AIMA (Hedge Funds) Journal - Q1 2010

Alternative Investment Management Association
AIMA Journal
The Global Forum for the Global Alternative Investment Management Industry
Q1 2010 www.aima.org No. 82
Address from the CEO Looking to the future with confidence
I
am delighted that the AIMA Journal, our flagship quarterly
publication, is back at the start of our 20th anniversary year. I
do hope you find it an enjoyable and valuable read.
It is now almost exactly a year since we, as the global hedge

fund industry association, publicly announced our support for the
principle of transparency - we said that it was desirable that all
hedge fund managers should be registered and authorised by the
authorities, and that the larger managers reported data of systemic
relevance.
If the concern of international policymakers after the crisis was that

they had insufficient information about the build-up of systemic
risks in financial markets, our response on behalf of our industry
was to offer our full co-operation in contributing to structures that
would supply them with the timely, relevant information which their best levels for a decade, we can look forward to the future
they needed to address financial stability issues. with confidence.
Our announcement came before the G20 summit in London, and it Finally, I would like to
was gratifying that the path that that summit set for the regulation pay tribute to Florence
of our industry was on these principles. Lombard, who will shortly
be stepping down as
Our work globally since then has been about working with individual Executive Director.
regulators and with supranational bodies to create the right
supervisory framework for the industry. After all, we share their It is Florence who, over
desire for improved financial stability. her many years of service,
has through the strength
Transparency is at the heart not only of the industry’s approach of her personality and the
towards supervision but also its relationship with investors. It is breadth of her vision turned
right that, with the increasing maturity and sophistication of the the association into a truly
industry and with the increasing investment in the industry by global organisation, and
institutional investors, greater transparency is both offered by for this we all owe her an
managers and sought by investors. enormous debt of gratitude.
On a personal note, I will
We believe that institutional investors now account for an absolute greatly miss working with
majority of assets under management by the industry, and that that her and I wish her every Andrew Baker
proportion is steadily increasing. This is a testimony to the success happiness in this next stage
Chief Executive Officer,
of the industry, not least in terms of offering higher returns and of her life.
lower volatility than other asset classes.
Alternative Investment
I very much hope you enjoy Management Association
There is an alignment of interests between investor and manager in reading the new AIMA
our industry that promotes sustainable and successful investment. Journal - and as always, we
With the industry once again receiving net inflows and returns at welcome your feedback.
ADDRESS from the ceo
GLOBAL REVIEW What lies in store in 2010

By Andrew Baker, CEO, AIMA
A
IMA’s strength is that it is a global disproportionate contributions to the authorities there are nevertheless planning
organisation with representation proposed Systemic Resolution Fund). gradual changes to the regulatory system in
across the world. I wanted to look at 2010. In Hong Kong, of course, mandatory
some of the key challenges we will be facing The House of Representatives voted on a registration and independent administration
globally this year. version of wide-ranging legislation before the are already cornerstones of the jurisdiction’s
end of 2009, while the Senate has just started regulatory system.
EMEA to debate it. Both chambers will eventually
have to agree on a reconciled – third – version In Singapore, there continues to be
So great was our concern about the European of the legislation before it can be sent to considerable interest from allocators.
Commission’s (EC’s) proposed Alternative President Obama for his approval. And we Similarly, start-up activity there has been
Investment Fund Managers (AIFM) Directive await further details about the President’s strong over the last 12-18 months and this
that we mobilised the industry on an banking proposals with interest. ought to improve further in 2010 as capital
unprecedented scale to respond to it. The raising becomes easier. 2010 could also see
original proposal from the EC had provisions In Canada, the implementation of National an even clearer delineation between the
in it that would have adversely impacted the Instrument 31-103 will mean all hedge boutiques and the institutional firms.
industry globally, not just in Europe. I would fund managers will have to register with
just like to take this opportunity once again securities regulators. There are two noteworthy issues on the
to thank all of you who have been involved regulatory front in Australia. First, the
in, or supported, our campaign. It has been Also in Canada, new accounting standards Australian Taxation Office is proposing
extremely gratifying that the industry has and the implementation of International a withholding tax policy that could
responded to this grave threat with such a Financial Reporting Standards will affect both disadvantage foreign purchasers of
display of unity. how hedge funds report their net asset values Australian assets. We submitted a response
and how they determine the values of their to the Australian Tax Office’s Draft Tax
We have made considerable progress since the underlying securities. Determinations of December 2009 (TD 2009/
original draft of the Directive was published D17 and TD 2009/D18) in February 2010.
last April, and it is encouraging that the new Furthermore, a national harmonised sales The main points made in our submission
Spanish Presidency of the EU has said that it tax on all goods and services in Canada concern the potentially negative effect for
will build on the good work of the Swedish will affect the tax treatment of hedge fund the Australian funds industry, with regard
Presidency. But there is still a long way to management fees. to the issues for offshore domiciled hedge
go. We hope that our sensible and moderate funds and for Australian-sourced income for
message – that we support good regulation and Meanwhile, our National Group in the Cayman foreign investors.
are offering our assistance to policymakers to Islands has much to look forward to in 2010. Fresh
help them produce that – will prevail. from the positive reviews the jurisdiction has And second, a short-selling regime will be
received from the IMF and UK government and introduced in Australia on 1 April 2010 that will
For more on our AIFM Directive campaign, after the Cayman Islands Monetary Authority’s see daily disclosures of positions to the regulator
turn to page six. accession to IOSCO last year, Cayman in 2010 and aggregated positions made available to
can be expected to strike yet more bilateral the market after only three days. Last year, a
agreements on co-operation and the exchange working group of the regulatory committee was
The Americas of information with OECD member states. formed when the ban for short selling was first
introduced. The working group has engaged
In the U.S, we support many of the At the same time, AIMA Cayman will continue actively with regulators.
regulatory measures likely to be passed this to support initiatives that enhance the
year. In common with our position elsewhere Cayman Islands’ international reputation for
around the world, we would welcome the openness and transparency. In conclusion
registration of managers and the reporting
of systemically relevant information by These are only some of the likely headlines
larger managers in the U.S.. Asia-Pacific for 2010. But whatever arises, AIMA will
continue to argue that it is in everyone’s
We are, however, also concerned about While Hong Kong’s existing robust set of short- interests, whether they are policymakers who
regulation in the U.S. that could negatively selling rules meant that the jurisdiction was regulate or the market participants who are
impact both the global industry (for one of the few international financial centres regulated, that we are able to produce global
example, through ‘dual’ registration) and in the world not to place a temporary ban on regulation of our industry that is transparent,
the U.S. industry (for example through such activities during the financial crisis, the proportionate, consistent and workable.
2 AIMA Journal Q1 2010

Contents
1 Address from the CEO Looking to the future with confidence
2 global review What lies ahead in 2010 around the world
5 AIMA ANNIVERSARY A look back as we turn 20
5 FLORENCE LOMBARD A tribute to her 16 years of service at AIMA
6 DIRECTIVE CAMPAIGN How our AIFMD campaign has progressed
9 REGULATORY & TAX Key updates from the Reg & Tax department
12 MEDIA EYE Media coverage of AIMA and the industry
14 WORLD VIEW News from our National Groups around the globe
15 thought leadership Tackling systemic risk by AIMA Chairman Todd Groome
16 OBITUARY The hedge fund industry loses another friend
17 irish opportunity A&L Goodbody on Ireland’s new funds legislation
18 SHORT SELLING TechInvest on the impact of Australia’s temporary ban
21 CAYMAN UPDATE Maples and Calder on Cayman’s post-crisis recovery
22 New Members AIMA members who joined in Q4 2009
24 Contact Us How to reach us
SPONSORING MEMBERS OF AIMA
PrimeFundSolutions
The AIMA Journal is published quarterly by the Alternative Investment Management Association Ltd (AIMA). The views and opinions expressed do not necessarily reflect those of the
AIMA Membership. AIMA does not accept responsibility for any statements herein. Reproduction of part or all of the contents of this publication is strictly prohibited, unless prior
permission is given by AIMA.
© The Alternative Investment Management Association Ltd (AIMA). All rights reserved.
AIMA Journal Q1 2010 3

aima SPONSORING MEMBER
We’re a
dedicated
partner to the
hedge fund
community.
CME Group provides hedge funds:
J\Zli`kpXe[ZfeÓ[\eZ\ Jlg\i`fikiX[è^k\Z_efcf^p
;\\gc`hl`[`kp =c\o`Yc\Zc\Xiè^j\im`Z\j
8efepd`kpXe[kiXejgXi\eZp N`[\iXe^\f]gif[lZkj
To learn more, visit our new hedge fund Web page at www.cmegroup.com/hf and
our Managed Futures Resource Center at www.cmegroup.com/managedfutures.
Or contact: Sponsoring Member of:
Renaud Huck i\eXl[%_lZb7Zd\îflg%Zfd "++)'..0-.('-

Associate Director, Hedge Funds – EMEA
Pierre Prunier g`\ii\%gile`\i7Zd\îflg%Zfd "-,-,0*,,/)

Director, Hedge Funds – Asia
:D<>iflg`jXkiX[\dXibf]:D<>iflg@eZ%K_\>cfY\cf^f#:D<#:_`ZX^fD\iZXek`c\<oZ_Xe^\Xe[>cfY\oXi\kiX[\dXibjf]:_`ZX^fD\iZXek`c\<oZ_Xe^\@eZ%:9FKXe[:_`ZX^f9fXi[f]KiX[\Xi\kiX[\dXibjf]k_\9fXi[f]KiX[\f]
k_\:`kpf]:_`ZX^f%EPD<O#E\nPfibD\iZXek`c\<oZ_Xe^\Xe[:c\XiGfikXi\kiX[\dXibjf]E\nPfibD\iZXek`c\<oZ_Xe^\@eZ%:FD<O`jXkiX[\dXibf]:fddf[`kp<oZ_Xe^\@eZ%8ccfk_\ikiX[\dXibjXi\k_\gifg\ikpf]k_\ìi\jg\Zk`m\
fne\ij%
:fgpi`^_k)'(':D<>iflg%8cci`^_kji\j\im\[%
aima announcements
KEY DATE AIMA to celebrate its 20th anniversary in 2010
A
IMA celebrates its 20th anniversary in funds globally, managing about $39 billion (about
2010. Formed in 1990, the Association has $64 billion adjusted for inflation) in assets. At the
become the leading global representative time, EMFA was present in five countries. Today,
body for the hedge fund industry. the hedge fund industry is worth more than $1.5
trillion in AUM while our members comprise over
AIMA’s origins date back to the September 1990 1,100 firms (with over 4,500 individual contacts)
founding of the European Managed Futures in more than 40 countries. Our hedge fund
Association (EMFA) during a gathering of 17 manager members manage in excess of 75% of
leading lights of the managed futures industry global hedge fund assets and 70% of global fund
at a lakeside hotel in Switzerland. They were of hedge funds assets.
motivated by a concern that regulators and
policymakers were not sufficiently educated was originally assured it would be only a part- It is one of AIMA’s great strengths that it is able
about this type of assets. They set out with two time job (see below) – to 20 current full-time to speak for the whole industry globally. AIMA’s
principal aims in mind: to campaign for better staff members. members include hedge fund managers, fund
regulation; and to educate investors, regulators of hedge funds managers, prime brokers, legal
and other stakeholders about the industry. These AIMA has continually demonstrated leadership and accounting services, fund administrators
remain among our core missions to this day. and innovation, including creating the AIMA and independent fund directors. They all benefit
Due Diligence Questionnaires, holding the first from our active influence in policy development,
The Association grew steadily, and by 1997 international regulatory forum, developing our leadership in industry initiatives and media
it was re-named the Alternative Investment the series of AIMA Sound Practice Guides, co- engagement and our outstanding reputation
Management Association (AIMA) in a move founding the Chartered Alternative Investment with regulators.
that underscored its broader remit as Analyst Association and launching the Hedge
well as its global ambitions. AIMA now has Fund Matrix and the Roadmap to Hedge Funds. None of what we do would be possible without
representation and offices across the world, the tremendous involvement and support of
in the Americas, Europe, the Middle East, Much has changed since the Association’s our members, whose selfless leadership and
Africa and Asia-Pacific regions. Its staff has founding. Back in 1990, there were only about dedicated service to the industry over the last
grown from less than one – Florence Lombard 500 hedge funds and about 80 funds of hedge 20 years we salute.
Au revoir Florence Lombard to step down after 16 years with AIMA
F
lorence Lombard, AIMA’s employee - “Doing the hard yards (and interminable air
number one in every sense, and former miles) to put Asia on the AIMA map”
Chief Executive Officer, is shortly to step - “Being the sort of person who makes
down after a long and distinguished career. people want to help… and harnessing that
Over the last 16 years, she has worked with goodwill for AIMA”
many of the leading lights of the hedge fund - “Achieving it all with charm in a macho
industry. For this edition of the AIMA Journal, industry”
we asked them to highlight her achievements. Most recently, Florence has served as AIMA’s
Here is a selection of the responses we Executive Director, focusing on the relationship
received: with governments and policy advisers
- “A tireless advocate of a balanced view of internationally. As part of her role, she has
the industry” helped lead our AIFM Directive campaign. She
- “An outstanding contribution to the global will remain as a Non-Executive Director on the
development of AIMA” Council of AIMA as well as on the Board of the
- “Her strategic vision, enlightened leadership CAIA Association. She is also a Director of the
style and strong business and organisational recently-launched Institute for Global Asset
skills have enabled AIMA to emerge as a leading interest” and Risk Management. The hobbies listed on
industry body” - “Showed vision to kick-start CAIA when the her bio may also hint at the next stage of her
- “Demonstrated a wholehearted commitment industry needed it” life – renovating properties, travel, writing,
to the industry and its practitioners” - “Provided members with outstanding value” music and the theatre.
- “Developed outstanding relations with - “Helped to establish the DDQs which became
regulators globally” the template for many companies’ RFPs” Everyone at AIMA – and the global industry
- “Positioned AIMA so it’s respected for its - “Is trusted by key policymakers and regulators that she has represented with such distinction
competence and avoidance of conflicts of around the world” - wishes her a long and happy retirement.

