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Elevator 12 jpfs

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The Elevator, Private Equity Magazine Editor, Patrick Gruhn discusses the impact of the current world financial crisis on the Alternative Investment fund Industry with Julian Stockley-Smith, Joint CEO …

The Elevator, Private Equity Magazine Editor, Patrick Gruhn discusses the impact of the current world financial crisis on the Alternative Investment fund Industry with Julian Stockley-Smith, Joint CEO of Geneva based JP Fund Services SA

Published in: Economy & Finance, Business

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  • 1. the­-elevator.net page 1the­-elevator.net Pro Polo turns an old game into a new business Is Morocco one of the real estate markets of tomorrow? ALSO INSIDE THIS EDITION: top 10 Smartphones; The Filthy Rich Handbook; Fashionable Yachting; top 10 places to live; Wealth Management Blue Ventus A project to deliver serenity in a hectic airport environment flexxon Changing the way fuel is made available to consumers project sumo A new idea for the profitable weight management market IssueXIIMARCH2009 the-elevator.net CHF12.00-EUR7.50 9771662864002
  • 2. page 2 the­-elevator.netthe­-elevator.net disclaimerdisclaimer The material in this magazine does not intend or purport to address the specific investment objectives, financial situation, or particular needs of any reader. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or financial instruments. Responsibility for compliance with the securities and consumer protection laws and regulations of authorities having jurisdiction lies with the principals and participants in the transactions described. Identification of, references, and comments on third parties and transactionsarebasedoninformationobtained from sources believed to be reliable but are not guaranteed as being accurate. Readers should rely solely on diligent independent research and their own judgment and that of their own professional advisers. Every prospective investor should consult his/her own legal counsel, accountant or other professional advisor concerning the legal, tax and economic considerations relating to any investment. Any statement, comment or information in this magazine is subject to change without notice and HEPT Media Ltd. is not under any obligation to update or keep current the information contained herein. HEPT Media and its respective officers, associates or clients may have an interest in the securities or derivatives of any entities referred to in this material. HEPT Media makes no warranties and accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. This document serves an informative purpose only and does not represent any recommendation or suggestion for any kind of investment. Unit valuations of any kind of investment and any income generated therefrom can increase as well as decrease and are not guaranteed in any way. Past performance, whether actual or back tested, is not necessarily indicative of future performance. This document is intended for distribution exclusively to qualified investors and is not intended for publication or distribution in the United Kingdom or the United States of America. jpfundservices sa www.jpfs.com Cayman Island Fund Creation Full legal documentation Licensed administration services Banking and broking arrangements US Feeder structures Marketing, promotion and other services jpfs_artwork 12/8/08 4:41 PM Page 2 the-elevator.net page 3the-elevator.net march09march09march09contents 22 26 22 42 40 38 48 Flexxon PAGE16 What if petrol stations could be moved to maximize return? PRo Polo PAGE18 Unleashing the market potential of a very old game. Blue Ventus PAGE22 Creating serenity in a hectic environment - the airports we find ourselves in. sumo PAGE24 A promising new beverage that can change the ways of weight management. datetuBe PAGE26 New, highly visual and video based project in a very profitable industry. FiRe Fence PAGE30 A high-tech project to protect homes from wild fires. moRocco Fund PAGE22 Where real estate could still have an upside. inteRView with PAGE38 Amerimar’s CEO talks about commercial real estate. downFall oF the masteRs PAGE40 What’s next for the fund industry? Places to liVe PAGE42 Ranked 1 to 10, the ultimate places to base yourself, and why. Where does your city rank? smaRt Phones PAGE48 We round up and test 10 of the best smart phones that are available right now. ALSO IN THIS ISSUE: OUR ALL NEW SPOTLIGHT AND WEALTH MANAGEMENT SECTION
  • 3. page 40 the­-elevator.netthe­-elevator.net I N T E RV I E WI N T E RV I E W the­-elevator.net page 41the­-elevator.net I N T E RV I E WI N T E RV I E W well in the current turmoil, the industry has not been immune to plummeting values. Research indicates that alternative investment funds in 2008 have (on average) borne losses equating to 18 – 20% of assets under management however this looks rather good when compared to financial market indices, for example the S&P 500 and the CRB commodities index were down around 40% on the year. There have been casualties and there are estimates that the assets in alternative investment funds will decrease by 30 – 50% compared to the beginning of 2008 from a combination of market losses and redemptions. Anecdotal evidence suggests that many investors are withdrawing from funds not because of poor performance but because it is one of the most liquid parts of their investment portfolio. Combine this with the bad press surrounding rogue managers like Bernie Madoff, even though he wasn’t running a fund, and it still looks challenging for the industry going forwards. From a business perspective, as a service provider, we still find many investment managers looking to establish hedge funds but are generally waiting to see where the markets are going to settle, there is an additional challenge to secure investment capital. However, we also see opportunity as investment managers look for lower cost solutions and to outsource activities previously undertaken ‘in house’. There seems to be mixed press about alternative investment funds, is it warranted? There are a couple of points to note; the alternative investment fund industry in general does not run an effective public relations campaign and it is restricted by law from any form of mass marketing. Couple this with the fact that fund managers often revel in the mystique and air of complexity that surrounds the industry and the result is a target for media sensationalism, disgruntled investor groups and politicians looking for someone to blame for the demise of financial market stability around the world. Assets in alternative investment funds only equate to around 10% of assets in global equity markets, not all use leverage in their trading strategies and their role in affecting equity market drops by short selling is questionable; in downfall of the Masters of the Universe Editor, Patrick Gruhn discusses the impact of the current world financial