighter, with more speakers saying that they were optimistic about the future of the hedge fund industry.
Comments of note were as follows. One speaker said that some funds that had gated their investors or suspended redemptions entirely were getting feedback from investors that they were pleased with the results of those actions. Many strategies that were mauled in 2008 rebounded strongly in 2009 and had investors redeemed when they wanted to, they would have locked in losses at what is viewed as the low point of the cycle. Quite a change from the uproar that originally greeted the notice of gating/suspension.
The mania of managed accounts appears to be tapering off. While there are still some investors that will only invest through a managed account, many investors are comfortable with the traditional fund structure-especially when they learn about the additional costs and administrative complexities associated with managed accounts.
Another observation was that many hedge fund CFOs may be struggling with the implementation of FIN 48. In addition to the technical issues inherent in FIN 48, historically, hedge fund CFOs have been stronger on the accounting side than on the tax side. Most hedge funds are structured as pass thru entities and pay no tax (exceptions are withholding and transaction taxes) so the issues tended to be more focused on tax matters at the individual level (ordinary vs. capital, trader vs. investor, etc.). FIN 48 will force hedge fund CFOs to focus more on international tax issues and potential liabilities associated with structured products.
Managing Director & Chief Financial Officer/Chief Compliance Officer, Agamas Capital Management, LP
and Member of HFBOA Board of Directors