In partnership with:

IFSL RESEARCH
HEDGE FUNDS 2010
APRIL 2010 WWW.IFSL.ORG.UK

OVERVIEW

Global hedge fund assets under management posted strong gains for much of Chart 1 Global hedge funds
2009 following sharp falls seen in the previous year due to conditions brought
about by the global economic downturn. This IFSL report provides an
$bn assets (bars) Number (line)

overview of the global hedge funds industry with particular emphasis on

2,200 12,000

London’s role as the second largest global centre for hedge funds.
2,000
1,800

Assets under management of the hedge fund industry increased by 13% in

1,600 10,000

2009 to $1,700bn1 (Chart 1). This followed a 30% decline in the previous year.
1,400

Redemptions continued for the second year running, albeit at a slower pace.
1,200

The 19% return in 2009, the best hedge funds’ performance in a decade, more
8,000
1,000

than made up for the $85bn in net outflows. The number of hedge funds
800

totalled around 9,400 at the end of the year, a reduction of more than 1,000
600 6,000

from the peak seen two years earlier. New hedge fund launches however
400

exceeded the number of liquidations in the second half of 2009. Growth of

200

hedge fund industry assets is likely to continue in 2010 barring further

0 4,000
2000 2002 2004 2006 2008

economic turbulence or major regulatory changes.

2001 2003 2005 2007 2009
Source: IFSL estimates

The fund of hedge funds industry has been particularly affected by the
economic downturn and the reputational damage following the revealing of the
Madoff fraud in 2008. Assets of fund of funds totalled around $500bn at the
Chart 2 Liquidation of impaired assets
end of 2009, down 17% from the previous year, and over 40% below the peak
seen two years earlier. The proportion of single manager hedge fund assets
$bn Impaired assets Assets returned to

originating from fund of funds fell to 30% in 2009 from 40% a year earlier.
standard liquidity terms
174

Flow of funds The surge in redemptions which started in the latter part of 2008
145
41%

continued in the first half of 2009. Some hedge funds were forced to suspend
54%

redemptions because selling illiquid assets would have exposed the remaining
116 71%

investors to bigger potential losses. Firms more oriented towards institutional

86%

investors have fared better in this environment as institutional investors have

87

been less inclined to redeem assets. More than a half of impaired assets at the
58

end of 2008 were returned to standard liquidity terms by the end of 2009
59%
46%

(Chart 2). The asset raising environment slowly improved during 2009 with a
29 29%

return to net asset inflows in the second half of the year (Chart 3).
14%
0
Q1 2009 Q2 2009 Q3 2009 Q4 2009

Location of management The US was the largest management centre for

1
$174bn global assets estimated as impaired at end-2008

hedge funds with 68% of the total at the end of 2009, down from 82% a decade
Source: Credit Suisse / Tremont Hedge Index

earlier. Europe followed with 23% and Asia 6%.

New York is the world’s leading centre for hedge fund managers, followed by
London. IFSL estimates that around 41% of global hedge fund assets were
managed from New York in 2009, down from over 50% at the start of the
decade. London’s 20% share of the global total was unchanged from the
previous year. London is by far the largest centre in Europe for the management
of hedge funds. At the end of 2009, three-quarters of European hedge fund
assets totalling nearly $400bn were managed out of the UK, predominantly
from London. The UK is also a leading centre for hedge fund services such as
administration, prime brokerage, custody and auditing.
1 Estimates of the size of the hedge fund industry vary due to restrictions imposed on advertising and 1
reporting of performance by hedge funds. As there are no authoritative estimates this report is based on
commercial databases and index providers which rely on information provided voluntarily.
April 2010 Hedge Funds

THE GLOBAL HEDGE FUNDS Chart 3 Net asset flow

INDUSTRY

Assets under management of the hedge

$bn Net asset flow Returns

fund industry increased by 13% in 2009

250 150

to $1,700bn (Chart 1). This follows a

200
100

30% decline in the previous year.

150

Redemptions continued for the second

100 50

year running, albeit at a slower pace.