AIFM DIRECTIVE CAMPAIGN
AIFMD UPDATE How our AIFMD campaign has progressed
AIMA launched a major campaign to seek Engagement with policymakers can read it here. It was a similar initiative to
substantial revisions to the European the newsletter we produced for UK politicians
Commission’s proposed Alternative Investment We have provided positive, constructive and civil servants earlier in 2009 and was
Fund Managers (AIFM) Directive after the support and specific technical assistance for aimed principally at MEPs. It contained key
draft legislation was published in April 2009. policymakers in the interests of securing the industry facts and figures and addressed some
The following is an overview of the key best possible outcome for our industry. of the main myths about the industry. It also
developments with the campaign. highlighted the social value provided by the
We have stressed our positive vision for industry - citing higher returns for pension
Please note that some of the hyperlinks in this the Directive, focusing on three elements: funds and other institutional investors, job
section are restricted to AIMA members. registration and authorisation, reporting of creation and tax revenues.
systemically relevant data and resolution of
Raising awareness cross border marketing issues. These elements
represented the G20 vision of regulation of the Position Paper
Whilst we support balanced and considered industry, which we support. We argued that if
regulation and indeed the broad principles the Directive featured these elements it would Our signature document on the Directive, our
contained in the Directive, we had reservations create a progressive framework for the industry AIFM Directive Position Paper, was published
regarding many of its proposals and their within the European Union that addressed in September 2009. It was the first document
potential to cause unintended consequences. concerns raised about systemic risk issues. that we provided to Member States who sought
The initial phase of our campaign was built our technical input on the Directive and was
around raising awareness of the provisions a substantial piece of work. You can read the
in the Directive with potentially serious Online Directive Centre Paper here and the Executive Summary here.
consequences for European pensions and
savings, commercial real estate, capital flows, We launched our online Directive Centre in
the competitiveness of EU financial services August 2009. The Directive Centre – intended Directive Rapporteur
and the desirability of Europe as a destination as an important resource for members and the
for international investment. media - contains everything relevant for our The Rapporteur who has been guiding the
campaign, including press releases, guidance Directive through the European Parliament,
Our campaign was a global one and emphasised notes, FAQs and other resource materials Jean-Paul Gauzès of the European People’s
that the draft Directive had ramifications for EU issued by AIMA; speeches and articles on the Party, was appointed in September 2009,
and non-EU fund managers, service providers Directive and links to relevant documents, along with several shadow rapporteurs. We
and investors. As investors such as European including the original draft Directive and details knew it would be vital that we liaise closely
pension funds became more aware of the threats of the legislative process; and a quotes section with M. Gauzès and the shadow rapporteurs,
posed by the Directive, increasing numbers featuring a host of different figures expressing and we issued a press release congratulating
began to come forward to voice their concerns. their opinions. You can access it here. the team on their appointment and saying we
In particular, the series of interventions by were looking forward to working with them on
a group of the largest pension funds in the the Directive. M. Gauzès produced his initial
Netherlands, who sent letters to the European Campaign intensifies report on the Directive in November 2009.
Commission and European Parliament, helped You can read it here, and you can read our
to expand the scope of the debate beyond the Amid our phase of engagement with statement on the report here. We noted that
hedge fund industry alone and gave additional policymakers, we sought to enlist as many while there were some areas of progress which
weight to our arguments. allies as possible. With both the European we welcomed, there were also many others of
Parliament and European Council studying the concern. It was notable at the time that M.
By the autumn of 2009, a broad consensus among proposals in parallel, we undertook intensive Gauzès said that his proposed changes to the
influential policymakers and commentators had meeting programmes with influential officials Directive were a “foundation, not a perfect
emerged that the Directive as originally drafted and policymakers in Brussels and across the finalised” solution and there were still “a lot
was flawed and required substantial revisions. EU. We met with key MEPs on the European of discussions to be had”.
There was a good example of this when Eddy Parliament’s ECON (Economic and Monetary
Wymeersch, Chairman of the Committee of Affairs) Committee and JURI (Legal Affairs)
European Securities Regulators (CESR), which Committee, and a number of Finance Ministers Swedish Presidency
represents the 27 EU regulators, said in October from the EU Member States. AIMA’s Andrew
2009 that the draft Directive was unworkable Baker also gave evidence to the U.K. House Sweden held the rotating Presidency of the EU
and needed a rethink (Reuters reported his of Lords committee looking at the Directive in during the second half of 2009 and invested
comments here). The success of the awareness- October – you can read a transcript of Andrew’s considerable resources in finding a compromise
raising phase of the campaign has meant that testimony here. to the Directive. Building on from the discussions
we have been able to move to a new phase of in the AIFMD Council Working Group, which was
engagement with policymakers in order to offer We also launched a newsletter for European formed in May 2009, the Swedes issued several
concrete, alternative solutions. policymakers in the fourth quarter of 2009. You compromise texts of the Directive. Their initial

AIFM DIRECTIVE CAMPAIGN
text is here. You can read a media statement Interaction with MEPs The Spanish produced their first document on
we issued after the first of these texts here. the Directive, an “issues note”, on 11 January
As part of our continuing dialogue with MEPs, 2010, which listed the remaining issues of
Subsequent compromise texts addressed the Andrew Baker addressed a lunch in Strasbourg contention – in line with those identified by
issue of remuneration. The Swedes initially in January 2010 of the Kangaroo Group of the Swedes at the end of their presidency. The
proposed a requirement to defer 40% or 60% MEPs, which campaigns for a completion of issues note is here. The tone of the document
of any bonus for three years, before amending the single market (see their website for more is noteworthy – they say the Swedish presidency
this to say that bonuses should be deferred information). Andrew stressed that the industry has done a “remarkable” job - something that
“over a period which is appropriate in view was keen to work closely with European concurs with what they have been telling us,
of the life cycle and redemption policy of the policymakers to achieve a positive result on the which is that they intend to continue the work
AIF concerned and is correctly aligned with the Directive, and his speech was well-received. of the Swedish.
nature of the risks of the AIF”. You can read Directive Rapporteur Jean-Paul Gauzès also
their 25 November 2009 text here. The section spoken at the event. On 1 February, the Spanish authorities published
on remuneration was on page 78, section (m). a compromise (found here). We understand that
this will be discussed at a series of meetings
The Swedes issued a progress report on Parliamentary amendments of the AIFMD Council Working Group. The
the Directive during the last days of their negotiations on the Directive are now entering
Presidency, which you can read here. They We produced a list of 80 preferred amendments a critical phase.
said that the four key remaining issues related to the draft Directive and passed them on to
to depositaries, valuation, remuneration and sympathetic MEPs before the 21 January 2010
third country issues. They acknowledged that deadline for submissions in order for them to Campaign contributions
there was a “high degree of convergence” of be proposed to the ECON committee. ECON
views on the rest of the text. They also issued is due to begin discussing the amendments Finally, we have been delighted by the
a final version of their compromise text of the on 22 February. Early indications are that we very positive response to our request
Directive, which you can read here. But they have been successful in having most, if not for voluntary contributions for our AIFM
were not able to reach a final compromise all, submitted to ECON. Directive campaign.
before the end of their term.
This has been the first time in the 20-year
In an update to members at the time, we said Spanish Presidency history of the Association that we have had
we believed that the Swedes had made useful to resort to such a call on our members and
progress during their Presidency but given that We held initial meetings with representatives of we are pleased to say that we are well on
the issues that remain to be resolved were the Spanish EU Presidency, both in Brussels and the way towards our target. It is gratifying
extremely significant for our industry, the in Madrid, before and immediately after the that the global hedge fund industry has
crucial question would be the attitude of the Spanish took over the rotating presidency of the responded to such a grave threat with this
subsequent Spanish Presidency. EU from Sweden at the beginning of 2010. display of unity.
AIFMD - Draft timeline for 2010: European Parliament and European Council

www.eurohedgesummit.com
EuroHedge
Summit 2010
21-22 April 2010, Palais de la Bourse, Paris
Strategies for a New Era

The EuroHedge Summit is a major hedge fund event which
attracts the industry’s elite from around the globe. Offering
incisive and topical content about hedge fund strategies it will
address the overall outlook for the hedge fund industry and the
financial markets.
Why you should attend the EuroHedge Summit?
• Reputation for being the leading hedge fund event in Europe

• Line-up of speakers that you will not find at other hedge fund events
• Up-to-date programme put together by our knowledgeable editorial staff
• Informal debate with senior level hedge fund mangers and investors
• Fantastic networking opportunity
• Two enjoyable days in the heart of Paris in the springtime
Register NOW and save 20%

Register before 19th February and receive 20% off the standard rates.
Don’t miss out, book your ticket now:
Ticket hotline: +44 (0) 20 7779 8999 www.eurohedgesummit.com
For sponsorship and exhibition Endorsed by
opportunities contact:
James Laight, T: +44 (0) 20 7779 7354
email: jlaight@hedgefundintelligence.com
H Full page forum Aima ad.indd 1 28/01/2010 15:53

