Guernsey’s Financial Services Commission has announced proposals to alter its collection of statistical information to take into account the development of different investment strategies within the hedge fund industry.
The Commission has for many years gathered statistics on the size and type of investment funds administered in the Bailiwick. Statistics gathered cover Guernsey-domiciled open and closed-ended investment schemes and also non-Guernsey open-ended collective investment schemes where some aspect of management, administration or custody is conducted within the Bailiwick. The Commission gathers these statistics in order to identify specific sectoral trends which may have regulatory consequences, and in order to identify funds which are increasing, or decreasing, in size and unusually rapidly. This data can usefully point to areas of stress both within the investment funds community generally, and also in respect of specific firms.
From the statistical returns, the Commission publishes aggregate data thus giving the public information on the general scale of the Guernsey investment fund sector. The aggregate data also has a breakdown by number of funds, with a subsidiary breakdown giving some measure of investment style, by value, by number of registered holders and also includes a figure for net new investment. There is also a breakdown of investment activity by geographical location.
The Commission also publishes an analysis by type and class. This embraces classifications such as ‘equity, debt, money market’, etc; it also includes classes such as ‘Funds of Funds’ and ‘Feeder Funds’. In a sense the table mingles an analysis of funds by investment style – equity, debt, etc; – with an analysis of funds by legal structure – under ‘funds’, ‘feeder funds’ and ‘umbrella funds’. In the Commission's opinion, this mingling of analysis on the one hand by investment style and on the other by legal structure is not the most helpful way to proceed. The choice of investment styles may also need to be extended. The category labelled ‘other’ is now the second largest category within the umbrella fund and multi-class analysis. It covers a range of strategies including private equity, real property and hedge funds/funds of hedge funds. As those are extremely significant contributors to the Guernsey totals, the Commission plans for those to be separately identified in the Commission’s statistics.
In its present format, the chart showing geographical distribution of investments is of diminishing value. This is because, where investment funds do not have a specific geographical objective, contributors to statistics are simply allocating all investments held by a particular fund or portfolio under the heading “global”. As at September 2008 (the latest information available) some 80% of all investments were included under this heading. In the Commission’s view, contributors should provide data for each investment portfolio broken down according to the actual composition of the portfolio, irrespective of whether the fund or cell does itself have a geographical restriction. It is acknowledged that this may create some additional work for contributors.
Finally, data supplied by contributors has always been on a net asset basis, i.e. the value of any borrowing by a fund is netted off from the value of investments held by that fund. While this may have been the right approach when traditional funds, limited as to their gearing capacity, predominated, in recent years the increasing importance of funds which carry significant gearing within their portfolios means that the statistics may understate significantly the value of assts actually being managed or administered in the Bailiwick.
The Investment Business Division, in conjunction with a Working Party made up of practitioners from the investment industry, has been considering the above issues and as a result has drafted a new statistical return. The proposed form would replace the four forms currently used for the submission of statistical information relating to open-ended schemes, closed-ended schemes and non-Guernsey open-ended schemes.
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