Quarterly Newsletter – Q1 2010
Posted on 12 Apr 2010
Laven up for Three Awards at HFM Week Service Provider Awards
Laven Partners was shortlisted in the HFM Week Service Provider Awards and competed in the categories of ‘Best Regulatory Advisory Firm’ and ‘Best Advisory Firm’. Meanwhile, Laven Legal Services – the group’s related legal practice – was nominated in the category of ‘Best Law Firm – Client Service’.
Last year, Laven Partners won the award for Best Regulatory Advisory Firm, and the judges noted that “in an age of growing regulation and corporate governance, Laven Partners’ experience and understanding of both hedge funds and compliance shone through.”
“We were overjoyed to be shortlisted for the awards a second year running and among a large and reputable group of service providers. This is proof that there is a place for the kind of niche expertise that is often missing from our larger industry peers”, said Jerome Lussan, CEO of the group.
“We have always believed that we offer an alternative service and that our success is linked to our dedication to our clients, always providing straightforward, practical and complete advice.”
Robert Mirsky, Managing Director and Partner at Laven, who joined the group in 2009 from Ernst & Young, says: “The nominations evidenced our commitment to the industry and to our clients. However, none of this would be possible without the hard work of our team. We are grateful for their continuing dedication and enthusiasm to our clients. It is that dedication that was truly reflected in these nominations.”
Laven sees renewed activity in first quarter of 2010
We have seen renewed activity in the first quarter of 2010 with new hedge fund business set ups on the rise.
In terms of FSA applications and fund set ups we have experienced a 50% increase in interest, evidencing a gradual return to pre-crisis conditions and greater confidence in markets.
We have also seen an increase in our operational due diligence work – since 2009, our demand for our services has expanded, and operational due diligence now represents 50% of the total work we carry out as opposed to 30% in 2009. We believe this is partly due to the lessons learnt from Madoff and partly because investors are becoming increasingly aware of the risks in investing and are thus allocating resources to thorough and independent due diligence providers having lost faith in traditional advisory shops.
Finally, the re-domiciliation of funds and managers has also been an area of growth, increasing by approximately 50% on last quarter. For further information on re-domiciliation, please also see our story below.
Laven Partners on the Radio!
Laven Partners was delighted to have our Managing Director, Robert Mirsky, appear on the radio program “N@ked Short Club” on Monday 15th February. The radio channel that broadcasted the program is Resonance FM and listeners can download the show on the following website: http://dl.dropbox.com/u/1442785/The_Naked_Short_Club_Feb_15th_2010.mp3
The program involves one hour of loose talk about hedge funds and the state of the world, plus sublime prose and some heady music.
Dr. Stu, who is the host of the program, interviewed a team of cognitive behavioural finance therapists. Other guests included John Godden, CEO of IGS, David Aldrich, Managing Director at Bank of New York Mellon, Philippa Aylmer, Editor of Hedge Fund Journal and City writer Sarah Dudney.
UK ruling could reverberate among wealthy tax exiles
A UK court ruling against a wealthy tax exile creates uncertainty for high-net worth individuals seeking to reduce taxes by living overseas and underscores broader efforts by authorities here and in other countries to clamp down on tax breaks for the rich.
The Court of Appeal on […16 February…] rejected a case by British-born millionaire Robert Gaines-Cooper, who claimed non-UK resident tax status. Mr. Gaines-Cooper, who owns an estate in the Seychelles and is a British citizen, argued that because he had spent less than 91 days a year on average in the UK, as per government guidelines, he met the criteria for obtaining nonresident tax breaks.
The UK isn’t alone in trying to shut loopholes used by the wealthy, whether at home or abroad. US President Barack Obama has called for tax increases on families with income above $250,000. Meanwhile, Berlin is pursuing wealthy Germans who hold Swiss bank accounts that shield hundreds of billions of euros, by some estimates.
The Court of Appeal said the government was justified in denying Mr. Gaines-Cooper the tax breaks because he retained significant personal ties to the UK According to legal filings and Mr. Gaines-Cooper’s Web site, the 72-year- old entrepreneur kept a residence in Henley-on-Thames, Oxfordshire, and returned frequently to the UK for business and social functions. His son was also born in the UK and attended an English boarding school.
A nonresident must “demonstrate a distinct break from former social and family ties within the UK,” the judges said in their ruling.
Robert Mirsky, a managing director at Laven Partners, says he has clients who are planning to or considering moving out of the UK because of the increase in income-tax rates, among other reasons. However, some clients are concerned about whether they will qualify for nonresident status if they retain ties to the UK such as children finishing school or retaining property here. People who are planning to leave are left in “limbo,” said Mr. Mirsky.