Regulatory and taX
REG & TAX A round-up of recent developments

Please note that some of the hyperlinks in this a private reporting threshold of 2% would be Directive to derivatives and by giving regulators
section are restricted to AIMA members. more appropriate. We also proposed a similar the possibility to set position limits. The EC
level of 2% for public disclosure (in aggregated stated that the proposals will be in line with
EMEA and anonymised form only); the objectives agreed by the G20 and confirmed
- A T+1 disclosure timeframe is too short, that it is willing to work with authorities in other
AIFM Directive particularly given the global nature of the nations to avoid the risk of regulatory arbitrage.
business. We consider that a T+2 timeframe,
For information about the Directive, turn to linked to the home state regulator’s time zone,
the dedicated section on pp6-7. is more appropriate; and U.K. Financial Services Bill
- A global position-based reporting regime
should be agreed. The Financial Services Bill 2009-2010,
VAT in the European Union introduced to the House of Commons on 19
November 2009 and amended during the
New rules concerning, in particular, the place UCITS IV committee stage, has several provisions which
of supply of cross border business-to-business may be relevant to U.K.-based hedge fund
(B2B) services came into force across the On 28 October 2009, the Committee of European managers, including: new powers for the
European Union in January 2010. These rules Securities Regulators (CESR) published its Advice Financial Services Authority (FSA) to impose
will not generally affect managers but may to the European Commission in two key areas of short selling restrictions; powers for the
involve an additional administrative burden, the UCITS IV implementation process: level two FSA to develop rules on requiring regulated
through the requirement to submit quarterly measures relating to the Management Company firms to create and maintain recovery and
EU Sales Lists. Because the value added tax Passport; and the format and content of the resolution plans (known as “living wills”);
(VAT) exemption for the management of Key Investor Information Document. For more provisions providing powers to implement the
special investment funds is not harmonised, information, click here. recommendations of the Walker Review on
this reporting obligation will need to be remuneration; and the creation of a Council
determined on a case-by-case basis. Under the for Financial Stability to oversee systemic risk.
new rules, the basic rule for B2B supplies is OTC derivatives Details of the bill can be found here.
that the place of supply is where the customer
is established. Where an investment manager In October 2009, the European Commission (EC)
supplies services which previously have been adopted a Communication which aims to ensure Bank Payroll Tax
treated as taking place where the customer efficient, safe and sound derivatives markets.
belongs, those services will continue to be so The Communication, available here, set out The U.K. HM Revenue and Customs (HMRC)
treated. It remains the case, therefore, that a future policy actions following the consultation issued a short statement on 18 December 2009
UK investment manager providing investment in July 2009 and a public hearing the following clarifying the application and scope of the Bank
management services to a Cayman fund or an September. Payroll Tax (BPT) announced in the Pre Budget
Irish fund will not need to charge UK VAT. This Report of 9 December. The HMRC statement
Note to assist members has been prepared by The policy actions aim to: confirmed that stand-alone asset managers
Paul Hale of Simmons & Simmons, on behalf of - reduce counterparty risk, for example by would not be affected by the tax. However, it
AIMA’s Tax Committee. proposing legislation to establish common safety, seemed clear that, for businesses which are a
regulatory and operational standards for central division of a bank or a subsidiary of a banking
counterparties (CCPs) and raising capital charges group, it would be a matter of assessing on a
Short selling for bilaterally-cleared as opposed to CCP-cleared case-by-case basis whether the tax applies in
transactions; the case of employees to whom bonuses are
AIMA submitted its response to the CESR - reduce operational risk by promoting to be paid. For more information on the HMRC
Consultation Paper, Proposal for a Pan- standardisation of the legal terms of contracts statement, click here. For HMRC’s frequently-
European Short Selling Disclosure Regime, on and of contract-processing; asked questions, click here.
30 September 2009. Our response included the - increase transparency by, for example,
following points: requiring market participants to record positions
- There is a lack of evidence to support CESR’s and all transactions not cleared by a CCP in Funds Investing in
claims that short selling can/has been used trade repositories, regulating and supervising Non-Reporting Funds
abusively; trade repositories and increasing transparency
- Whilst we support private disclosure of short of trading as part of the review of the Markets HM Treasury (HMT) published draft regulations
positions to regulators (subject to a sensible in Financial Instruments Directive (MiFID) for for Funds Investing in Non-Reporting Funds
threshold), we strongly oppose public disclosure all derivatives markets including for commodity (FINROFs), relating to the awaited FSA’s Funds
of such positions. If data is to be made public, it derivatives; and of Alternative Investment Funds (FAIF) regime.
should be aggregated and anonymised; - enhance market integrity and oversight by Click here for more information.
- The private reporting threshold level of 0.1% clarifying and extending the scope of market
suggested by CESR is too low. We argued that manipulation as set out in the Market Abuse
(continued on page 10)

Regulatory and taX
(Continued from page 9)

to other FSA-authorised firms, nor to introduce (e) a new regime for foreign branches that
any new rules on remuneration for the time operate in the UK. The FSA is running briefing
Takeover Code being. In issuing its feedback, however, the FSA sessions in London and Edinburgh on the new
said that it would review the effectiveness of the liquidity requirements, with emphasis on the
The Takeover Panel issued Response remuneration code in mid-2010, when it would implications of the rule changes and how firms
Statements on 16 December on Extending the consider the lessons learned from last year’s are expected to comply. More information and
Code’s disclosure regime and Miscellaneous exercise. Click here for more information. a booking form is here.
Code amendments, further steps in its
consultation by PCP 2009/1 of May and PCP
2009/2 of July 2009. Click here for more on Short selling disclosure regime AMERICAS
both statements.
On 1 October 2009, the FSA issued its feedback Tax Extenders Act 2009
Our response to the consultation supported statement (FS09/4) on its February 2009
the opening position disclosure and Discussion Paper (DP09/1) regarding the The U.S. Tax Extenders Act was passed by
extended composite disclosure requirements long-term treatment of short selling. FS09/4 the House of Representatives on 9 December
(provided they were efficiently advised to confirmed that the FSA’s preferred policy 2009 and including the Foreign Account Tax
the market) and called for further industry approach remained substantially the same as Compliance Act (FATCA) and Taxation of
consultation before any further steps in set out in DP09/1. Carried Interest as Ordinary Income) would,
relation to the securities borrowing and if enacted, have a substantial impact on the
lending disclosure proposal. fund industry. Its provisions include those
Turner Review to: (1) increase withholding and reporting
obligations on payments made to certain non-
FSA fees and levies On 30 September 2009, the FSA published a U.S. persons, including investment funds; (2)
feedback statement on the Turner Review and subject certain gross payments to non-U.S.
AIMA submitted a response to the FSA its associated discussion paper (DP) of the persons made on specified Notional Principal
Consultation Paper, Regulatory fees and previous March. In its feedback statement, Contracts to a 30% withholding tax; and (3)
levies: policy proposals for 2010/11. We available here, the FSA noted that the key tax at ordinary income rates income earned on
made these main points on the proposed concerns raised by respondents were: (a) the “incentive allocations” or “carried interest”
shift to an income-based fee measure: importance of an international approach when by partners providing investment management
- it would, effectively, penalise small firms looking at policy options; (b) that any measures services to certain partnerships.
who charge performance fees and who, implemented by the UK alone could damage
typically, have a small number of larger London’s competitiveness; (c) large firms were
clients (funds) and relatively few approved against increased requirements for systemically Registration and reporting
persons; important firms; and (d) the need for an impact
- it could result in a much less reliable basis assessment of the ‘whole package’ of reform to The House of Representatives passed the Wall
for the FSA’s fee income as firms’ incomes, be carried out. Street Reform and Consumer Protection
especially performance fees, are volatile; Act (H.R. 4173) in December 2009. The bill
- the FSA should await testing of the income included proposals for financial regulatory
measure under FSCS in 2011, the implementation HMRC/HMT Seminar reform, protection of consumers and investors,
of RDR in 2012 and further analysis of likely insurance issues and regulating the over-the-
costs impact before any decision is taken to AIMA gave a seminar to more than 50 officials counter derivatives markets. It may mean that
proceed further with this proposal. Our full from HMRC and HMT. The seminar was an other proposals on derivatives (from the House
response can be found here. opportunity for HMRC and HMT to gain an Financial Services and Agriculture Committees
increased understanding of the issues that are and from Senator Christopher Dodd, chairman of
important to the hedge fund industry, and for the Senate Banking Committee) may not proceed.
Offshore Funds open discussion of relevant matters. For more information, click here.
HMRC published the Offshore Funds (Tax)

(Amendment) Regulations (SI 2009/3139) in UK liquidity requirements SEC Custody Rules
December 2009. The Regulations are available
here, accompanied by an Explanatory The FSA published its final rules on the liquidity The U.S. Securities and Exchange Commission
Memorandum. requirements expected of firms in November (SEC) published a change to Rule 206 of the
2009. The provisions set out in the rules include: Investment Advisers Act of 1940 applicable to
(a) an updated quantitative regime coupled SEC-registered investment advisers and coming
Financial services remuneration with a narrow definition of liquid assets; (b) into effect on 12 March, relating to custody of
over-arching principles of self-sufficiency and clients’ assets. The rules seek to address issues
The FSA issued a feedback statement (FS09/5) adequacy of liquid resources; (c) enhanced highlighted by the Madoff scheme in respect of
on 8 December 2009 with the welcome decision systems and controls requirements; (d) granular investment advisers retaining custody of client
not to extend its code on remuneration policies and more frequent reporting requirements; and assets. For more information, click here.

AIMA SPONSORING MEMBER
Thinking of re-domiciling your fund?

