hFMWeek

S pecial r epo r t

h o w t o s ta r t a h e d g e
fund in the us 2011
DIstributed with HFMWeek

LAUNCHES
All the essential information for first-time fund managers

REGULATION
Updates on federal and state legislation covering hedge funds

RESPONSIBILITY
The widening spectrum of administrative services

featuring Concept Capital // ifna // Sadis & Goldberg LLP //

SS&C // US Bancorp // VITEOS

001_HFMHow2US11_Cover.indd 1 14/02/2011 11:26

 h o w t o s t a r t a h e d g e f u n d i n t h e US 2 0 1 1
derak adler of ifina talks to HFMWeek about how the primary development fund provides a fast, simple and
Derek Adler ACSI is
domiciled in the UK and
during his career in the
City of London has been
regulated by the FSA and
NFA. Educated in England
and Switzerland, he is
a director and founding
member of ifina, a fully
licensed fund administrator.
009_010_HFMHow2US11_Ifina.indd 15
the co m p l e t e
pac k ag e
cost-effective solution for fund managers
T
he journey from start-up to becoming a well
established and recognised fund can be a long
and challenging process. Increased regulatory
restrictions and reluctant investors are making
fund launches harder than ever for emerging
managers. HFMWeek talks to Derek Adler of
ifina about the launch of its new product, Primary Devel-
opment Fund, and how this aims to provide a complete
service package that can give start-up funds a competitive
advantage with minimal costs involved.
HFMWeek (HFM): Can you tell me about the new product
you are launching?
Derek Adler (DA): We are offering
a new service in the form of Primary
Development Fund (PDF) in Cay-
man, which will provide fund man-
agers with administration, auditing, The Primary
director and legal functions as part
of a complete service package. The Development Fund
underlying value of PDF is to pro-
vide a fast, simple, effective solution provides the manager
for managers in a regulated market
and this umbrella fund platform is with the opportunity
ideally created for managers in start-
up situations or emerging invest- to build a track record
ment managers with very low assets
under management. whilst the fund
It provides a low-cost solution
by avoiding the higher fees of the becomes established,
traditional standalone funds and is
ideally suited for fund assets of be- which will also enable
tween $1m and $10m, uncapped.
This cost-effective start-up solution, further capital to
which provides competitive ongo-
ing annual operating costs to assist be raised
”
the manager, will include monthly
administration, valuation and share
registry services, as well as direc-
tional services and an annual audit.
It will work out of the Cayman Islands as the primary off-
shore jurisdiction, which will be regulated by the Cayman
Islands Monetary Authority but can work across other juris-
dictions depending on the needs of the investment manager.
HFM: How exactly will it work and how will it help new
launches?
DA: A fund will be established as a segregated sub-fund of
Primary Development Fund Ltd. Managers will be charged
a d m i n i s t r at i o n
approximately 50% of the normal rate for establishing the
fund. The individually tailored and regulated Segregated
Portfolio/Sub Fund will provide managers with the abil-
ity to select their ‘own’ named fund as well as the oppor-
tunity for ‘non-regulated’ managers to act as investment
manager to their fund. This does not prevent the sub-fund
launching in its own right and breaking away from the
umbrella structure at any point in the future. Therefore,
not only are there substantial savings in the initial launch
stages of the fund and with the ongoing charges but there
is also the flexibility to convert to a standalone fund in the
future if the manager wishes. The PDF and its low-cost
basis provide the manager with the opportunity to build
a track record while the fund be-
comes established, which will also
enable further capital to be raised.
This process also minimises
the problem of major investors
wishing to invest only in well-es-
tablished funds.
The costs involved in this prod-
uct are really the main advantage
for emerging managers as normal
operational costs can be a big de-
terrence for managers considering
the launch of their own fund, due
to a lack of initial seed capital. Even
once the fund has been launched,
delays in raising further assets can
also hinder the success of the fund.
To minimise the burden of setting
up the fund, all the manager needs
to decide is the choice of jurisdic-
tion. This new service will be of-
fered to clients on a global basis
and while available in a number of
regulated jurisdictions, the initial
focus will be in Cayman, although
a BVI structure is already under-
way. Other jurisdictions such as
Malta are also available but more expensive and addition-
ally with some restrictions. The advantage of being estab-
lished in Cayman is that this service can be offered to man-
agers who have not yet become regulated and therefore
the conditions for this product are extremely favourable
for investments managers looking to expand.
HFM: Who else is involved and what do they contrib-
ute to the platform?
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11/02/2011 11:26
 h o w t o s t a r t a h e d g e f u n d i n t h e US 2 0 1 1 a d m i n i s t r at i o n

DA: The platform is supported by trusted, inter-
nationally recognised institutions and is available
at an all inclusive cost. We offer a complete pack-
age whereby ifina group will be the administrator
partnered with Barclays Bank (Isle of Man) as
the bank account, MF Global Direct as the bro-
ker account, Baker Tilly (Cayman) Limited as
the auditor and Solomon Harris as the law firm.
The affiliation with these companies will also give
managers the advantage of reduced fees across
the board, due to economies of scale.
HFM: Have you had much interest from US
managers in the platform and how can it be of
particular use to them?
DA: Yes, the PDF has attracted attention from
even more managers in the US seeking such a
product for start-up funds. We are looking to
in the same jurisdiction. However, the PDF prod-
uct is cheaper than its rivals because its cost base
is cheaper, partly because the Cayman Islands is
Key to the business less expensive than Luxembourg and also because
its partner companies have agreed to provide their
model is the fact services at a substantial discount. The set-up charge
is around 40% to 50% cheaper than would typically
that in Cayman, fund be the case if ifina were to set up a standalone Cay-
man fund for a client, while the auditors’ and direc-
managers do not have tors’ fees being provided to PDF clients are 50%
lower than they would be on the open market. Key
to be regulated, as the to the business model is the fact that in Cayman,
fund managers do not have to be regulated, as the
regulatory burden is regulatory burden is placed on the fund’s adminis-
trator, which in the case of sub-funds of the PDF
placed on the fund’s would fall to ifina.
administrator HFM: What new challenges will current regu-

”
launch a US version onshore very soon to accom-
modate the interest we have received.
HFM: What makes ifina’s new structure
unique in this space?
DA: The concept is not unique but the choice of jurisdic-
tions is. We offer the PDF out of BVI, Malta and Cayman
which I believe is unusual. In addition, we propose a very
competitive pricing structure and a complete package of
top institutional contributors to the platform. This enables
emerging managers to start their own fund in a regulated
and controlled environment, which is unique. The PDF
concept is similar to one used by other operators such as
KMG Sicav-SIF SA, based in Luxembourg, which involves
the creation of a fund platform that enables third parties
to launch their own funds quickly, cheaply and with less
attention to regulation than if they were to do so directly
latory changes bring to fund administrators in
2011?
DA: Many of the changes that have been made and
many of the new rules that have been introduced
are more likely to affect the larger hedge funds and fund
of funds. This is not the case relating to smaller funds,
particularly those trading derivatives and start ups, which
the PDF will cater to, focusing on the needs of traders
with relatively small amounts of capital. The PDF exists
to provide a cost-effective structure that permits traders
to have the opportunity to have a controlled and regulat-
ed environment in which to manage money, without hav-
ing to worry themselves about such burdensome regula-
tory details as capital adequacy requirements, or having
to fill out thousands of forms. The PDF gives investors a
structure that’s fully regulated, in which they can build
up a track record as a money manager. n

10 h f m w e e k . co m

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