High compliance requirements for investments in offshore hedge funds deter many German investors from this asset class. How institutional investors can overcome regulatory hurdles and invest in offshore funds in a legally compliant manner was discussed by FERI experts with portfolio managers, legal experts and globally active hedge fund managers at the 10th FERI Hedge Fund Investment Day, which again took place as an online conference this year.
The total assets managed by hedge funds worldwide have risen to a new record level of almost four trillion US dollars by mid-2021. Large investors in Germany clearly prefer investments in regulated hedge funds (UCITS). Offshore investments, on the other hand, are often avoided due to concerns about legal restrictions. "On closer inspection, there is no reason for reservations about offshore funds. After all, the regulatory requirements can be met safely and quickly with a qualified and structured review," said Marcus Storr, Head of Alternative Investments FERI Trust GmbH. This also explicitly applies to investors who are subject to the German Insurance Supervision Act (VAG).
In order to enable institutional investors to better seize the opportunities of offshore hedge funds in the future, FERI has developed a special due diligence procedure in which the contracts between hedge fund provider and investor are scrutinised for all economically relevant points and accompanied by external legal advice. Among other things, the conditions and fees, the portfolio transparency, the responsible management, the investment policy as well as the extent of leverage and short sales are examined. A fixed component of the due diligence is also a detailed money laundering check, in which the shareholder structure and the composition of the fund investors are examined. "In this way, we want to encourage investors in Germany to become more involved in the attractive offshore sector in the future," added Storr. From the perspective of specialist legal advisors, initiatives such as FERI's due diligence are also important in helping offshore funds gain greater acceptance in Germany, he added. "A regulatory and economically clean audit of offshore hedge funds is the basis for a successful allocation in this exciting market segment," said Dr. Frank Wilbert, lawyer and partner at Luther Rechtsanwaltsgesellschaft mbH, Frankfurt am Main.
At the 10th FERI Hedge Fund Investment Day, institutional investors and portfolio managers discussed current developments in the hedge fund industry. Renowned hedge fund managers from Dubai, Dublin, Stockholm and New York also gave an insight into selected investment strategies.