50
0

Strong performance in 2009 however

0
-50

more than made up for the $85bn in net

-50
-100

outflows. -150 -100

-200

Flow of funds The surge in redemptions -300

-150
-250

which started in the latter part of 2008

-200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 q3 q4 q1 q2 q3 q4

continued in the first half of 2009. Source: IFSL estimates

2008 2009

Hedge funds more oriented towards

institutional investors have fared better in this environment as they have been
less inclined to redeem assets. Some hedge funds were forced to suspend
Chart 4 Hedge fund launches and

redemptions towards the end of 2008 because selling illiquid assets would have Number
liquidations

exposed remaining investors to bigger potential losses. More than a half of 2,500
these impaired assets were returned to standard liquidity terms by the end of 2,000
Launched

2009 (Chart 2). The asset raising environment slowly improved during 2009
Liquidated

with a return to net asset inflows in the second half of the year (Chart 3). 1,500

Number of hedge funds The number of hedge funds totalled around 9,400 at
1,000

the end of 2009. Three-quarters of these were single manager hedge funds and
500

the remainder fund of hedge funds. This 2009 total represents a reduction of 0

more than 1,000 from the peak seen two years earlier (Chart 4). The fall was
caused by funds closing due to losses, lack of liquidity and redemptions as
-500

investors looked for safer investments. New hedge fund launches however
-1,000

exceeded the number of liquidations in the second half of 2009. -1,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Employment According to the Alternative Investment Management

Source: IFSL estimates

Association (AIMA), the UK hedge fund industry employs around 40,000

people. Around 10,000 of these are directly employed by hedge funds and the
Chart 5 Management location of global
remainder among the industry’s advisers and service providers. The hedge fund
hedge fund assets

industry employs some 150,000 people worldwide.

% share of assets under management
100 1%
5% 3%

Geographical distribution of hedge funds

6%
12%
80 23%

Domicile of fund Hedge funds can be registered in onshore or offshore

locations. Around 60% of the number of hedge funds in 2009 were registered
60

in offshore locations. The Cayman Islands was the most popular registration
location and accounted for 39% of the number of global hedge funds. It was
40 82%

followed by Delaware (US) 27%, British Virgin Islands 7% and Bermuda 5%.
68%

Around 5% of global hedge funds are registered in the EU, primarily in Ireland
20

and Luxembourg. 0

Location of management Hedge funds are predominantly managed from

2002 2003 2004 2005 2006 2007 2008 2009

onshore locations. The US is by far the leading location for management of

US Europe Asia Other
Source: IFSL estimates

2
April 2010 Hedge Funds

hedge fund assets with over two-thirds of the Chart 6 Top hedge fund cities
total. Its share, however, was well below its
80% share at the start of the decade. Europe % share of total hedge
doubled its share during this period (Chart 5). fund
% share of largest 100 hedge
assets by location of London funds assets by location of
manager manager

New York is the world’s leading centre for

New York
55

managers of hedge funds, followed by

50 Other

London. IFSL estimates that 41% of global

New York
45 San Francisco 11%

hedge fund assets were managed from New

40 Wesport 3%
4%

York in 2009, down from over 50% at the

35
Greenwich 6%

start of the decade (Chart 6). London’s

30 47%
25

20% share of the global total was unchanged

20 Boston 7%

from the previous year. A breakdown by

15

management location of the largest 100

10 21%

hedge funds shows that New York

5 London

accounted for 47% of assets in 2009,

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

followed by London 21%, Boston 7% and

Source: IFSL estimates

Greenwich 6%.

London is much the largest centre in Europe

Chart 7 European based hedge funds market

for the management of hedge funds.

According to Eurohedge data, at the end of
% share, 2009
$bn Number

2009, 76% of European single manager

600 Assets $bn 2,000
Number of funds

hedge fund assets totalling $382bn were

Other
500

managed out of the UK, the vast majority

US
Netherlands 2% 9%
1,500 France 2% UK

from London (Chart 7). London’s share was

2%
400 Switzerland 4%

up slightly from 75% in the previous year. If

Sweden 5%

fund of funds’ assets are taken into account,

300 1,000 76%

London probably accounts for close to 90%

of hedge funds assets managed in Europe.
200

There were nearly 1,400 European-based

500

hedge funds in 2009, of which two-thirds

100

were located in London. Other important 0 0 Total: $382bn

locations for hedge fund managers in

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Europe include France, Switzerland and

Source: Eurohedge

Sweden.
Chart 8 Global hedge fund returns
Many hedge funds in Europe have recently launched UCITS III compliant
stand-alone onshore fund vehicles which are allowed to be distributed
average annual return, %

throughout the EU to institutional and retail clients. These funds employ a

30

range of strategies that use derivatives and limited leverage within a regulated 25

framework. A Deutsche Bank survey recorded a 50% growth in 2009 of UCITS

assets under management and
20

found that 35% of investors in its Table 1 UCITS Absolute Return Funds
15

survey plan to allocate to such

10

funds in 2010. The UK is the end-2009

5

dominant centre in this area and France

Number $bn, assets
UK 72 14.4 0

accounts for about a half of Luxembourg

21 4.6 -5

assets under management and

9 4.4
Sweden 3 2.3 -10

number of funds (Table 1).

