Opportunities abound for Gibraltar fund administrators

Gibraltar has a number of small, local companies occupying specific niches in fund administration. It is keen to attract some of the big-name companies to help drive business to the territory. Until then the industry continues to expand, benefitting from an increase in Gibraltar-domiciled funds.

Gibraltar may be limited in space but it is ambitious in its desire to attract fund administrators to the territory. While there are several niche administrators operating there, the industry believes to move the jurisdiction to the next level, a big-name administrator needs to establish in order to act as a catalyst for fund development.

Meanwhile, the largest administrator in Gibraltar, Capita Financial Group, has seen its client base steadily grow since opening in the territory with the acquisition of an existing administrator in 2007.

“When I moved to Gibraltar the hedge fund sector was seen as a growth area,” says Karthik Iyer, managing director of Capita Financial Administrators.

He sees the growth of Gibraltar-domiciled funds coming mostly through the popularity of the experienced investor fund (EIF) regime.

However, as a global administrator Capita is working with funds domiciled in the Cayman Islands, British Virgin Islands and Bahamas as well as looking at re-domiciling funds from the Isle of Man and the UK.

“Our clients are widespread: UK-based, Switzerland, Austria. It is mixed with a bias towards the EU and Europe. We have a mixture of fund types, mainly hedge funds,” explains Iyer. Capita in Gibraltar is focusing mainly on what it sees as medium-sized funds in the range of £30–£300 million. Iyer says administration in Gibraltar is more specialised.

“It is not like Dublin and Luxembourg. We’re playing to our strengths with more and more clients coming from re-domiciles as well as start-ups usually from the EU,” he notes.

He estimates Capita is picking up around one new client a month. At present the Gibraltar operation is serving around 25 funds with a total of assets under administration of $1.3 billion.

Iyer says Capita is looking to get into the Ucits area and sees opportunities coming from Ucits IV, particularly from the passporting of management companies and the master/feeder structures.

Acknowledging that Dublin and Luxembourg have a headstart in this area, Iyer nevertheless believes Gibraltar will be able to pick up the smaller and medium-sized Ucits administration mandates.

Being a global administrator will help the Gibraltar operation pick up business, believes Iyer. He says the company is already looking at expanding into other European justifications including Dublin and the Channel Islands.

Iyer says Capita could enjoy a first-mover advantage in Gibraltar and thinks it is a particularly good move for the company to be based inside the EU.

Capita, says Iyer, will “concentrate on the fund administration services” which he says is its “bread and butter” core.

Already the company is servicing a wide range of funds, including some esoteric and exotic ones as well as plain vanilla. He believes being set up Gibraltar brings several advantages, not least of which is being in what is seen as a well-regulated EU jurisdiction.

A longer-established and well-regarded fund administrator in the territory is Grant Thornton. Established in 1995 Grant Thornton Gibraltar consists of a group of separate companies each delivering specific service lines.

Grant Thornton Fund Administration provides a range of services to the fund industry including fund set-up, fund accounting, transfer agency and client services, valuations, financial accounting and compliance. According to Freddie White, managing director, the company has seen steady growth “as if the slowdown never happened” and believes this augurs well for the future.

Adrian Hogg, director, agrees. He is seeing an increase in “serious” enquiries as funds are beginning to launch again. Also some Caribbean and non-EU domiciled funds are considering moving to a more-regulated environment as they see being in an EU jurisdiction as insurance against any adverse effects from the proposed alternative investment fund managers (AIFM) directive.

White believes any new EU regulations are unlikely to mean substantial changes to Gibraltar’s existing regulations but does say more Caribbean funds are approaching the company about re-domiciling. “It is a changed world out there,” says White.

“Our strength is being relatively young in the hedge fund world and being a well-regulated and EU jurisdiction. The AIFM may prove an opportunity for us,” he concludes.

He says the existing experienced investor fund (EIF) regime in Gibraltar, which is the favoured vehicle for hedge funds, has worked well. However, like Iyer, he is keen to see Ucits work coming into Gibraltar and believes Ucits IV, if Gibraltar is an early adopter, should drive more business towards the territory.