We’d be happy to talk.
PrimeFundSolutions
Since 1969, Prime Fund Solutions (PFS) has pioneered the provision of fund services and financing to
the alternative asset management industry. Drawing upon our vast experience and strong presence in
key locations – offshore and onshore – PFS is in a unique position to assist in the re-domiciliation of funds.
As well as our expertise, we offer a unique client-oriented operating model, employing a robust
global infrastructure and experienced staff. Our clients have come to expect operational excellence
and superior client service for their funds and for their most important asset, their investors.
If you are interested in discussing the re-domiciliation of funds, or would like further information
>LÕÌÊ ÕÀÊ ÃiÀÛViÃ]Ê «i>ÃiÊ VÌ>VÌ\Ê iiÛ>\Ê ³{£Ê xnÊ ÎÓÓÊ äÈÎÊ UÊ }Ê }\Ê ³nxÓÊ Î{£ÈÊ Èään
UÊ `\Ê ³{{Ê ÓäÊ Î£ÓÊ {ÎÇÊ UÊ ÕÝiLÕÀ}\Ê ³ÎxÓÊ ÓÇxäÊ x£ääÊ UÊ iÜÊ 9À\Ê ³£Ê È{ÈÊ {Î{Ê ä££ÈÊ
UÊ/Þ\Ê³n£ÎÊx{ÓxÊx£°Ê"ÀÊÛÃÌÊÕÀÊÃÌiÊ>ÌÊÜÜÜ°«ÀivÕ`ÃÕÌÃ°V
/ÃÊ>`ÛiÀÌÃiiÌÊÃÊÃÃÕi`ÊvÀÊvÀ>ÌÊ«ÕÀ«ÃiÃÊÞÊLÞÊÀÌÃÊ*ÀiÊÕ`Ê-ÕÌÃÊ1®ÊÌi`ÊÜVÊÃÊ>ÕÌÀÃi`Ê
>`ÊÀi}Õ>Ìi`ÊLÞÊÌiÊ>V>Ê-Õ«iÀÛÃÊÕÌÀÌÞÊÊÌiÊ1Ê>`ÊÃÊ>ÊiLiÀÊvÊÌiÊÀÌÃÊ*ÀiÊÕ`Ê-ÕÌÃÊ}ÀÕ«ÊvÊ
V«>iÃ°Ê/ÃÊ>`ÛiÀÌÃiiÌÊìÃÊÌÊVÃÌÌÕÌiÊ>ÊvviÀÊÌÊ«ÀÛìÊ>ÞÊÃiÀÛViÃÊÀÊwÊ>V>Ê«À`ÕVÌÃ°Ê
Press Clippings
MEDIA EYE International press coverage of AIMA and the industry
AIMA and the global industry we represent - U.K. newspapers the Sunday Telegraph campaign. In October, AIMA Canada’s Gary
receive regular and widespread media and City AM fought a campaign against Ostoich told Reuters that the Directive could
coverage in Europe, the U.S. and around the Directive. In this article to kick off its have a major impact on Canada’s hedge fund
the world. The following are some edited campaign, the Sunday Telegraph quoted industry. This statement came after the release
highlights, with hyerlinks to the relevant Andrew Baker extensively and said that we had of press releases in local markets around the
articles and broadcast clips, of the press led the lobbying effort against the proposal. world that set out the considerable impact of
coverage AIMA and the industry received Telegraph head of business Damian Reece the Directive beyond the EU’s borders.
during the latter part of 2009. called for “reform” here.
- The possible impact of the Directive on
Please note that some of the hyperlinks in this - The then Swedish Presidency of the European the Hong Kong hedge fund industry was
section will be restricted to subscribers of the Union published its proposed compromise reported by China Daily and the Hong Kong
relevant publications. text for the Directive in November 2009. AIMA Economic Journal, while Bloomberg assessed
issued this statement to the global media; we the Directive’s impact on Singapore and Hong
AIFM Directive also then issued a separate comment on the Kong and Super Review magazine of Australia
remuneration annex within the new Swedish reported that the Directive would affect
The Alternative Investment Fund Managers text, expressing our concern. This was Australian fund managers.
(AIFM) Directive dominated much of the reported by the Financial Times, Bloomberg,
coverage of AIMA and the industry during the Reuters and Global Pensions.
latter part of 2009. U.S. media coverage
- Andrew Baker gave evidence about the
The coverage included the following highlights Directive to the U.K. House of Lords, and the The latter part of 2009 was of course marked by
(note: some of the publications listed may full transcript of the hearing was published by a series of proposed legislative changes in the
require subscriptions): the Hedge Fund Journal. U.S.. These proposals culminated in December
2009 with House of Representatives voting in
- AIMA’s Andrew Baker appeared on World - In December 2009, Directive rapporteur support of a wide-ranging Wall Street Reform
Business Report on BBC1 and BBC World in Jean-Paul Gauzes published his proposed Act. The Senate is currently considering its
September 2009 to talk about the Directive. amendments to the draft legislation. AIMA version of the eventual legislation.
And we also recorded a TV clip of Andrew gave its initial response to the report in this
talking about the directive for our Directive media statement. The news was reported by As well as engaging with policymakers in
Centre on our website. You can see it here. a wide range of international and industry the U.S., AIMA released media statements
publications, many of which carried elements relating to the proposals on Capitol Hill. In our
- The results of a survey of AIMA members by of AIMA’s media statement. The coverage communications, such as this press release,
independent think-tank Open Europe drew included Hedge Funds Review, Opalesque, we reiterated our support for the registration
widespread media coverage. The survey Hedge Fund Journal and EurActiv. of U.S.-based hedge fund managers and the
concluded that the Directive could cost of the reporting of systemically relevant data to the
alternative investment industry $2.8 billion in - Even a European Parliament-commissioned SEC. But we made clear that we were worried
its first year and $1.4 billion a year thereafter. study questioned the rationale behind the about the potential for excessive reporting
The news was covered by, among others, Directive and argued that the legislation requirements overwhelming both regulators
Bloomberg, Reuters, the Daily Telegraph, could reduce the annual growth rate of the and managers.
and City AM. EU by as much as 0.2%. The news, including
AIMA’s response, was carried by a number In this media statement, we expressed
- In October 2009, Andrew discussed the of media outlets including the Wall Street concern that the asset threshold for the
progress of the campaign thus far in Hedge Journal and the Financial Times. proposed Systemic Resolution Fund – a pool
magazine and he considered the implications of capital that would be used to rescue firms
of the Directive on pension funds and other - Our campaign drew praise from a variety deemed too big to fail - would be set at $10
institutional investors in Pensions Insight. of quarters, including Hedge Funds billion for hedge funds yet $50 billion for all
The campaign also hit the airwaves, with Review, which said in December 2009 that other financial institutions and we called for
Andrew a regular fixture on TV and radio the association had “risen to new heights” a fairer and more proportionate measure.
reports, including this discussion on BBC and was fighting a “sustained and fairly This was picked up by a number publications
Radio 4’s World At One programme. effective campaign”. including HedgeCo.net, Hedgeweek, the
Hedge Fund Journal and Opalesque.
- Later in October, HFM Week quoted Andrew - In this article, columnist Simon Osborne of
expressing concern that the hedge fund magazine Asian Investor supported our policy Meanwhile, we conducted a series of
industry would only have a sole representative of constructive engagement with policymakers interviews with U.S. media organisations. The
at an important hearing of the European on the Directive. most extensive of these saw AIMA Chairman
Parliament’s Economic and Monetary Affairs Todd Groome interviewed at length by the
Committee on the Directive. - We have fought a global media Directive Hedge Fund Law Report in November 2009.

Press Clippings
Todd was invited to discuss some of the big articles by AIMA Hong Kong’s Christophe Lee, world that carried statements by Andrew
issues facing the global industry including Financial Secretary John Tsang, Simon Galpin Baker and AIMA Australia’s Kim Ivey.
regulation, disclosure, dual registration and of InvestHK and Robert Ray of CME Group.
short-selling. Singapore regulation: Hedge funds in Singapore
Hong Kong survey: A survey by AIMA Hong would “almost certainly” need to be licensed as
Kong that found the local hedge fund industry the central bank seeks to tighten regulation of
In brief employed about 4,000 people was reported the industry, AIMA Singapore’s Michael Coleman
by Bloomberg in November 2009. told Bloomberg in October 2009.
Todd Groome profile: Hedge Funds Review
published a profile of AIMA’s Todd Groome, which Hong Kong market: The Asset magazine Post-Madoff: AIMA Canada’s Gary Ostoich
reflected on Todd’s long career, his aspirations carried a lengthy article about the Hong Kong was among the Canadian hedge fund industry
for AIMA and his views on the industry. market based on an interview with AIMA Hong’s professionals quoted in a Reuters piece about
Christophe Lee. how the industry was rebuilding trust with its
Ex-Chairman wins award: Hedge Funds clients after the Madoff affair.
Review reported that AIMA Council member Short selling: The Guardian reported in
and former AIMA Chairman Christopher October 2009 that investors would have to AIMA Canada event: The outcome of an
Fawcett, senior partner at Fauchier Partners, disclose their short-selling positions in every AIMA Canada luncheon event in Toronto was
had won the 2009 European Long-term European company under EU proposals backed reported on by Reuters.
Achievement in Fund of Hedge Funds award. by the FSA. Andrew Baker was quoted as saying
the reporting threshold had been set too low. Cayman seminars: AIMA Cayman’s launch in
Hong Kong anniversary: The Hong Kong November of a number of seminars looking
Economic Times carried a full-page piece And Opalesque in November 2009 published a at the key elements of an investment fund
marking the 10th anniversary of AIMA Hong round-up of reforms to short-selling and other from a director’s perspective was covered by
Kong in November 2009 with messages and regulations in various jurisdictions around the Cayman Net News.
CAIA ASSOCIATION NEWS

Designation for AI professionals recognised worldwide
I
n 1999, there was no global standard of knowledge for the in its efforts to maintain the currency of its program. Candidates
alternative investment industry. AIMA helped change that in 2002 sitting for Level I and Level II exams in March 2010 will be the first
when it joined with CISDM (Center for International Securities to use the newly published CAIA Alternative Investment Knowledge
and Derivatives Markets) to co-found the Chartered Alternative Series. The series covers the information and associated skills
Investment Analyst (CAIA) designation program. required for all professionals working with alternative investments,
while allowing for the inclusion of future updates on a timely basis.
Today, just eight years later, more than 3,500 financial The series is the result of collaborative work with CAIA members,
professionals worldwide, many from AIMA member companies, industry experts, and academics, including Mark Anson, Ernest
have earned their CAIA designation. More will join the CAIA roster Jaffarian, François-Serge Lhabitant, Thomas Meyer, Pierre-Yves
after this year’s two exam cycles – in March and September Mathonet, Richard Spurgin, and David McCarthy.
2010. Members include a variety of professionals such as portfolio
managers, financial planners, institutional investors, consultants A mini quiz on the CAIA.org website allows AI savvy professionals to
and regulators. Their growing interest in creating AI communities test their knowledge before deciding on whether the program will
has helped launch 11 CAIA chapters worldwide, including add to their level of professionalism. Employees of AIMA member
chapters in London, Hong Kong and Germany. companies who are interested in taking the September 2010
exams are encouraged to sign up early in order to secure the early
As membership and reputation grow, the CAIA Association, which registration discount. Registration for the September exams will
is the sponsoring-body of the designation, has reached a milestone open in early April 2010.
As a founding sponsor of the Chartered Alternative Investment Analyst (CAIA) Association, AIMA is able to offer member
companies exclusive discounts on CAIA examination and membership fees.
Employees of AIMA member companies are eligible for a 25% discount off the standard CAIA examination fees, and receive 60%
off their first year of CAIA membership. For more information, see here.

AIMA National Groups
WORLD VIEW News round-up from AIMA’s National Groups around the world
AIMA is the only truly global hedge fund

association. As a global organisation, we are
uniquely positioned to address industry issues
from a worldwide perspective.
During the latter part of 2009, our various

National Groups around the world worked
on a wide range of initiatives. Please note
that some of the hyperlinks in this section are
restricted to AIMA members.
AIMA Australia
AIMA submitted a response to the Australian Tax AIMA has branch offices and National Groups around the world
Office’s Draft Tax Determinations (TD 2009/
D17 and TD 2009/D18) in February. The main
points in our submission concern the potentially federal Goods and Services Tax (GST) from 1 Council (Board of Directors). Mr Tye has been
negative effect for the Australian funds industry, July 2010. The result will be an increase in a senior fixture of the Asian finance industry
with regard to the issues for offshore domiciled taxes on fund management fees, rising from for the past 14 years. He co-founded
hedge funds and for Australian-sourced income 5% to 13% and 12% respectively. In addition, DragonBack in 2007 with his two partners.
for foreign investors. We hoped that the new rules came in at the start of 2010 which Previously, he was the Chief Financial Officer
recommendations for change made by the levelled the playing field between funds based of PMA, one of Asia’s biggest hedge fund
Australian Finance Centre Forum in its report in provinces having the higher melded tax rate, managers. He has also held senior positions
released by Ministers on 15 January, including and those having the lower tax rate under the with Credit Suisse.
an ‘investment manager regime’ to provide old provincial systems.
non-resident investors with a tax exemption in Meanwhile, AIMA Hong Kong formally celebrated
respect of investments in foreign assets through Meanwhile, AIMA Canada sponsored the sixth 10 years in the jurisdiction in November 2009
intermediaries, would be taken up. Annual Hedge Funds Care Canada gala at the with a cocktail reception at the Hong Kong
Royal Ontario Museum, Toronto in November Club. The event attracted a large gathering of
AIMA Australia also updated members about 2009. The event helped push the charity to participants, including representatives from
a short-selling regime that will be introduced over the $1 million mark in terms of funds the local hedge fund industry and international
on 1 April. The new system will see daily raised to prevent child abuse and neglect. guests, officiated by Financial Secretary John
disclosures of positions to the regulator and Tsang. The event was sponsored by InvestHK,
aggregated positions made available to the CME Group, Thomson Reuters, Prime Fund
market after only three days. AIMA Cayman Solutions and Ernst & Young.
AIMA Cayman launched a series of seminars

AIMA Canada for independent directors of hedge funds AIMA Singapore
during the latter part of 2009. The events
AIMA Canada updated members on regulatory also provided the local industry with useful AIMA Singapore carried out a survey of its
and tax developments. Instrument 31-103, networking opportunities. members and released the findings to the
which will affect many areas of the Canadian media. Among the survey’s findings were
alternative investment industry, was put into that Singapore is home to around 140 single-
effect by Canadian Securities Regulators at the AIMA Hong Kong strategy and about a dozen of funds of hedge
end of September 2009. funds. It was discovered that Singapore-based
AIMA Hong Kong liaised with the Securities and hedge fund firms had about $35 billion in assets
To help address some of the questions and Futures Commission (SFC) regarding the SFC’s under management (or about $300 million on
issues surrounding the new requirements and consultation paper on Short Selling Position average). In addition, the survey estimated
deadlines, AIMA Canada’s Legal and Finance Reporting and issued a response. AIMA Hong that the local hedge fund industry employs
Committee produced a special section on Kong also responded to the Financial Services more than 800 professionals.
AIMA Canada’s website, called Registration and the Treasury Board’s consultation paper on
Reform NI 31-103. Proposed Anti-Money Laundering Measures. On the regulatory front, AIMA Singapore
consulted AIMA members regarding the
AIMA Canada explained to members that AIMA was delighted to welcome Philip Tye, draft criteria for a new licensing regime for
Ontario and British Columbia would harmonize Partner and Chief Operating Officer of the jurisdiction proposed by the Monetary
their old provincial taxes on goods with the DragonBack Capital in Hong Kong, on to our Authority of Singapore (MAS).

