Prime brokers may also provide a capital introduction service, which can be useful in helping a hedge fund manager raise capital in the fund’s early years. Capital introduction may be wider than just introducing investors to hedge funds and includes providing strategic assistance to a fund manager seeking to market the fund as well as feedback on current market trends, investor sentiment, fund terms and other matters. Administrator. The fund’s administrator will typically be appointed to provide the following services: (i) registrar and transfer agent, responsible for the issue, redemption and UCITS Traditionally, UCITS were used as investment vehicles by managers pursuing long-only and relative return strategies (and that overwhelmingly remains the case today). However, as interest in absolute return strategies has increased, asset managers pursuing “traditional” investment strategies have increasingly developed their own absolute return type strategies. Hedge fund managers have also increasingly used UCITS to access greater distribution potential with different investors. This has led to a convergence between traditional long-only asset management and absolute-return asset management. The attraction of UCITS as a way of structuring absolute-return strategies derives from its marketability. The increased marketability of UCITS is largely a result of its liquidity and regulated status, which gives many investors a certain level of comfort (and a perception that UCITS offers a safer product in which to invest). UCITS benefit from a marketing passport that makes it relatively simple to market the product across Europe (and a number of other jurisdictions outside of Europe have made it relatively simple to register UCITS for public distribution). Many European investors may be limited in their ability to invest in offshore hedge fund products as a matter of local law or regulation, or alternatively as a result of internal policy
transfer of fund shares or interests and ensuring that all subscription and redemption forms have been completed in full and in compliance with applicable anti-money laundering requirements; (ii) calculation of the fund’s net asset value and management fees and performance fees (using series or equalisation accounting as applicable); (iii) general communication with investors, including the circulation of updated fund documentation and notices to investors (including ahead of shareholder meetings); and (iv) preparation of the fund’s financial statements and providing assistance with the fund’s audit. requirements. Many institutional investors are also limited as to the level of allocation they can make to alternative strategies – and UCITS are often deemed not to be “alternatives” whether or not they pursue an absolute return strategy. As such, UCITS have a wider investor potential in Europe than traditional hedge fund products. As a result of the foregoing, many hedge fund managers run absolute-return strategies alongside their traditional hedge fund strategies. However, there are a number of restrictions and requirements of which managers should be aware before deciding whether or not to establish a UCITS. These include: ^ restrictions on permitted assets ^ concentration limits ^ counterparty exposure limits ^ limits on risk exposure/leverage ^ restrictions on short selling ^ collateral management obligations ^ liquidity requirements A number of strategies, including less-liquid, highly leveraged or highly concentrated strategies, will not be suitable.
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