Italy 3 1.1
Others -15
38 3.5 1998 2000 2002 2004 2006 2008

Despite the global economic

Total 146 30.3 1999 2001 2003 2005 2007 2009
Source: Hedgefund Intelligence Source: Hedgefund Intelligence

3
April 2010 Hedge Funds

slowdown, London retains its structural advantages which make it an attractive

location for hedge fund management. These include its local expertise, the
Chart 9 Asset flows by sector

proximity of clients and markets and a strong asset management industry.

London is also a leading centre for hedge fund services such as administration,
$bn
-4.8

prime brokerage, custody and auditing. With around a half of European

Convertible Arbitrage H1-2009 -0.9

investment banking activity conducted through London, it is a natural location

Dedicated Short Bias H2-2009 -0.7
0.1

for prime brokerage services.

-6.0
Emerging Markets
0.7
-0.4

Asia, and more particularly China, is taking on a more important role in the
Equity Market Neutral
2.2

global hedge fund industry more as a source of funds than a location for
Event Driven -26.5
6.7

management. The UK and the US are leading locations for management of

-6.1
Fixed Income Arbitrage

Asian hedge funds’ assets with around a quarter of the total each. Other
-1.3
-6.5

important centres include Hong Kong, Australia, Singapore and Japan.

Global Macro
1.8
-20.6
Long/Short Equity

HEDGE FUNDS’ RETURNS AND INVESTMENT STRATEGIES

7.1
Managed Futures 0.2
2.9

Hedge funds’ 2009 return globally averaged 19%, the highest for a decade
Multi-Strategy -19.5
-1.7

(Chart 8). This comes just one year after hedge funds posted the worst
-30 -25 -20 -15 -10 -5 0 5 10

annual loss in history brought about by the falls in equity markets, a ban on
Source: Credit Suisse/Tremont Hedge Fund Index

short-selling and pressure to liquidate positions to meet margin and redemption

calls. As market conditions improved in 2009 and equity markets recovered,
Chart 10 Global hedge funds by source
of capital
hedge funds saw positive performance across most strategies. The 2009 return
was lower than the 27% return on the MSCI World Index but much higher than
% share
100

the 6.9% of the Barclays Capital Global Aggregate Bond Index.

8% 8% 8% 7% 12% 14%
90 10% 9% 9% 7%
80 12% 12% 12%

Hedge funds investment strategies vary enormously. Strategies may be

10% 15% 15%
70

designed to be directional (which try to anticipate market movements) or

14%
18% 19%
60

market-neutral (which have low correlation to the market movements). Equity

20% 24% 30%
50

long/short strategies typically account for the leading share of strategies. While
31%
40 29%

nine out of ten of the most common investments strategies saw a net outflow
30 54%

of funds in the first half of 2009, only four experienced outflows in the second
48% 44%
20 44%

half of the year. Long/short equity, event driven, managed futures saw the
31% 26%
10

biggest inflows in the second half of the year (Chart 9).

0
1999 2001 2003 2005 2007 2009

SOURCES OF FUNDS
Individuals Fund of funds Pension funds
Corporations Endowments and foundations

Institutional investors are the biggest source of

Source: Hennessee Group LLC

capital for hedge funds, having overtaken high net

worth individuals in 2008. Funds with a higher
Chart 11 Institutional investors in hedge funds

proportion of institutional investors fared better in

market conditions of falling liquidity in 2008 and
% share, 2009

the early part of 2009. A breakdown of institutional

by type of investor by originating country

investors by type of investor shows that fund of

Other Fund of hedge Other

hedge funds accounted for 24% of assets, followed

funds
12%
Asset managers 20%

by public pension funds 17%, endowment plans

6% 24%
US

14% and private pension funds 14% (Charts 10 and

Germany
2%
Canada 3%

11). The geographical breakdown of institutional

Family offices 13% 52%
Australia 3%

investors shows that more than a half originate in

17% 5%
Switzerland

the US, followed by the UK 14% and Switzerland

14%
14%

5%.
14% Public pension
funds UK
Private pension funds
Endowment plans

Fund of hedge funds’ assets totalled around $500bn

or some 30% of global hedge fund assets. This was
Source: Preqin

4
April 2010 Hedge Funds

down 17% from the previous Table 2 Largest hedge funds Chart 12 Global Fund of Hedge Funds
year and nearly a half below the industry
peak seen two years earlier Largest hedge funds ( January 2010) $bn, assets under Number of