THOUGHT LEADERSHIP article
REGULATION Tackling systemic risk

By Todd Groome, Chairman, AIMA
Policymakers looking to improve systemic risk and financial stability Improving transparency
analysis need to identify the key drivers of systemic risk, develop a
practical and effective reporting system for systemically-relevant A fundamental premise underpinning current policy discussions is a
information, and gather such data in an efficient manner from a desire to improve transparency; both at the market and counterparty
targeted group of financial institutions from all sectors. The hedge level, and with and among supervisors. As a matter of principle, this
fund industry is prepared to contribute to that analysis and process. basic premise and goal should be supported.
I
n the emerging sphere of supranational macro-prudential The global hedge fund industry, through the Alternative Investment
supervision, an important debate is progressing among Management Association (AIMA), its global association, in February
global policymakers. Throughout the G20, policymakers and 2009 (in advance of the G20 Finance Ministers meeting in London),
practitioners are attempting to solve one of the fundamental announced its support for a variety of policy initiatives focused on
challenges posed by the recent crisis: how to construct a global improving transparency, including mandatory manager registration
system of oversight and supervision capable of identifying the build- and the periodic reporting by larger managers of systemically-relevant
up of excesses and stresses in the financial system, and how best to information to supervisors and other macro-prudential authorities.
address such warning signs in a timely and effective manner. The goal
is to mitigate systemic risk and market melt-downs, and the related We understand that this could bring additional challenges, including
negative effects on the real economy. the risk of creating structures that may foster regulatory overload. As
such, it is important that (i) a macro-prudential or financial stability-
What are the key drivers of systemic risk or financial instability? This oriented reporting system be applied consistently on a global basis, (ii)
is an important starting point, and as fundamental as it seems, many only institutions that can practically contribute to this analysis should
policymakers today do not agree on the drivers or how to define be asked to incur the costs of doing so, (iii) supervisory capacity needs
these terms. to exist to effectively use this information, and (iv) all financial sectors
and relevant market participants are required to contribute.
Let’s assume that financial instability is more than market volatility
or individual firm failures, but involves such extreme volatility and Supervisory framework
market disruptions that key markets cease to function, including in
particular the failure of core financial functions such as the provision AIMA has been working with major national and supranational
of liquidity and credit. Such extreme events are often the product authorities to develop such a supervisory framework throughout 2009,
of strong procyclical forces, exacerbating market or economic and most supervisory authorities appreciate the challenges inherent in
adjustments, and the stakes are even higher today given the increased devising a reporting system for systemically-relevant information. The
inter-connectedness of global financial markets and institutions. data gathered needs to be relevant to the risks we seek to mitigate,
and it must be understood that neither the public nor the private sector
Thus, an important policy goal must be to better understand market can draw on infinite resources in this regard. Take a practical example:
dynamics, and to develop policies that reduce or modify a variety supervisors would gain little from scrutinizing every position taken by
of procyclical forces in markets (eg, fair value accounting, over- a hedge fund manager, or any other market participant. A reporting
reliance on risk-based capital and VAR-type models, and increasingly system seeking to gather too much information is more likely to conceal
common risk management models and practices within and across the building-up of risks than to uncover them, since red flags may
sectors), as well as the resulting procyclical behaviour of a broad remain hidden under a mass of data. Indeed, it is important to observe
group of market participants. Policy adjustments can reduce these and understand the larger picture, including market and institutional
procyclical drivers and facilitate more diverse market behaviour, and linkages, in order to evaluate systemic risks.
thus improve financial stability by reducing the “crowded response”
to market shocks. The primary goal of such reporting is to improve the supervisory
understanding of market dynamics, not to interfere in markets or to
It is widely acknowledged today that hedge funds were not a cause seek a “zero-failure” regime. However, the crisis has again raised
or a contributor to the systemic events of 2008. Indeed, hedge funds, questions over one of the guiding principles of prudential supervision,
as an important contributor to market liquidity and price discovery, that of “non-zero failure.” Policy-makers should recognize that they
typically provide important stabilizing and counter-cyclical influences to will not be able to prevent all failures; nor is that a desirable goal. In
a variety of markets. The diversity of investment strategies and trading an efficient and functioning market, some firms will fail, so the focus
styles evident in the hedge fund industry provide important market should be on creating brakes, buffers, or barriers in the system to
stability to the frequent herding behaviour evident in many traditional prevent cascading failures, as well as the means to efficiently reallocate
investment management and banking activities. capital to more productive uses. As a practical matter, based on a
variety of growing fiscal pressures, many governments may also be
For these same reasons, it is quite logical, even necessary, that increasingly unable or unwilling to pursue large bailouts and related
hedge funds contribute to the supervisory analysis of markets and stimulus programs.
systemic risk.
(Continued on page 16)

thought leadership article
Risk analysis
Previous G7 and Financial Stability Board (FSB) studies did not find
unique systemic risks created by hedge funds; in general or vis-a-vis What type of information should be gathered? Supervisors should
their systemically important bank and broker counterparties. And consider a range of issues, and look beyond the popular focus on
as concerns herding behavior, hedge fund managers by design look leverage. It is worth noting that the historic peak of average hedge
for value and opportunity away from the herd, as part and parcel of fund leverage, set in 2006, was $2.90 for every dollar invested
their efforts to generate investment outperformance. Indeed, on this (2.9 times assets), according to Credit Suisse - a miniscule level
issue, supervisory efforts may be better spent evaluating the market compared to the 30-50 times leverage employed by some of the
behaviour of other market participants. biggest banks at that time.
A few statistics may be instructive. The entire hedge fund industry During 2007 and 2008, the average leverage employed by hedge
manages assets worth about $1.5 trillion today. It may seem a funds was much lower. To better understand market and system
large number, but the broader asset management industry is vast risks, supervisors need to evaluate a variety of risk factors, such as
– around $62 trillion in assets under management by some estimates. (i) portfolio or balance sheet concentrations, (ii) historic and current
By that measure, hedge fund firms manage a little over 2% of all volatility levels across markets, (iii) very importantly, liquidity
professionally-managed assets. Of course, some banks manage more conditions on both sides of the balance sheet, and (iv) leverage
assets than the entire hedge fund industry, and do so with much levels, on and off-balance sheet, across institutions and sectors.
greater leverage. Understanding these risk factors, especially liquidity conditions,
should be of primary importance and produce a better analysis
Nevertheless, hedge funds should not – and do not - fly under the of systemic risk. This is also the type of risk analysis (in general
radar. Improving financial stability means empowering supervisors to terms) that major hedge fund managers conduct on a regular basis,
take a holistic view of the financial system. While hedge funds – and and possibly why numerous observers have concluded that risk
this is an important distinction - are not systemically “important” management systems at major hedge funds are typically of the
institutions based on the risk they pose to the financial system or the highest standard.
core services they provide, as mature market participants our industry
can and should contribute to financial stability analysis by providing Policymakers and regulators are not alone in the desire for
public authorities with systemically “relevant” information. It should greater financial stability; it is in the interests of everyone
also be noted that many of the largest hedge fund managers have operating in financial markets and the broader economy, including
been voluntarily sharing market and risk management information the alternative investment community. The G20, the FSB, the
with national and international authorities for many years. International Organization of Securities Commissions (IOSCO)
and national supervisors have made a significant commitment to
Which hedge fund managers should be asked to provide such improve financial stability.
information to supervisors? One criteria (not the only one) should be
assets under management – with managers having more than $1 billion As part of the new regulatory framework, the hedge fund industry and
in AUM, for example, required to comply with enhanced reporting AIMA are working closely with national and international supervisory
requirements. This would capture about 325 managers and about authorities, and fully support their efforts to create an effective
80% of assets managed by the global hedge fund industry; providing global macro-prudential system and reduce systemic risk. Otherwise,
both practical and relevant coverage. In this way, supervisors should we could all be left in the dark... again.
gain a useful view of market activity via the window of hedge fund
managers, including market trends and the possible build-up of various An abridged version of this article appeared in the Financial
types of risks across the financial system and sectors. Times’ FTfm supplement
OBITUARY Hedge fund industry loses another friend

By Florence Lombard, Executive Director, AIMA
P
aolo Cristofolini, a veteran of the the first ever European fund of hedge funds, the industry and how several years ago he
European hedge fund industry and a incorporated in Guernsey. Paolo went on had beaten a cancer scare with good humour.
member of AIMA for many years, was to set up Commodities Corporation, which Our sincere condolences go to Paolo’s family
killed by an avalanche in Verbier, Switzerland became the Geneva arm of Goldman Sachs and his many friends.
on 3 January 2010. Asset Management, then Agora Capital
Management. He also created a wine It has been a sad year for the European
Paolo was a personal friend of mine of more investment fund and was on the board of, or hedge fund industry, which has lost several
than 25 years. Together in 1989, before AIMA advised, several of our member companies. other ‘old’ friends, including Gilles Halna
was even thought of, under a joint venture He will be missed by all those who knew him. du Frètay, Tony Stocks, Thierry de la Ville
between Bearbull Asset Management and Personally, I will always remember him for Huchet, Jean-Pierre Aguilar and Steven
Elders Finance Group, we had established his extraordinary energy, passion for life and Krampf to name but a few.

