Hedge Funds forum looks at local trends
Cayman Net News (Monday,  February 20, 2006)

Ross McDonough, Partner at Campbells, Alan Tooker,
ARC Directors and Allison Nolan, Athena International
Management

The recommendations for changes to the Mutual Funds Law were completed in 2004 so professionals within the hedge fund industry were very interested in the progress from Gary Linford, the Head of Investment and Securities Division at the Cayman Islands Monetary Authority (CIMA).

“The Mutual Fund Working Group completed its report in May 2004 and the Board of the Cayman Islands Monetary Authority approved those recommendations in August 2004 then we had Hurricane Ivan” said Mr Linford. 

“In early 2005 we were keen to get back into it but were facing elections in May. Since then the Financial Secretary has indicated that this will be a priority.” 

Mr Linford said there will be no fundamental changes to the Mutual Funds Law. One recommendation is to make a clear distinction between the retail and institutional market. Another proposal is to up the minimum investment to $100,000, which is in line with international standards. 

Numerous experts in the hedge fund industry spoke at the Cayman Fund Focus one-day conference at the Grand Cayman Marriott Beach Resort on 10 February.

Alistair Walters, Partner at Campbell said approximately 125 people attended the fourth annual conference that targets issues and trends that are specific to the Cayman Islands. 

“We perceived a need on the Island for a forum that would specifically address what is going on in the industry here,” said Mr Walters. 

“It seemed that people should not have to go off Island to big conferences that may only have a small portion affecting the industry in Cayman. So we deliberately tailored the conference to local audiences, which is very nuts and bolts on the daily operations of funds.”

Mr Walters said the conference is so successful that professionals from several overseas countries specifically came to Cayman to attend including guests from the Netherlands, British Virgin Islands, New York, London and Dublin.

Another hot issue at the conference were how the recent litigation in the Securities Exchange Commission (SEC) has impacted the industry. 

Keith Miller, a partner with Kirkpatrick & Lockhart, covered international litigation and regulatory development and how it impacts the Cayman Islands especially with the US Securities Exchange (SEC). 

“There is an emphasis by the SEC on trading violations such as short selling, soft selling, insider trading and front running ” said Mr Miller. 

Campbells Partner Ross McDonough discussed the consequences of a Cayman Fund being liquidated by a US receiver, especially when most of the assets are physically in the States. 

Robert Searle talked about the factors driving the phenomenal growth in US funds. 

“Hedge funds appear to continue to increase their investments in a range of asset classes which are inherently less liquid than conventional assets or whose liquidity is more likely to be reduced in times of market stress,” said Mr Searle.

He added that attempts by hedge funds to close illiquid positions at times of market turmoil do raise the possibility of volatile and disorderly markets.

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Based in the Cayman Islands, Athena International Management Limited is a sophisticated offshore provider of directorship services, primarily to the investment funds and structured finance industries, together with a comprehensive range of corporate services. For more information visit www.athena.ky