(Charts 12 and 13). The value of 1. JP Morgan

$bn management funds

the industry’s assets began to fall 2. Bridgewater Associates

50.4 900 3,500
43.6

in mid-2008 as investors began 4. Brevan Howard Asset Management LLP

3. Paulson & Co. 32.0 800

converting their investments into 5. Soros Fund Management

27.9 3,000
700

cash due to widespread losses in 7. Och-Ziff Capital Management Group

27.0
6. D.E. Shaw Group 23.6 600

the hedge funds industry. The 8. Baupost Group

23.5 2,500

fall in reputation of the industry

21.8 500
9. Man AHL 21.7

following the revealing of the Source: Hedgefund Intelligence

400
10. Angelo, Gordon & Co. 20.8 2,000

Bernard Madoff fraud in 2008

300

also contributed to the decline. Adding to this, fund of hedge funds

200 1,500

significantly underperformed hedge funds in 2009 with around 10% in returns 100

in 2009, much less than the 19% made by the hedge funds industry. 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1,000

The breakdown of hedge funds of funds by manager location shows that around
Sources: IFSL estimates

a quarter of assets were managed from the UK. The US was the most popular
location with around 30% of the market. Switzerland, France and Hong Kong Chart 13 Single-manager hedge fund capital
were also important centres. To deal with the decline in assets many fund of
provided by funds of hedge funds
funds were forced to reduce management and performance fees in order to % share

attract new investments and retain existing customers. The number of

publicly quoted hedge fund of funds has increased over the past decade. Most
40

of these listings are on the London and Zurich exchanges. The London Stock
35

Exchange overtook Zurich in 2006 to become the location of choice for funds
30

of hedge funds listings. 25

Secondary market for hedge funds is a market where investors can buy into
20

some hedge funds at a discount to net asset value. This is an OTC market where
15

each deal is individually priced and structured. The secondary hedge funds
10

market allows investors to sell stakes in funds that have lockups or have 5

limited redemptions. It also lets others into funds that aren't accepting new
investors. As record investor redemptions swept over the industry in late 2008
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

and restrictions on redemptions imposed by some hedge funds increased, many Sources: IFSL estimates

investors turned to the secondary market to try to sell their stakes. In December
2009, Hedgebay, one of the leading players in secondary market-making for
hedge funds, saw its global hedge funds secondary market index drop to a
Chart 14 Concentration of hedge fund

record low, to just under 80% of the average net asset value.
assets
% share, 2009

LARGEST HEDGE FUNDS 100

The hedge fund industry has become more concentrated at the top end over the
30%

past decade. With fund closures on the rise and new launches on the decline for
80

much of 2008 and 2009 consolidation intensified. The industry will probably
be characterised by a greater concentration of assets in the large funds in the
60 99%

next few years. The top 100 hedge funds accounted for around 70% of total
industry assets in 2009, up from 54% in 2003 (Chart 14). JP Morgan was the
40
70%

largest hedge fund with $50bn under management in January 2010 (Table 2). It
was followed by Bridgewater Associates $44bn and Paulson & Co $32bn. The
20

8% hedge fund attrition rate in 2009 was down on the previous year but much
higher than the 3% to 5% range seen over the previous 10 years (Chart 15).
0 1%
Funds Assets
Source: IFSL estimates

5
 April 2010 Hedge Funds

PROVIDERS OF SERVICES TO HEDGE FUNDS

Chart 15 Hedge fund attrition rates
Prime brokers offer brokerage and other professional services to hedge funds
and other large institutional customers. Rather than providing particular niche
% share

services, prime brokers offer a diverse range of services including: financing,

14

clearing and settlement of trades, custodial services, risk management and 12

operational support facilities (Chart 16). The bulk of prime brokers’ income
comes from cash lending to support leverage and stock lending to facilitate
10

short selling, both areas that have been affected to a large extent in 2008 and 8

early part of 2009 by redemptions and a general decline in hedge funds’

leverage levels. London is Europe’s leading centre for prime brokerage
6

services and accounts for more than 90% of its activity, as the largest
investment banks that provide these services are either headquartered or have
4

a major office there.