from our members
From our members

We encourage all of our Members to contribute to the AIMA Journal. Anyone wishing to do so is invited to contact
the Coordinator of the Journal, AIMA Communications Officer Dominic Tonner, at dtonner@aima.org, or the Editor,
AIMA Director of Communications Christen Thomson, at cthomson@aima.org. We look forward to hearing from you.
IRISH OPPORTUNITY New Irish legislation will enable offshore fund companies
to migrate into Ireland
By Brian McDermott and Nollaig Greene, A&L Goodbody
I
reland has enacted new legislation to enable fund companies to - Minimise delays and unnecessary paperwork;
migrate into Ireland and be registered as Irish regulated funds
without any change in the legal entity. The process aims to - Make it easier to use the track record of the fund for marketing
maximise efficiency and to minimise any regulatory, tax or other purposes.
burdens on the migrating company.
The Irish limb of the process will be quite streamlined. It should, in
This new procedure will enable funds structured as companies to summary, involve a single filing of registration documentation with
convert to EU regulated funds, enjoying the market advantage of each of the Irish Companies Registration Office and the Irish Financial
recognised investor protection safeguards (such as independent Regulator.
custody and administration, including valuation). Migrating funds
will have the flexibility to structure as UCITS (with the benefit of the The following are the key steps and requirements:
UCITS passport), or as Irish Qualifying Investor Funds (with the benefit
of greater flexibility in investment options). Other reasons why funds - The migrating fund will apply to the Irish Registrar of Companies to
may migrate to Ireland would be to position themselves to deal with be registered in Ireland by way of continuation of existence.
the potential challenges presented by both the AIFM Directive (such
as the marketing of non EU funds in the EU) and OECD and EU tax - The application will be signed by a director of the migrating fund
initiatives affecting traditional offshore fund domiciles. and will be accompanied by the prescribed registration documents
(which will include a director’s statutory declaration in respect of
Ireland is estimated to service over 40% of global alternative the migrating fund and a declaration as to its solvency) as well as a
investment funds as at October 2009. As at June 2009, Ireland had further declaration as to compliance with the Act’s requirements by a
€1.4 trillion in total fund assets under administration, €650 billion solicitor or director.
of which are in non-domiciled funds and €703 billion in domiciled
funds, according to the Irish Funds Industry Association. Many offshore - The migrating fund must have obtained confirmation from the
funds are already serviced in Ireland and many fund promoters and Irish Financial Regulator that it proposes to authorise the applicant
investment managers may already have established funds in Ireland (whether as a UCITS or a non UCITS). This will mean that any migrating
and will be familiar, and comfortable, with the jurisdiction. fund will have to comply with all of the relevant requirements of
the Irish Financial Regulator. We anticipate that the finalisation of
To facilitate the migration of fund companies into Ireland, the documentation for the Irish Financial Regulator and the Irish Registrar
Companies (Miscellaneous Provisions) Act 2009 (the Act) was signed of Companies will run in parallel.
into law on 23 December 2009. It includes provisions which will enable
existing offshore fund companies to re-domicile to Ireland. This will be - The migrating fund must be solvent with no action pending to wind it
an alternative to such companies merging, or entering into a formal up or to appoint a liquidator to it.
scheme of amalgamation, with a successor Irish fund company (which
has, up until now, been the preferred method for fund companies to - Notice of redomiciliation must be served on the creditors of the
move to Ireland). The new process ensures that there is no change in migrating fund.
the legal entity and thus investors remain shareholders in the same
entity. This should: - Any necessary contractual consents must be obtained by the
migrating fund.
- Ensure there is no chargeable event for the fund or its investors as a
result of the migration as it will not involve a sale or transfer of assets - The migration process will be subject to compliance with the
or shares; relevant legislative and regulatory requirements in the country of
origin of the migrating fund and to compliance with the requirements
- Eliminate or significantly reduce stamp duties, other taxes and of the constitution of the migrating fund.
other costs relating to the migration as there will be no change in the
beneficial ownership of the fund’s assets;
(Continued on page 18)

from our members
has once again shown its commitment to the funds industry in Ireland.
We anticipate that the Irish Registrar of Companies will register the This development also demonstrates the ability of the funds industry
migrating fund and the Irish Financial Regulator will authorise the fund to work with the relevant authorities in Ireland in order to support and
on the same day. From the date of registration the migrating fund assist the delivery of measures which, it is believed, will be responsive
company shall be deemed to be a company formed under the Irish to the needs of the international funds community.
Companies Acts. Following such registration, the migrated fund must
then apply to be deregistered in its country of origin. Brian McDermott is head of the Investment Funds Unit and Nollaig
Greene is professional support lawyer in the Investment Funds Unit,
By enacting this legislation in a short timeframe, the Irish Government A&L Goodbody.
SHORT SELLING Impact on Australian stock prices

By Emily Stewart, Rick Steele, Ashley Young, TechInvest Pty Limited
Introduction Analysis
A
s a result of declining stock prices and increased volatility To test the null hypothesis of a statistically insignificant relationship
on the Australian Securities Exchange (ASX), the Australian between short selling and abnormal stock price movement, a linear
Securities and Investments Commission (ASIC) placed a regression model is created with the following specifications:
temporary ban on both naked and covered short selling of securities,
effective 22 September 20081. The ban was subsequently lifted on Model 1: Daily Returnt = α + β (Gross Short Salest) + εt.
non-financial stocks on 19 November 20082, on the condition that
brokers report their gross short sale positions to the ASX, which is Where:
subsequently released to the public at 9am the following day in the Daily Return6 = Daily stock price return adjusted for dividends (the
form of a Daily Gross Short Sales Report. Throughout the period of the dependent variable);
ban, restricted stocks were shorted as allowed by limited, authorised α = Intercept term;
market-makers. Following numerous reviews of the short selling β = Sensitivity of Daily Return to Gross Short Sales;
restrictions, which resulted in maintaining the ban on restricted stocks Gross Short Sales7 = Daily gross short sales as a percentage of shares
due to continued market volatility3, ASIC finally lifted the ban on the on issue (the independent variable);
remaining financial and selected stocks on 25 May 2009. ε = Error term.
Australia was one of the few developed countries to have continued The focus of the modelling is the estimated value for β, the sensitivity
to impose short selling restrictions on financial stocks and the only of a stock’s daily return to gross short sales, using a 5% level of
major developed market to have imposed a short selling ban on both significance.
4
financial and non-financial stocks . The restrictions were placed with
limited available evidence on the impact of short selling on stock In order to adjust the stock returns for movements in the overall
prices. market, a second linear regression model was created for each using
the relative daily return of the stocks (relative daily return) as the
The following examines whether, over the period that the ban was dependent variable, calculated as the stock’s daily return (adjusted
partially lifted, there is a relationship between reported short selling for dividends) less the daily return on the All Ordinaries Accumulation
and stock price movements. The models developed are intended to Index. The independent variable remained the same as in Model 1; the
be explanatory as opposed to predictive models, designed to explore reported gross short sales as a percentage of shares on issue:
whether there is any support for the populist argument that short
selling has affected stock price declines.
Method 1
D’Aloisio, T 08-205 Covered Short Selling not Permitted September 21, 2008.
2
Five additional non-financial securities remained subject to the short selling ban: Calliden
Data sample: Group Limited, Futuris Corporation Limited, The Rock Building Society Limited, Wesfarmers
Limited and Wide Bay Australia Ltd.

3
This study is based on the stocks comprising the S&P/ASX 20 as at 19 ASIC Extends Ban on Covered Short Selling of Financial Securities March 5, 2009. See also
November 2008. The S&P/ASX 20 represents the 20 largest stocks by Hamson et. al Has the Short Selling Ban Reduced Liquidity in the Australian Stock Market?
market capitalisation, which as at 19 November 2008 constituted 58% December 22, 2008 for analyses on volatility and the short selling restrictions.
of the All Ordinaries total market capitalisation5. Coincidently, the 4

See Marsh, W & Neimer, N Impact of Short Sales Restrictions on Share Prices November 30,
S&P/ASX 20 represents a 50/50 split of stocks that were released from 2008.
5
the provisions of the ban on 19 November 2008 (shortable stocks) and Figures obtained from IRESS Market Technology database and Standard and Poor’s.
6
those that remained under the restrictions of the short selling ban Data sourced from IRESS Market Technology (IRESS)
7
until 22 May 2009 (non-shortable stocks). The period covered is from Data sourced from the Daily Gross Short Sales report as published on asx.com.au
8
19 November 2008 to 22 May 2009; a total of 127 observations. Data sourced from IRESS

from our members
Table 1: Model 1 results

Shortable stocks (Model 1)
Stock Company name Industry group Gross short sales coefficient R2

(ASX code) estimate (p-value)
BHP BHP Billiton Limited Materials 11.67 (0.041)** 0.03

BXB Brambles Limited Commercial & Professional -1.15 (0.856) 0.00
Services
CSL CSL Limited Pharmaceuticals -0.74 (0.892) 0.00
FGL Foster’s Group Limited Food, Beverage, Tobacco 8.70 (0.033)** 0.04
NCM Newcrest Mining Limited Materials 8.69 (0.063)* 0.03
ORG Origin Energy Limited Energy 5.41 (0.481) 0.00
RIO Rio Tinto Limited Materials -6.22 (0.095)* 0.02
TLS Telstra Corporation Limited Telecommunications -7.09 (0.045)** 0.03
WOW Woolworths Limited Food & Staples -6.14 (0.165) 0.02
WPL Woodside Petroleum Limited Energy 9.54 (0.188) 0.01
Non-shortable stocks (Model 1)
2
Stock Company name Industry group Gross short sales coefficient R
AMP AMP Limited Insurance 17.33 (0.057) * 0.03
ANZ Australia and New Zealand Banks 4.47 (0.243) 0.01
Banking Group Limited
CBA Commonwealth Bank Banks -0.77 (0.903) 0.00
of Australia
MQG Macquarie Group Limited Diversified Financials 15.39 (0.140) 0.02
NAB National Australia Bank Ltd Banks 4.69 (0.260) 0.01
QBE QBE Insurance Group Limited Insurance 5.81 (0.249) 0.01
SUN Suncorp-Metway Limited Insurance 1.89 (0.620) 0.00
WBC Westpac Banking Corporation Banks 1.18 (0.710) 0.00
WDC Westfield Group Real Estate -6.00 (0.478) 0.00
WES Wesfarmers Limited Food & Staples 4.02 (0.126) 0.02
* statistically significant 1-tailed test result

** statistically significant 2-tailed test result
Model 2: Relative Daily Returnt = α + β (Gross Short Salest) + εt. indicating that share prices increased as gross short sales increased.
TLS, however, returned a negative gross short sales coefficient
Where: estimate, indicating that prices decreased with an increase in gross
Relative Daily Return8 = Daily stock price return adjusted for short sales. Using a one-tailed test, AMP, NCM and RIO produced a
dividends, less the daily return on the All Ordinaries Accumulation statistically significant relationship. AMP and NCM had positive short
Index (the dependent variable); sales coefficient estimates, while RIO returned a negative gross short
α = Intercept term; sales coefficient estimate.
β = Sensitivity of Relative Daily Return to Gross Short Sales;
Gross Short Sales = Daily gross short sales as a percentage of shares on Model 2 (turn to page 20), using relative share price returns as the
issue (the independent variable); dependent variable, produced statistically significant results using
ε = Error term. a two-tailed test for BHP and NAB. These stocks returned positive
gross short sales coefficient estimates, indicating relative share prices
Results increased as gross short sales increased. In the context of a one-
tailed test, MQG returned a statistically significant result, also with a
Model 1 produced three statistically significant relationships using a positive gross short sales coefficient estimate.
two-tailed test, namely BHP, FGL and TLS. Two of the three stocks,
BHP and FGL, had positive gross short sales coefficient estimates, (Continued on page 20)

from our members
Table 2: Model 2 results

Shortable Stocks (Model 2)
Stock Company name Industry group Gross short sales coefficient R2

BHP BHP Billiton Limited Materials 8.98 (0.021)** 0.04
BXB Brambles Limited Commercial & Professional -0.37 (0.950) 0.00
Services
CSL CSL Limited Pharmaceuticals -5.56 (0.314) 0.01
FGL Foster’s Group Limited Food, Beverage, Tobacco 5.71 (0.193) 0.01
NCM Newcrest Mining Limited Materials 7.63 (0.103) 0.02
ORG Origin Energy Limited Energy -3.12 (0.672) 0.00
RIO Rio Tinto Limited Materials -5.26 (0.103) 0.02
TLS Telstra Corporation Limited Telecommunications -6.70 (0.122) 0.02
WOW Woolworths Limited Food & Staples -2.40 (0.603) 0.00
WPL Woodside Petroleum Limited Energy 6.02 (0.255) 0.01
Non- Shortable Stocks (Model 2)
2
Stock Company name Industry group Gross short sales coefficient R
AMP AMP Limited Insurance 10.79 (0.165) 0.02
ANZ Australia and New Zealand Banking Banks 1.88 (0.507) 0.00
Group Limited
CBA Commonwealth Bank of Australia Banks -0.94 (0.841) 0.00
MQG Macquarie Group Limited Diversified Financials 15.92 (0.075)* 0.03
NAB National Australia Bank Limited Banks 6.22 (0.039)** 0.03
QBE QBE Insurance Group Limited Insurance 0.34 (0.938) 0.00
SUN Suncorp-Metway Limited Insurance 2.12 (0.528) 0.00
WBC Westpac Banking Corporation Banks -0.11 (0.961) 0.00
WDC Westfield Group Real Estate -4.05 (0.587) 0.00
WES Wesfarmers Limited Food & Staples 3.24 (0.138) 0.02
* statistically significant 1-tailed test result