crisis on the Alternative Investment fund Industry with Julian Stockley- Smith, Joint CEO of Geneva based JP Fund Services SA words: patrick gruhn In Tom Wolfe’s 1987 book “Bonfire of the Vanities”, lead character high flying investment banker Sherman McCoy is a self stylised ‘Master of the Universe’. Wolfe recently describes how the mantle has shifted from Investment Bankers to Fund managers in a New York Times article (September 2008) and we can reflect on whether they are likely to suffer the same fate as those from the investment banking industry. Most people with investment experience have a clear understanding of the role of mutual funds but it appears there is some confusion to what an alternative investment fund is; can you give a brief review of the differences? A mutual fund is a pooled investment structure normally for retail investors. It is restricted in what it can invest in, for example ‘long only equity’, and is subject to strict regulatory and reporting obligations and definitions that differ depending on jurisdiction. Alternative Investment (Hedge) funds were developed 50 years ago to give more flexibility to investment strategies using derivatives and other trading instruments; in return they are restricted to investments from sophisticated or accredited investors and not subject to strict regulatory oversight regarding trading strategies. The use of the word ‘Hedge’ in the name is rather misleading as they generally are not set up as ‘hedged’ investment structures; another reason ‘Alternative Investment Strategies’ is increasingly being used. Well, it’s an understatement to say the financial markets are in uncharted territory. As a service provider to this sector what are your observations on how the current financial crisis has affected the Fund industry to date and how has it affected your business? Alternative investment fund performance has broadly reflected trends in the global financial markets and although some managers employing contrarian investment strategies have generally performed very downfall of reality they are probably more a victim of system failures like others, rather than causing it. Are we seeing the beginning of the end for the alternative investment business? No; and even in these market conditions, it appears that fewer ‘alternative investment strategy funds’ are closing than expected. Pension and superannuation funds, institutional investors and high net worth private investors will continue to need avenues of investment in the future, ‘’alternative investment structures’ are currently important vehicles to make it possible to target specific sectors in an efficient and increasingly transparent manner. Some pundits estimate there is around 3 trillion dollars of investable cash awaiting appropriate timing to re-enter the market place. We have been pleasantly surprised by the consistent level of inquiry for new funds from managers looking to take advantage of opportunities exposed by current markets There are suggestions we need to see stronger regulation over hedge funds, do you agree with this approach? We would be very supportive of more sensible application of regulation in general; on one hand we’re overburdened with compliance for money entering funds as many investors are excluded from a full range of investment choices for their own ‘protection’. If we assess the effectiveness of the global regulatory environment encapsulating mutual funds, many investors argue that if current results reflect effective regulation, they’d rather do without it. It is interesting to observe the generally overzealous nature of regulators and burdensome costs forced upon professionals who follow the rules while regulators often bypass those who ignore all common standards of honesty and decency. New York Democratic Rep. Gary Ackerman, summed up many people’s thoughts through his comments related to the Madoff inquiry and the role of senior SEC officials when he stated “You couldn’t find your backside with two hands if the lights were on... You have totally and thoroughly failed in your mission,”... PROFILE: Julian Stockley- Smith, Joint CEO, JP Fund Services SA Switerland Julian started his finance career in the early 1980s with Godsell, Astley and Pearce, a subsidiary company of EXCO Plc, as a spot foreign exchange broker. After a number of years in London, Wellington and Tokyo including time as a regional director for Exco Plc in the Asia Pacific, Julian completed an MBA before trading financial markets from a base in Australia. In 2002 Julian and business partner, Philip Griffiths commenced representing Saxo Bank in the Asia Pacific region where they were successful at establishing a significant presence, particularly in the institutional environment. In 2007, Julian relocated to Geneva and is actively involved in analysis, trading and targeted corporate finance projects along with the core JPFS business. Wewouldprefertoseemoreenforceduse of independent directors, independent fund administrators and independent brokers; just as entry barriers for investors are excessive, controls over investment manager accountability are worryingly absent. Investors should be sure that adequate, independent safeguards are in place before they invest. This is an opportunity to improve a successful industry; a fund is the only way to develop a scaleable investment pool into which people can invest. Given that you expect the ongoing success of this sector of the industry, what changes do you anticipate and where do you see yourselves in this? It is clear that there is increased cost consciousness in setting up and running alternative investment funds. Some elements of the industry are complacent and poor returns are exacerbated by the high level of establishment and running costs of funds precisely the premise upon which our business is built . From an investment perspective, managers are likely to take a cautious approach to investing with lower levels of leverage and less focus on chasing pure alphain illiquid assets; redemption terms will more accurately reflect the liquidity available in difficult market conditions. Investors, on the other hand, should conduct significantly increased due diligence on investment managers, investment structures and documentation; greater transparency will be essential. From a macro perspective, the industry is likely to trend towards a concentration at top end and bottom end levels of assets under management with larger multi strategy funds and increasing numbers of smaller single strategy or asset class funds. Our company is ideally placed to service the new breed of hedge fund manager who will demand a reasonably priced structure in a short amount of time. We are also ideally positioned with our ability to provide the requisite, well regulated independent administration, auditing and banking services that will become market norms. JP Fund Services is a boutique Fund service provider specialising in offshore structures for all types of asset managers