Bermuda Stock Exchange Steps Up Hedge Fund Competition

by Carla Johnson, Investors Offshore.com

19 June 2001

The surge in popularity experienced by the hedge fund market in recent years has prompted the Bermuda Stock Exchange (BSX) to aggressively compete for hedge funds in the offshore finance sector. CEO of the BSX, William Woods, told the Bermuda Sun newspaper: 'The hedge fund industry is returning 15 per cent per annum and to achieve this they diversify risk across asset classes and geographical boundaries and produce high rates of return whether equity markets go up and down. They produce more regular returns and they are outperforming traditional equity markets at the moment.'

According to Mr Woods the development in the accessibility of hedge funds over the last few years has been very encouraging. He said: 'There used to be a limit of a $1,000,000 to enter a hedge fund and now a lot of hedge funds have a minimum investment of $100,000 or even sometimes $50,000 and so they are accessible to more people. At the same time more people are now classified as high net worth individuals, for example they have $100,000 to invest.'

He added: 'There are lot more people in this category than there were 10 years ago and people are structuring mutual funds in ways that you can invest in them for as little as $5,000. The mutual fund aggregates everybody's investment and then invests in a range of hedge funds or funds so it becomes a way for retail investors to get into the hedge fund market.'

The BSX directly competes for the custom of high net worth clients worldwide, largely institutional, in the offshore and hedge fund market with other exchanges from the Cayman Islands, the British Virgin Islands and the Bahamas. The fee structures are typically higher than exchanges which compete for European-based pension or institutional funds. Mr Woods explained: 'People may set up two funds, one in Dublin for Europe and one in Bermuda for the rest of the world with a higher fee structure. Or alternatively you could have one Bermuda fund and you market it inside and outside of Europe.'

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