Laven Partners Continues to Provide Updates on EC Directive
In March, we sent out our ninth monitoring update on the proposed AIFM Directive. Despite the extensive lobbying efforts and more than 1,700 amendments presented by MEPs, on 11 March the Directive was officially moved to the European Commission’s Committee of Permanent Representatives for consideration. However, on 16 March, the Spanish Presidency announced the postponement of a discussion on the directive due to be held by the EU Economic and Financial Affairs Council.
After four Spanish Presidency revisions, the main issue regarding marketing of funds for investment managers based outside the EU remains unresolved. France and Germany appear to be allied in pushing for stricter requirements, whereas the UK is concerned about the protectionist measures that might be implemented by non-EU countries in retaliation. Other outstanding issues are the Directive’s scope and depositary requirements among other things.
The House of Lords EU Committee’s report published on 10 February illustrated that “coherent oversight of AIFMs across the EU by requiring the registration of, and the collection of appropriate data from, managers” is welcomed; however the “one size fits all” approach will not work. The report also suggests that the retail level of protection detailed in the Directive is not required, as alternative funds are typically aimed at institutional investors that have resources to undertake appropriate due diligence. It also concluded that “EU managers should be able to continue to invest in non-EU funds, and fund managers located outside the EU should be able to invest in Europe.” Professor Robert Kosowski, Assistant Professor in the Finance Group of Imperial College Business School, was involved in the preparation of the report as specialist adviser.
A number of meetings are being held both in London and Brussels – the Internal Market and Services Commissioner Michel Barnier visited the UK to meet with London MEP Sayed Kamall and leading hedge fund and private equity firms, in order to ensure a continuous dialogue between the regulators and the industry.
Opposition to the Directive has also gained momentum on the other side of the Atlantic, where the Managed Funds Association (MFA) echoed US Treasury Secretary Tim Geithner’s concerns over the protectionist nature of the Directive. MFA president and CEO Richard Baker urged the US government and relevant federal financial regulators to “actively and substantively engage their European counterparts to enact a set of reforms that promote transparent, liquid and stable financial and capital markets.”
Nonetheless, the US criticism was rejected by Marine de Carné, spokeswoman for the French delegation to the EU, who said that the Directive “wasn’t discriminatory because once a fund manager had met the European standard, it would have a passport to the whole EU”.
The rush towards stricter regulation is even more questionable in light of the recent report carried out by the UK’s Financial Services Authority, which concluded that hedge funds do not pose systematic risk. In particular, the regulator found that counterparty risk levels were minimal, as prime brokerage divisions of investment banks did not have overly significant exposures to any one hedge fund.
The biggest concern at this point appears not to be details of the text itself, but the fact that by the time the Directive is implemented in 2012 the Directive will simply be outdated. We do not expect the issue of the Directive to be resolved by the July deadline and the EU Presidency will be taken over by Belgium on 1 July 2010.
Laven Partners on Bloomberg TV
Jerome Lussan, CEO of Laven Partners, appeared on Bloomberg TV earlier this week as FSA expert, commenting on the FSA’s insider dealing operation which resulted in six arrests.
The FSA announced on Tuesday that in its first operation carried out with the Serious Organised Crime Agency, six men were arrested on suspicion of being involved in an insider dealing ring.
In the interview for Bloomberg TV Lussan said: “These arrests send a strong signal to the City. It is imperative that firms put in place robust systems and controls to protect their businesses in line with FSA rules. Investment managers which allow their employees to trade their private accounts need to be particularly vigilant.”
“Firms should invest in compliance resources either by using a fully dedicated in-house compliance officer or by employing external compliance consultants. Compliance needs to be an integral part of every financial institution.”
To view the entire interview, please click here.
Investment managers increasingly interested in re-location
With the prospect of tighter regulations and tax rises due from April, the discussions surrounding the exodus of managers from the UK are heating up. At the same time the alternative investment management industry has been exposed to new scrutiny by the draft Alternative Investment Fund Managers’ Directive which promises to introduce new regulations.
Since the beginning of the year, we identified an 80% increase in queries relating to relocation from the UK and as a result will be holding a seminar in May on manager relocation to Switzerland. The seminar will be held in conjunction with Lombard Odier Darier Hentsch & Cie, the oldest firm of private bankers in Geneva, and FBT Attorneys-at-Law, a Swiss law firm specialized in regulatory, legal and tax issues.
Jerome Lussan comments: “Although the topic of re-location has been at the forefront of everyone’s minds for the past couple of years, we have seen a sharp increase in genuine interest in re-locating since the start of 2010. Managers are keen on finding out what their options are. And it’s not just the managers who are contacting us about re-locating their operations, we are also actively moving funds from the Cayman Islands to Luxembourg.
Many don’t have a clear idea of their target location yet although Switzerland is still one of the jurisdictions we get asked most about.”
Although there are potentially great tax regimes to be benefitted from, relocating to another jurisdiction is not that straightforward. We’re aiming to cover all the basic areas managers want to know. Hopefully the seminar will serve as an all-round starting point for industry professionals.