2

Major restructuring occurred amongst prime brokers in 2008 and 2009

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

such as the acquisition of Bear Stearns by JP Morgan, the takeover of Lehman

Sources: Hennessee Group; IFSL estimates

Brothers by Barclays Capital and the acquisition of Merrill Lynch by Bank of

America. This resulted in a shift in market share from some former investment
banks to commercial banks. Goldman Sachs and JP Morgan were the largest
prime brokers in 2009 each with around a fifth of the market. Morgan Stanley
saw the biggest decline in its market share, dropping to 13.5% in 2009 from
Chart 16 Types of services provided to

20% in 2008 (Table 3). According to the Financial Services Authority, the
hedge funds by prime brokers

average margin requirement of prime brokers increased from around 25% in

% share of banks surveyed
providing a service, 2004

2007 to nearly 40% in October 2009 (Chart 18). This is likely to drop in 2010
as liquidity continues to return to the industry. Hedge funds leverage increased
Securities lending 70%

to an average of around 1.50 in 2009 from 1.10 in 2008, almost back to levels
Cash lending 55%

in the years preceding the credit crisis (Chart 19).

Trade execution 50%

Clearance & settl. 45%

Fund administrators The extent to which hedge fund managers outsource

Fund administ. 40%

administrative functions such as accounting, investor services or risk analysis Custody services 40%

varies widely. Assets under administration by third-party hedge fund Risk Management
administrators fell by around 2% in the first half of 2009 following a 30% fall Capital introduct.
30%

in 2008. Citco Fund Services retained its position as the largest hedge fund
25%

administrator despite a 9% fall in assets under management in the second half

Credit lines 20%

of 2009 to $340bn. It was followed by State Street Alternative Investment Source: Banking Supervision Comittee, ECB
0 10 20 30 40 50 60 70 80

Solutions and The Bank of New York Mellon (Table 4). There may be an
increase in the outsourcing of administrative functions in the coming years as
hedge funds will be looking to reassure their clients due to the fall in reputation
of the industry following the Madoff fraud and the
suspension of redemptions by a number of funds in the Chart 17 Structure of a typical hedge fund
latter part of 2008.
Managers of offshore hedge funds typically rely on offshore
Investors

administrators for various types of services and operational

support. In addition to helping set up the offshore fund,
offshore administrators may also provide accounting and
Fund
Hedge fund Custodian

reporting services; offer advice on an ongoing basis with

Administrator

reference to complying with applicable laws; or offer

independent pricing of a fund’s portfolio of securities. Some Hedge Fund Manager Prime broker/dealer

offshore locations may subject the administrators to

licensing and auditing requirements.
1
Dashed lines indicate optional relationships
Sources: AIMA and ASSIRT Hedge Fund Booklet

6
April 2010 Hedge Funds

Custody Hedge fund assets are Table 3 Largest hedge fund prime brokers
generally held with a custodian,
Table 4 Largest hedge fund administrators

including cash in the fund as well Jan-2009 Jan-2008 end-June 2009 Growth from

as the actual securities. The flow Goldman Sachs

% share % share $bn 2008 (%)

of capital capital to meet margin JP Morgan

19.1 18.5 Citco Fund Services 340 -9
State Street Altern. Invest. Solutions
calls may also be controlled by Morgan
18.8 - 208 -14
Stanley 13.5 20.0 The Bank of New York Mellon 159 7

custodians.
UBS 6.9 7.8 Goldman Sachs Admin. Services 156 -14
Deutsche Bank 6.6 5.9 Citi 129 -14

Auditing Most hedge funds are

Citigroup 5.5 4.2 HSBC Securities Services 123 -16
Credit Suisse 5.5 4.0 SS&C Fund Services 100 0

set up in a way that does not

Newedge Financial 2.8 - CACEIS Investor Services 84 -8

require them to have their

Merrill Lynch 2.7 2.9 GlobeOp Financial Services 81 -8
Others 18.6 Fortis Prime Fund Solutions 81

financial statements audited.

36.7 -27
Source: Eurekahedge Source: HFN - Hedge Fund Administrator Survey

Some hedge funds however, may undergo annual audits if this is a part of the
contract between the hedge fund and its investors. This may however change if
regulation of hedge funds is tightened. Some offshore locations require hedge
funds to have their accounts audited.

