Offshore Fund Management 2005

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Offshore Fund Management 2005

  1. 1. A Datamonitor report Offshore Fund Management 2005 In Change Lies Opportunity Published: Dec-05 Product Code: DMFS1801 Providing you with: • Global in scope including Bahamas, Bermuda, BVI, Caymans, Dublin IFSC, Guernsey, Hong Kong, Isle of Man, Jersey, Luxembourg, Singapore, Switzerland • Market size data for 12 jurisdictions including segmentation by customer group and source country. Market forecasts for fund assets to 2007 • Topical coverage includes EU Savings Tax Directive, UCITS III rulings, competitor strategy alternative investments and other Use this report to… key issues • In-depth survey covers opinions of 75 Calculate your market share offshore fund managers across BVI, of offshore funds markets Bahamas, Caymans, Jersey, Guernsey, Isle of Man, Luxembourg and Switzerland www.datamonitor.com/financial
  2. 2. Offshore Fund Management 2005 DMFS1801 An introduction to the report Offshore Fund Management 2005 analyzes the global offshore mutual fund market. It combines rigorous and insightful analysis with a range of data on the size and composition of the offshore mutual fund sector. It leverages the expertise and resources of Datamonitor's Wealth, Investments and Protection Team including Datamonitor's Global Offshore Database and an in-depth survey of fund managers from across Luxembourg, Switzerland, the Channel Islands and the Caribbean. The analysis covers market size, the regulatory environment, key developments across offshore jurisdictions, competitive activity by fund managers and the future outlook for the industry. Key findings and highlights • The offshore fund market has bucked wider predictions of doom and gloom for offshore and sustained robust growth cumulating in a 51.5% in assets increase since 2000. Indeed, growth in offshore fund assets has been some three time faster than major mutual fund markets in Western Europe and the US over the last five years. • Amid the growing regulatory burden and pressures on offshore fund managers to keep fees depressed in a low return environment it is hardly surprising that cost base concerns have come to the fore. The two major pre-occupations in this respect are costs of compliance and staff remuneration. • While client interest in offshore fund management is strongly expected to increase by the industry, competition for new business is anticipated to be intense. When asked what would make it hardest for fund managers to gain more clients in the next two years, 50.7% of respondents sighted competing offshore players as the main barrier to new business. Reasons to buy • Calculate your market share of offshore funds markets • Ascertain the impact of key regulations on your offshore fund business • Assess future revenue and client acquisition opportunities using insights from our survey and market forecasts Contact us... From Europe: tel: +44 20 7675 7366 fax: +44 20 7675 7016 email: fsinfo@datamonitor.com From Germany: tel: +49 69 9750 3119 fax: +49 69 9750 3320 email: deinfo@datamonitor.com From the US: tel: +1 212 686 7400 fax: +1 646 365 3362 email: usinfo@datamonitor.com From Asia Pacific: tel: +61 2 9006 1526 fax: +61 2 9006 1559 email: apinfo@datamonitor.com
  3. 3. www.datamonitor.com/financial Sample pages from the report Competitive Landscape Expanding investment coverage is a key priority for offshore fund managers Offshore fund managers are keen to find ways to expand their investment coverage in a bid to expand the range of fund products on offer and capture exposure to new asset classes and markets. Efforts to extend alternative investment coverage are a strong theme across fund managers in all regions with 41.1% of respondents highlighting such plans. The Offshore Fund Market In contrast there is much more variation in the proportion of fund managers with plans to extend coverage of emerging markets with 66.7% of respondents in the Channel Islands/Isle of Man compared with 40.0% remained at a broadly equivalent level to the onshore European average over a 5 has in the Caribbean and 22.2% in Luxembourg/Switzerland. In addition, traditionaltime horizon. not being ignored with year markets are some 38.4% of fund managers intending to extend their coverage of these areas, Looking back over a one year timeline tells a similar story with regard to the relative most notably in the Channel Islands/Isle of Man (46.7% of respondents). growth of offshore centres, suggesting that those centres that persevered most strongly through the more difficult years in 2000-2002 have managed to sustain their progress through into 2004. The only exception in this respect is Hong Kong, which Figure 17: Emerging market coverage is a key axis of development for2004 after an exceptionally strong year in 2003. has seen growth slow significantly in Channel Islands/Isle of Man fund managers competition form Singapore. Mainly as a result of Extending your coverage Executive Summary of emerging markets 60.0% Changing your external Figure 7: Developing manager seen exceptionally strong growth in funds both Bermuda has selection capabilities investment managers 40.0% over the short and long term, 2000-2004 pressing concerns pervading among offshore fund competitors The two most 80% today are increasing regulatory pressures (a concern of 54.7% of fund managers 20.0% surveyed) and retaining existing clients (41.3%). 70% Reworking your asset Extending your alternative allocation models 60%investment coverage Cay mans Growth rate, 2003-2004 50% Bahamas Figure 2: A three-tiered Bermuda competitive picture exists within the offshore 40% Guerns ey market fund Increasing use of third Extending your coverage M IO 30% Singapore party investment managers of traditional markets OFFSHORE ONSHORE 20% Improving investment Lux Dublin (1) Competition between reporting 10% BVI Jers ey onshore and offshore Channel Islands & Isle of Man Caribbean Luxembourg / Switzerland HK 0% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Source: Datamonitor Offshore Fund Managers Survey 2005 -10% Question: How are you planning to develop your offshore fund offering in the next CH DATAMONITOR two years? Choose only the three most important -20% CAGR, 2000-2004 (2) Competition between Source: Datamonitor Global Offshore Database 2005 DATAMONITOR different offshore jurisdictions (3) Competing financial insitutions Offshore Fund Management 2005 DMFS1801 within individual offshore centres © Datamonitor (Published 11/2005) Page 59 Source: Datamonitor DATAMONITOR This report is a licensed product and is not to be photocopied The sources of offshore assets vary across jurisdictions Offshore fund managers looking to generate new business are most heavily 57.3% of fund business is sourcedprioritizing marketing/branding initiatives in an effort to maximize awareness for from retail clients their products. 