In many ways, 2007 was a tough year for funds and Troubled Funds: Minimizing Risks and Identifying Solutions was the ambitious agenda set for last week’s International Funds Conference ’08 hosted by Stuarts Walker Hersant and sponsored by Cayman National and PricewaterhouseCoopers.
A line-up of dynamic and extremely knowledgeable speakers offered up an impressive range of analysis of the future prospects for the fund industry both in Cayman and across the globe, as well as providing some in-depth examination of key issues along the way.
In his opening remarks, Timothy Ridley perhaps best known as current CIMA chair noted offered his personal musings on what Cayman can expect in the coming year.
‘The hedge fund industry has over the past 10 years become a major driver of the financial services industry in many jurisdictions, and in Cayman possibly more than most,’ he said.
‘As our more mature industries of banking, capital markets, fiduciary (private client) and general corporate and commercial have stabilized, the fund and, to a lesser extent captive insurance, industries have flourished.’
He reported that CIMA will shortly start releasing statistical information not available in any other fund domicile jurisdiction.
In another development, he said CIMA anticipates its application for full membership in the International Organisation of Securities Commissioners will be approved.
Membership will involve entering into the IOSCO multilateral memorandum of understanding that provides for cross border assistance and exchange of information between the parties. In this connection, CIMA will also continue its negotiations for bilateral MOU’s with relevant and qualified foreign regulators.
In anticipation of an IMF assessment later on this year, Mr. Ridley said CIMA is considering ways in which to decline registration of questionable funds.
‘Those involved with the structuring, establishment and ongoing operation of funds would do well to pay heed to substance as well as form, and to keep this under regular review,’ he said.
He also urged directors, advisors, managers, administrators and others with obligations to funds to take steps to raise the profile and credibility of their roles given the greater responsibilities and attention they will be facing.
High on the day’s agenda was the recognition that the fund industry has reached a stage of maturity that will require much more attention to their demise as well as their growth.
The day’s speakers included Charles Flint of Blackstone Chambers who discussed FSA regulation of hedge fund managers, providing some interesting case studies, followed by an entertaining presentation by Kurt Mayr and Evan Flaschen of Bracewell & Guiliani who presented a compelling case for preparing well in advance for the winding down of an offshore fund, using several high profile failed hedge funds domiciled offshore, including the Bear Stearns, case to illustrate their argument for solid contingency planning and a call for Cayman to clarify its registration legislation language.
Causing quite a stir was the next speaker Larry Engel who warned of the lurking danger posed by Credit Default Swaps and other under-appreciated exposures.
He was followed by an energetic presentation by DWS Scudder icon Robert Froelich, known to most as Dr. Bob, who made his predictions for the coming year. Painting a relatively grim outlook for US economic growth in a socially divisive election year, not all was doom and gloom as his advice to keep a global perspective was well received by the international audience.
The afternoon kicked off with Lawrence Edwards of PricewaterhouseCoopers outlining how to decide between restructuring or insolvency when considering saving the life of a troubled fund.
Following Maury Cartine of Marcum & Kliegman’s discussion of the view from Washington and what the SEC has in store, former CIMA staffer Gary Linford provided some hard-hitting observations on improvements that still need to be made in Cayman’s fund industry.
David DeRosa, the day’s final speaker, made the argument for more stringent accountability for directors and administrators, and the discussions wound up with a large panel discussion of several case studies and how to resolve some issues that may become more frequent.