REGULATION OF HEDGE FUNDS

Chart 18 Average margin requirement

The hedge fund industry has faced calls for stricter regulation in recent years.
% margin requirement

Although hedge funds did not play a major role in the emergence of the credit
45

crisis it is alleged that they contributed to volatility through short-selling

40

transactions and selling shares as a result of deleveraging and redemptions. The

35

Financial Stability Board, successor to the Financial Stability Forum, was 30

established in April 2009 following the G-20 London summit. The oversight of 25

the new body was extended to all financial institutions important to global
financial stability including for the first time large hedge funds.
20
15

In the US, hedge fund managers have not been subject to regular SEC
10

(Securities and Exchange Commission) oversight. Rule changes introduced by

5

the SEC in February 2006 that required hedge fund managers to register under
0

the Investment Advisers Act were overturned by the federal court in the same
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09
Oct-05 Oct-06 Oct-07 Oct-08 Oct-09

year. Since then US hedge fund managers who registered with the SEC have
Sources: Financial Services Authority

done so voluntarily. The Private Fund Investment Advisers Registration Act

2009 will make the registration of hedge fund managers in the US mandatory.
It will also subject hedge funds to new reporting and record keeping
requirements. In October 2009 the House Financial Services Committee voted
in favour of the Bill. The Bill will be presented to the House of Representatives
Chart 19 Hedge funds use of leverage

in 2010 and if it passes it will move onto the Senate and eventually to the Gross market exposure as a

President to sign into law.

% of assets under management, end-year

Domestic regulation of hedge funds varies across Europe. In April 2009, the
170

European Commission published its proposal for a Directive on Alternative

160

Investment Fund Managers (AIFMD) to establish EU-level regulation. It is

150

now being considered by both the European Parliament and the Council of
Ministers. The impetus for the Directive came from the G20 summit in London
140

which set the path for hedge fund regulation, with G20 leaders agreeing that
130

hedge fund managers should be registered by their national regulators and

120

should report systemically relevant data to those regulators. While the industry, 110

led by the global hedge fund body AIMA, is supportive of those goals,
international concern has been expressed by the marketing provisions of the
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Directive which could effectively prevent non-EU funds and managers from
Source: Hennessee Group LLC, Financial Services Authority,

accessing the EU market and thus prevent EU investors from investing outside
IFSL estimates

7
April 2010 Hedge Funds

the EU. The Directive could be agreed this summer, although it would take
several years to implement. IFSL Research:
Report author: Marko Maslakovic
UK hedge fund managers and advisors are typically required to seek
authorisation from the Financial Services Authority (FSA). The regime for
Director of Economics: Duncan McKenzie
d.mckenzie@ifsl.org.uk +44 (0)20 7213 9124
hedge fund managers in the UK is similar to that which applies to other
Senior Economist: Marko Maslakovic
investment managers. They are able to take advantage of the Investment m.maslakovic@ifsl.org.uk +44 (0)20 7213 9123
Services Directive which allows them to offer their investment services to International Financial Services London
clients in other countries within the EEA. The FSA oversees a group of the 29-30 Cornhill, London, EC3V 3NF
largest hedge fund managers from within a specialist supervisory team. The www.ifsl.org.uk
FSA also specifies restrictions on sales and marketing of hedge fund ------------------------------------------------------
products. Hedge fund products for example, cannot be marketed to the International Financial Services London (IFSL) is a private
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general public but UK investors can deal directly with offshore funds. successfully promoting the exports and expertise of UK-
based financial services industry throughout the world.
Offshore hedge funds are registered in tax neutral jurisdictions allowing
investors to minimise their tax liabilities. Offshore hedge funds are usually This report on Hedge Funds is one of 16 financial sector
reports in IFSL’s City Business Series. All IFSL’s reports can
structured as corporations although may sometimes be limited partnerships. be downloaded at www.ifsl.org.uk.
Generally the number of investors is not restricted. Onshore hedge funds
often set up a complementary offshore fund to attract additional capital © Copyright April 2010, IFSL

without exceeding limits on the number of investors. The vast majority of

offshore funds are registered in the Cayman Islands followed by the British Data files
Virgin Islands and Bermuda (Chart 17). Datafiles in Excel format for all charts and tables published
in this report can be downloaded from the Reports section of
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