** statistically significant 2-tailed test result
In summary, only one out of the 20 stocks analysed returned results ASIC Extends Ban on Covered Short Selling of Financial Securities
indicating a statistically significant negative relationship between www.asic.gov.au, 5 March 2009
stock price returns and gross short sales, using a two-tailed test. One
out of the 20 stocks analysed returned similar results using a one- D’Aloisio, T. and ASIC
tailed test. Where the dependent variable was relative stock price 08-205 Covered Short Selling not Permitted
returns, there was no statistically significant negative relationship www.asic.gov.au, 21 September 2005
using either two or one-tailed tests. In both models there were, in
fact, more instances of statistically significant positive relationships. Gardner, P. Hamson, D. Smith, G. and Wanzare, M.
This study should encourage further analyses as the results are Has the Short Selling Ban Reduced Liquidity in the Australian
inconsistent with the conventional wisdom that declining share prices Stock Market?
are associated with short selling. JASSA, The FINSIA Journal of Applied Finance, Issue 4, 2008 pp14-20
The authors are Emily Stewart, Rick Steele, Ashley Young, TechInvest Marsh, W. and Neimer, N.
Pty Limited (www.techinvest.com.au). The Impact of Short Sales Restrictions
17 December 2008
TechInvest is a member firm of AIMA Australia
Standard and Poor’s
Bibliography S&P/ASX All Ordinaries
19 November 2008
Australian Securities and Investment Commission

from our members
COUNTRY PROFILE Cayman hedge fund sector continues to grow

By Paul Govier, Joint Managing Partner and Head of Investment Funds, Maples and Calder, London
F
or over 20 years, the Cayman Islands has been a leading the opportunity of investing in the best offshore hedge funds and
jurisdiction for the establishment of hedge funds. But in the it looks likely that existing private placement rules will remain to
wake of the financial crisis, and the subsequent political allow offshore funds to be marketed in the EU. On the other side of
backlash and various proposed regulatory reforms for the hedge fund the Atlantic, the Obama Administration has introduced legislation
industry, it has been suggested that this position is being challenged. designed to attack so called “tax havens”; but the proposed US draft
This article analyses the recent statistics for fund launches in the legislation now looks a more proportional response and should not
Cayman Islands in order to identify any trend away from Cayman. The impact the Cayman model. The G20 and the OECD have committed to
results make for interesting reading. a global approach to the regulation of hedge funds and harmful tax
competition; Cayman has responded by agreeing to tax information
Statistics exchange agreements with major G20/EU nations. In addition, Cayman
has received positive reviews from the IMF and the UK Treasury.
At the end of December 2007, when the full extent of the credit Also last year, the Cayman Islands Monetary Authority became a
crunch and political response was yet to be realised, there were full member of IOSCO - acknowledgement that it is recognised by a
9,413 registered funds in the Cayman Islands. The vast majority of number of international bodies as meeting international standards.
these were hedge funds. Go forward two years, and substitute a
nascent economic crisis for a nascent economic recovery and many There has been investor pressure too. Some risk-averse investors
commentators would have you believe that the landscape has shifted have a preference for conservative strategies better suited to more
dramatically. Do the statistics bear them out? regulated products, such as UCITS funds. There are also certain
investors who, for political reasons, require an EU vehicle in which
According to the statistics available at the time of writing, there are to invest. But such regulation comes at a cost, restricting investment
9,862 investment funds established in the Cayman Islands. In other strategy and leverage flexibility and hampering performance.
words, the Cayman Islands has increased its total number of funds by Conversely, sophisticated investors and innovative managers often
449 (or 4.6%) since the economic crisis began. During this period, the prefer the Cayman model which allows for investment strategies
Cayman Islands has continued to launch in excess of 100 funds per which produce better risk adjusted returns. And Cayman embraces
month, with 1,365 new funds being launched during 2008 and 1,150 transparency – it was the first offshore hedge fund jurisdiction, for
new funds being launched in 2009. example, to introduce know-your-customer and anti-money laundering
rules and collect and publish statistical information on its industry.
Reasons for trend
There has also been domestic pressure. The Cayman Islands, like many
The Cayman Islands enjoys a position of dominance by virtue of a other nations, incurred a domestic deficit as a result of the global
combination of good luck and good judgement. Proximity to the USA economic crisis. However, the Cayman Islands acted quickly to address
certainly helped, but the Cayman Islands are by no means alone in the deficit, cutting expenditure and raising money through innovative
being in the right place at the right time. Perhaps more importantly, and incremental measures that will not impact on its vital offshore
the Cayman Islands implemented early on a regulatory regime that industry. It has also implemented initiatives to attract hedge fund
struck the right balance between flexibility and prudence and then managers and other foreign entrepreneurs to establish offices in the
applied an approach of, “if it ain’t broke, don’t fix it”. Cayman Islands to further bolster the economy into the future.
The Cayman Islands has also remained cost efficient, having increased Finally, most of the pressure felt by the Cayman Islands applies equally
its annual fees this year by a small amount; the first increase in to the alternative jurisdictions. All of the offshore jurisdictions,
over five years. As a result of years of gaining expertise in this field, and several onshore ones, have been subject to global pressure on
Cayman is now recognised as possessing vast experience in the hedge tax reform. Many of the regulatory initiatives will impact on them as
fund space which is difficult to replicate elsewhere. The Cayman well, even the AIFM Directive. And investors have been hurt badly in
hedge fund model, based on tax neutrality and professional efficiency, supposedly highly-regulated onshore jurisdictions.
has been reviewed extensively by counsel for managers and investors
and is regarded as a tried and tested model; robust enough to Conclusions
withstand the challenge of the credit crisis.
The choice of domicile for a new hedge fund is perhaps not as obvious
That is not to say that the inertia in favour of the Cayman Islands as it once was. However, the Cayman Islands continues to be the
has not been under pressure; but the offshore hedge fund industry preferred home for new and existing hedge funds. Investor appetite
has responded. for regulated products has fuelled an increase in activity in some
onshore centres, but on the whole for products that complement,
Firstly, there has been regulatory pressure. Certain drafts of the now rather than replace, an offshore hedge fund offering. Regulatory
notorious EU AIFM Directive include provisions designed to favour developments, particularly within the EU, may well change the
the distribution of EU domiciled funds within Europe - although landscape in the future. But for now, for most hedge fund managers,
European investors have lobbied hard to ensure they are not denied the status quo prevails.

NEW MEMBERS
New members of AIMA during Q4 2009
Membership of AIMA is corporate, thereby entitling all of your company’s principals to enjoy the many benefits.
For further details, please telephone John Stephens on +44 (0)20 7822 8380. Alternatively, you can email John at
jstephens@aima.org. We look forward to speaking with you.
All information supplied in the following member profiles has been provided by the member company and its accuracy is not
guaranteed by AIMA.
ALTER DOMUS Email: ckielland@btig.com.hk CHILTON INVESTMENT COMPANY

Country: Hong Kong Business activity: Other service providers Country: USA
Contact: Javed Rahman Website: www.btig.com Contact: Jennifer Duggins
Telephone: +852 3579 5858 Telephone: +1 203 352 4000
Email: javed.rahman@alterdomus.com Email: jduggins@chiltoninc.com
Business activity: Fund administration, BUTLER INVESTMENT MANAGERS Business activity: Hedge fund manager/adviser
accounting & custody services Country: UK Website: www.chiltonfunds.com
Website: www.alterdomus.com Contact: Lorna Nolan
Telephone: +44 (0)20 7319 7700
Email: lnolan@butler-ig.com CHINA ASSET MANAGEMENT (HONG
ARGYLE STREET MANAGEMENT Business activity: Hedge fund manager/adviser KONG)
Country: Hong Kong Country: Hong Kong
Contact: Angel Lo Contact: Iris Chen
Telephone: +852 2106 0888 CAPITAL FUND MANAGEMENT Telephone: +852 3406 8688
Email: angel.lo@asmhk.com Country: France Email: iris.chen@chinaamc.com
Business activity: Hedge fund manager/adviser Contact: Martin Tornqvist Business activity: Hedge fund manager/adviser
Telephone: +33 1 49 49 59 49 Website: www.chinaamc.com
Email: martin.tornqvist@cfm.fr
BATELEUR CAPITAL Business activity: Hedge fund manager/adviser
Country: South Africa Website: www.cfm.fr CMS BUREAU FRANCIS LEFEBVRE
Contact: Mark Williams Country: France
Telephone: +27 21 657 2100 Contact: Jérôme Sutour
Email: mark@bateleurcapital.com CAVENAGH CAPITAL Telephone: +33 1 47 38 55 00
Business activity: Hedge fund manager/adviser Country: Singapore Email: jerome.sutour@cms-bfl.com
Website: www.bateleurcapital.com Contact: Andrew Gale Business activity: Legal services
Telephone: +65 3125 2200 Website: www.cms-bfl.com
Email: andrew.gale@cavenaghcapital.com
BLACK CASTLE ASSET Business activity: Hedge fund manager/adviser
MANAGEMENT Website: www.cavenaghcapital.com CRYSTALLINE MANAGEMENT
Country: Switzerland Country: Canada
Contact: Serge Aerne Contact: Jean-Pierre Langevin
Telephone: +41 71 535 5015 CENTAUR FUND SERVICES Telephone: +1 514 284 0248
Email: s.aerne@black-castle.ch Country: Ireland Email: jplangevin@arbitrage-canada.com
Business activity: Hedge fund manager/adviser Contact: Ronan Daly Business activity: Hedge fund manager/adviser
Website: www.black-castle.ch Telephone: +353 1 899 2400 Website: www.arbitrage-canada.com
Email: ronan.daly@centaurfundservices.com
Business activity: Fund administration,
BLACKHEATH FUND MANAGEMENT accounting & custody services CSAM ASSET MANAGEMENT
Country: Canada Website: www.centaurfundservices.com Country: Singapore
Contact: Jennifer Coghill Contact: Gabor Marosi
Telephone: +1 416 363 2962 Telephone: +65 6823 1531
Email: jcoghill@blackheathfundmanagement.com CENTURION INVESTMENT Email: marosi@csamam.com.sg
Business activity: Hedge fund manager/adviser MANAGEMENT Business activity: Hedge fund manager/adviser
Website: www.blackheathfundmanagement.com Country: Singapore
Contact: Brian Wong
Telephone: +65 6338 3190 DYNAMIC CREDIT PARTNERS
BTIG HONG KONG Email: brianwong@centurion.sg Country: USA
Country: Hong Kong Business activity: Hedge fund manager/adviser Contact: James Finkel
Contact: Christian Kielland Website: www.centurion-investment.com Telephone: +1 212 319 7027
Telephone: +852 3416 5003 Email: jfinkel@dynamiccredit.com

NEW MEMBERS
Business activity: Hedge fund manager/adviser Email: gp@hadroncapital.com Email: jsilverstein@lowenstein.com

Website: www.dynamiccredit.com Business activity: Hedge fund manager/adviser Business activity: Legal services
Website: www.lowenstein.com
ELLIOTT ADVISORS (HK) HERSCHEL ASSET MANAGEMENT