“An obvious theme is the opportunities from Ucits and the AIFM,” he notes. Being in the EU, he believes, will be a major advantage in future.

Personalised service
Nicola Green, managing director at Helvetic Fund Administration, is equally upbeat about prospects. With assets under administration (AUA) at $724 million in September 2009, up by over $100 million from the end of 2008, Green has cause for optimism. She says she is seeing a lot more new funds setting up, although she admits the market has changed and there has been a lot of contraction over the last two years. Although Helvetic avoided slimming its staff, the company has lost a couple of funds through closure and liquidation. However, she now sees a real change in the market and expects the trend for new launches to continue into 2010.

“My opinion is that Gibraltar will remain a service centre mainly for the smaller funds. These, if not caught in too much legislation, should continue,” says Green.

While there is a lot of talk about re-domiciling Caribbean funds to Europe, Green has seen little sign of this being anything but talk at the moment, although she believes this will be one of the main trends in 2010. If it does happen Green believes Gibraltar will be well placed to attract these funds.

For Green the main competitive advantage of her business and other fund administrators in Gibraltar is the personalised service they are able to offer smaller funds. She says Helvetic is content to grow through word of mouth and referrals from existing clients. One trend she is detecting is the shift to administering more Gibraltar-domiciled funds. Around a quarter of the funds Helvetic services are Gibraltar EIFs. This is a substantial change of the last three to four years, although the majority of funds Helvetic services are still Caribbean based.

With more choice globally as well as within Europe, Green believes there is still room for everyone. She sees Gibraltar’s main advantage as being focused on “an excellent level of service” that larger jurisdictions cannot give the smaller funds.

“For many of the other jurisdictions it is almost impossible for fund administrators to service anything under $100 million,” she says.

“Setting up in Luxembourg or Dublin can be costly. For us fund size is not a problem. We can set up and work with Ä10 million funds and still give them the same level of service.”

Another niche administrator operating out of Gibraltar is Vista Fund Services. In a management buyout in summer 2009 Gibraltar-based Quest Fund Administration was acquired by its management from Quest Holdings Gibraltar.

The new company trades as Vista Fund Services offering a full range of services for jurisdictions outside Gibraltar including the Cayman Islands, British Virgin Islands and Malta. According to CEO Malcolm Ruffell, AUA is around $100 million and rising.

Like Helvetic, the smaller hedge funds are not a problem for Vista. Ruffell says limitations are more around the ability of the company to provide daily net asset values (NAVs). For Vista, monthly NAV is less of a “strain”. Nevertheless, he says Vista is “fairly flexible” and is confident it can “cover anything”.

“From our point of view we offer a hands-on, bespoke service to smaller funds. There is a lot of emphasis on customer service, something Dublin and Luxembourg can’t offer the smaller funds. They just can’t give them as much attention and that level of service,” says Ruffell.

Like others in the sector he is confident of continued growth in 2010. “I think we will see steady growth of Gibraltar as a domicile. We are beginning to create an awareness of the jurisdiction and people should start considering it when launching new funds,” notes Ruffell.

Another company like Grant Thornton offering a variety of services is Benady Cohen. Director Moe Cohen set up the business in 2007 with a business partner who was previously with KPMG. Cohen also comes from an accounting/auditing background having previously been with BDO Stoy Hayward.

He wants to expand his opportunities and saw the fund sector as the future. The company provides a range of services including audit and fund administration.

Through the international network of accounting organisations known as Nexia, Benady Cohen has access to a far wider client base.

With AUA of just under £80 million, Cohen, like other fund administrators, is focusing on providing a personalised service while he works to build up recognition of the jurisdiction.

The company provides a range of fund administration services including corporate administration services to offshore funds and fund accounting services.

Cohen is a strong advocate of Gibraltar’s fund sector and has been working closely with Hassan’s James Lasry, now chairman of the Gibraltar Funds and Investment Association, to help promote the jurisdiction.

“We’re looking at promotion opportunities,” he says, admitting Gibraltar is a long way behind other EU jurisdictions.

Despite playing catch up with the more established jurisdictions, Gibraltar’s fund administrators are confident of increasing growth in the future, albeit tailored to the size and capacity of the jurisdiction.