Country: Hong Kong Country: Australia MACINTYRE HUDSON
Contact: Verman Wong Contact: Mark Burgess Country: UK
Telephone: +852 3558 1000 Telephone: +61 3 9631 4855 Contact: Chris Sutton
Email: vwmwong@elliottadvisors.hk Email: mark.burgess@herschel.com Telephone: +44 (0)20 7429 4100
Business activity: Hedge fund manager/adviser Business activity: Hedge fund manager/adviser Email: chris.sutton@mhllp.co.uk
Website: www.herschel.com Business activity: Accounting, audit, tax &
related services
ESEMPLIA EMERGING MARKETS Website: www.macintyrehudson.co.uk
Country: UK HILLTOP FUND MANAGEMENT
Contact: Jim Kandunias Country: UK
Telephone: +44 (0)20 7858 3000 Contact: Rory Hills MACROVALUE INVESTORS
Email: jim@esemplia.com Telephone: +44 (0)20 7788 7799 Country: Hong Kong
Business activity: Hedge fund manager/adviser Email: rory.hills@hilltop.co.uk Contact: Satoko Isobe
Website: www.esemplia.com Business activity: Hedge fund manager/adviser Telephone: +852 2523 9577
Website: www.hilltop.co.uk Email: satoko.isobe@macrovalue.com
Business activity: Hedge fund manager/adviser
GALILEO CAPITAL Website: www.macrovalue.com
Country: Switzerland INFINITY CAPITAL PARTNERS
Contact: Simon Collard Country: USA
Telephone: +41 22 700 6347 Contact: Sarah Wilde MAMO TCV ADVOCATES
Email: sc@galileo-cap.com Telephone: +1 678 904 6301 Country: Malta
Business activity: Hedge fund manager/adviser Email: swilde@infinityfunds.com Contact: Joseph Saliba
Website: www.galileo-cap.com Business activity: Allocator manager Telephone: +356 21 231 345
Website: www.infinityfunds.com Email: joseph.saliba@mamotcv.com
Business activity: Legal services
GLOBAL TRADING STRATEGIES (UK) Website: www.mamotcv.com
Country: UK JAMES CAIRD ASSET MANAGEMENT
Contact: Amie Chechkin Country: UK
Telephone: +44 (0)20 7665 6901 Contact: Amy Ward ML CAPITAL GROUP
Email: Amie.chechkin@gtsinvest.com Telephone: +44 (0)20 7073 2100 Country: Malta
Business activity: Other service providers Email: amy.ward@jcam.com Contact: Ronnie Tanti
Website: www.gtsinvest.com Business activity: Hedge fund manager/adviser Telephone: +356 213 348 01
Website: www.jcam.com Email: ronnie@mlcapital.com
Business activity: Consultant (investment)
GLOBAL TRADING STRATEGIES Website: www.mlcapital.com
INVESTMENT MANAGEMENT KINGSTON SMITH CONSULTING
Country: Australia Country: UK
Contact: Murray Chatfield Contact: David Morrey MOORE MANAGEMENT
Telephone: +612 9321 8531 Telephone: +44 (0)20 7566 4000 Country: Jersey, Channel Is.
Email: murray.chatfield@gtsinvest.com Email: dmorrey@kscllp.co.uk Contact: Patricia Remond
Business activity: Hedge fund manager/adviser Business activity: Consultant (compliance) Telephone: +44 (0)1534 822 500
Website: www.gtsinvest.com Website: www.kscllp.co.uk Email: patricia.redmond@mooregroupltd.com
Business activity: Fund administration,
accounting & custody services
GOODHART PARTNERS KIS CAPITAL PARTNERS Website: www.mooremanagement.com
Country: UK Country: Australia
Contact: Peter Taylor Contact: Mark McGuire
Telephone: +44 (0)20 7016 6080 Telephone: +612 8227 7100 OPVS GROUP
Email: ptaylor@goodhartpartners.com Email: mark.mcguire@kiscapital.com Country: Singapore
Business activity: Allocator manager Business activity: Hedge fund manager/adviser Contact: Nicholas Loh
Website: www.goodhartpartners.com Website: www.kiscapital.com Telephone: +65 6577 3177
Email: nicholas.loh@opvsgroup.com
HADRON CAPITAL LOWENSTEIN SANDLER Business activity: Hedge fund manager/adviser
Country: UK Country: USA Website: www.opvsgroup.com
Contact: Giorgia Pozzoli Contact: Jordana Silverstein
Telephone: +44 (0)20 7469 5900 Telephone: +1 212 262 6700 (Continued on page 24)

NEW MEMBERS

Website: www.quantumglobalfinancial.com THIRD POINT
ORYX INVESTMENT MANAGEMENT Country: USA
Country: South Africa Contact: Marc Zwebner
Contact: John Versfeld RATIONAL ASSET MANAGEMENT Telephone: +1 212 224 7400
Telephone: +27 21 673 5900 Country: USA Email: mzwebner@thirdpoint.com
Email: john@oryxim.co.za Contact: Danilo Santiago Business activity: Hedge fund manager/adviser
Business activity: Hedge fund manager/adviser Telephone: +1 646 652 8707 Website: www.thirdpoint.com
Website: www.oryxim.co.za Email: dsantiago@rationalasset.com
Website: www.rationalasset.com TIMOTHY LOH SOLICITORS
PANDA GLOBAL ADVISORS Country: Hong Kong
Country: USA Contact: Henri Arslanian
Contact: Hans Haywood SAM CAPITAL Telephone: +852 2899 0190
Telephone: +1 212 257 6745 Country: UK Email: harslanian@timothyloh.com
Email: hans.haywood@pandaglobaladvisors.com Contact: Dietmar Schmitt Business activity: Legal services
Business activity: Manager/advisor other Telephone: +44 (0)20 7427 0740 Website: www.timothyloh.com
Website: www.pandaglobaladvisors.com Email: dschmitt@samcapital.com
Website: www.samcapital.com TRIPLE THREE PARTNERS
PAUL, HASTINGS, JANOFSKY & Country: Australia
WALKER (EUROPE) Contact: Simon Ho
Country: UK SKANDINAVISKA ENSKILDA BANKEN Telephone: +61 2 9967 9778
Contact: Christian Parker AB (PUBL) LONDON BRANCH Email: sho@triple3p.com
Telephone: +44 (0)20 3023 5100 Country: UK Business activity: Hedge fund manager/adviser
Email: christianparker@paulhastings.com Contact: Magnus Ward Website: www.triple3p.com
Business activity: Legal services Telephone: +44 (0)20 7246 4285
Website: www.paulhastings.com Email: magnus.ward@seb.co.uk
Business activity: Prime brokerage services TT INTERNATIONAL (HONG KONG)
Website: www.seb.se Country: Hong Kong
PVE CAPITAL Contact: Quentin Burrows
Country: UK Telephone: +852 3476 6000
Contact: Joseph Vittoria STATISTICAL RESEARCH Email: burrowsq@ttint.com
Telephone: +44 (0)20 3206 7374 LABORATORY Business activity: Hedge fund manager/adviser
Email: jv@pvecapital.com Country: UK
Business activity: Hedge fund manager/adviser Contact: Dominic Wells-Cole
Telephone: +44 (0)20 3170 7775 WADHWANI ASSET MANAGEMENT
Email: dominic.wells-cole@srlglobal.com Country: UK
QBASIS FUND MANAGEMENT Business activity: Fund administration, Contact: Pradip Dasani
Country: Cayman Islands accounting & custody services Telephone: +44 (0)20 7663 3400
Contact: Michael Kuehn Website: www.managedaccountplatform.com Email: pradipd@waniasset.com
Telephone: +1 345 926 7265 Business activity: Hedge fund manager/adviser
Email: michael.kuehn@qbasisfund.com
Business activity: Hedge fund manager/adviser TANNENBAUM HELPERN SYRACUSE
& HIRSCHTRITT WITHERS BVI
Country: USA Country: British Virgin Islands
QUANTUM GLOBAL FINANCIAL CORP Contact: Michael Tannenbaum Contact: John Greenwood
Country: Canada Telephone: +1 212 508 6700 Telephone: +1 284 494 4949
Contact: Michele Vincenti Email: tannenbaum@thshlaw.com Email: john.greenwood@withersworldwide.com
Telephone: +1 250 588 6828 Business activity: Legal services Business activity: Legal services
Email: mvincenti@quantumglobalfinancial.com Website: www.thshlaw.com Website: www.withersworldwide.com
Contact
The Alternative Investment Management Association Ltd,
2nd Floor, 167 Fleet Street, London EC4A 2EA
Tel: +44 (0)20 7822 8380 Email: info@aima.org
Registered in England and Wales at the above address. Company No. 4437037 – VAT No. 577 5913 90

AIMA (Hedge Funds) Journal - Q1 2010

Uploaded by

Copyright:

Available Formats

AIMA (Hedge Funds) Journal - Q1 2010

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

AIMA (Hedge Funds) Journal - Q1 2010

Uploaded by

Copyright:

Available Formats

Alternative Investment Management Association

Q1 2010 www.aima.org No. 82

Address from the CEO Looking to the future with confidence

It is now almost exactly a year since we, as the global hedge

If the concern of international policymakers after the crisis was that

GLOBAL REVIEW What lies in store in 2010

2 AIMA Journal Q1 2010

1 Address from the CEO Looking to the future with confidence

2 global review What lies ahead in 2010 around the world

5 AIMA ANNIVERSARY A look back as we turn 20

5 FLORENCE LOMBARD A tribute to her 16 years of service at AIMA

6 DIRECTIVE CAMPAIGN How our AIFMD campaign has progressed

12 MEDIA EYE Media coverage of AIMA and the industry

15 thought leadership Tackling systemic risk by AIMA Chairman Todd Groome

16 OBITUARY The hedge fund industry loses another friend

17 irish opportunity A&L Goodbody on Ireland’s new funds legislation

18 SHORT SELLING TechInvest on the impact of Australia’s temporary ban

21 CAYMAN UPDATE Maples and Calder on Cayman’s post-crisis recovery

22 New Members AIMA members who joined in Q4 2009

24 Contact Us How to reach us

SPONSORING MEMBERS OF AIMA

AIMA Journal Q1 2010 3

Or contact: Sponsoring Member of:

Renaud Huck i\eXl[%_lZb7Zd\^iflg%Zfd "++)'..0-.('-

Pierre Prunier g`\ii\%gile`\i7Zd\^iflg%Zfd  "-,-,0*,,/)

KEY DATE AIMA to celebrate its 20th anniversary in 2010

Au revoir Florence Lombard to step down after 16 years with AIMA

AIMA Journal Q1 2010 5

AIFMD UPDATE How our AIFMD campaign has progressed

6 AIMA Journal Q1 2010

AIMA Journal Q1 2010 7

Strategies for a New Era

Why you should attend the EuroHedge Summit?

• Reputation for being the leading hedge fund event in Europe

Register NOW and save 20%

For sponsorship and exhibition Endorsed by

H Full page forum Aima ad.indd 1 28/01/2010 15:53

REG & TAX A round-up of recent developments

AIMA Journal Q1 2010 9

(Continued from page 9)

HMRC published the Offshore Funds (Tax)

10 AIMA Journal Q1 2010

Thinking of re-domiciling your fund?

MEDIA EYE International press coverage of AIMA and the industry

12 AIMA Journal Q1 2010

CAIA ASSOCIATION NEWS

AIMA Journal Q1 2010 13

AIMA is the only truly global hedge fund

During the latter part of 2009, our various

AIMA Cayman launched a series of seminars

14 AIMA Journal Q1 2010

REGULATION Tackling systemic risk

AIMA Journal Q1 2010 15

OBITUARY Hedge fund industry loses another friend

16 AIMA Journal Q1 2010

From our members

AIMA Journal Q1 2010 17

SHORT SELLING Impact on Australian stock prices

Limited and Wide Bay Australia Ltd.

Renaud Huck i\eXl[%_lZb7Zd\^iflg%Zfd "++)'..0-.('-

Pierre Prunier g`\ii\%gile`\i7Zd\^iflg%Zfd "-,-,0*,,/)