48.0% of all fund managers highlighted this as an initiative (with Globally across the 12 offshore centres under analysis retail investors are thought to offshore fund managers in the Caribbean looking set to be the most active with account for 57.3 % of fund assets with the remaining 42.7% attributed to institutional 61.5% of respondents. Offshore Fund Management 2005 Initiatives to improve CRM andDMFS1801 support systems are the most heavily prioritized © Datamonitor (Published 11/2005) strategic option for fund managers today with 60.0% of respondents confirming Page 22 their intention in this respect. This is true across offshore fund managers in all This report is a licensed product and is not to be photocopied three regions under analysis. The move is consistent ties in with concerns regarding the need to retain existing clients, something which was highlighted as the second most pressing concern for offshore fund managers. It also suggests that offshore fund managers are looking to enhance customer information and monitoring systems as part of “know you customer” requirements. With substantial investments being made in CRM, Datamonitor believes that offshore fund managers need to make sure they derive maximum Offshore Fund Management 2005 DMFS1801 © Datamonitor (Published 11/2005) Page 6 This report is a licensed product and is not to be photocopied Request more sample pages...for FREE! From Europe: tel: +44 20 7675 7366 fax: +44 20 7675 7016 email: fsinfo@datamonitor.com From Germany: tel: +49 69 9750 3119 fax: +49 69 9750 3320 email: deinfo@datamonitor.com From the US: tel: +1 212 686 7400 fax: +1 646 365 3362 email: usinfo@datamonitor.com From Asia Pacific: tel: +61 2 9006 1526 fax: +61 2 9006 1559 email: apinfo@datamonitor.com
  4. 4. Offshore Fund Management 2005 DMFS1801 Table of contents EXECUTIVE SUMMARY - Hedge funds subjected to wide range of regulatory attentions THE OFFSHORE FUND MARKET • Hedge funds are becoming an important part of the • Introduction offshore funds business • The offshore fund market has grown strongly • US calls on Hedge funds to register with the SEC - The global offshore fund market now stands EUR 3.1 • France develops a pragmatic assessment of the risk trillion spectrum for different hedge fund approaches - Offshore fund assets have grown three times faster than • Germany broadens hedge fund access, but also gets the onshore Europe and the US jitters about hedge funds' market impact - Growth in the offshore fund sector has been driven by a • Italian hedge fund regulation looks set to remain combination of factors unchanged - Bermuda, Guernsey and Dublin have been the fastest • Spain has recently regulated for the creation of a hedge growing offshore fund markets in the last five years fund market • The sources of offshore assets vary across jurisdictions • The UK regulator remains cautious in its approach to - 57.3% of fund business is sourced from retail clients hedge funds - The US and the UK are the largest contributing countries • Inter-jurisdiction competition spurs regulatory of offshore fund assets globally developments - Historical and geopolitical ties define the specific links - Luxembourg sets down plans to maintain its leadership in between offshore centers and onshore source countries offshore funds • Changes persist in the international regulatory • Luxembourg leads the way as a base for UCITS funds environment • Luxembourg is keen to reposition itself towards - The EU STD will bring changes but should have a limited innovation and new products impact on fund business volumes • Grand Duchy is also keen to profit from the growth in • EU STD is finally agreed and goes into effect alternative investments • The EU STD applies only to individual investors in • Luxembourg drops tax on money market funds certain funds - Dublin's new fund legislation to maintain the center's strong • The EU STD has had and unexpected impact on growth offshore funds business in some countries outside of - Bermuda works on Collective Investment Schemes Act the agreement 2005 • Fund managers and offshore fund centers are not - Bahamas new fund legislation introduces SMART funds without a strategic response to the STD - Cayman Islands takes the lead on hedge funds and - UCITS rulings offer opportunities for offshore fund reviews mutual fund legislation managers - Jersey's Expert Funds have been accompanied by efforts • The UCITS directive is now 20 years old to speed up the fund authorisation process • UCITS products have imposed themselves strongly, but - Guernsey to follow suit with a streamlined process for there a number of unresolved issues qualified investors • Key offshore centers could serve as a strong base for - Gibraltar not to be outdone on fund regulation front large UCITS funds with cross border potential - Hong Kong offshore fund taxation debacle leaves • Non-UCITS may be more enticing than UCITS for Singapore in strong competitive position offshore fund managers • Data tables - Onshore nations continue to open up to foreign funds • UK distributor status rulings open up access to the UK COMPETITIVE LANDSCAPE market for specialist offshore funds • The competitive environment is heavily influened by • The German case highlights how attempts to impose regulation new discrimatory tax regimes in Europe will surely fail - Competition in offshore fund management occurs at three • Australian tax changes also free up access to offshore levels fund managers - Increasing regulatory pressures and client retention are • Taiwan relaxes rules for offshore fund distribution and offshore fund managers most pressing concerns promotion • Business strategy is embracing a number of initiatives - Initiatives to enhance new business acquistion “...Cost pressures in key areas such as compliance and staffing mean margins are tightening. Responding to this requires finding ways to increase economies of scale to generate cost efficiencies and/or developing more sophisticated higher margin products...” Datamonitor Senior Analyst
  5. 5. www.datamonitor.com/financial - Initiatives to improve relationship management Table 5: What strategic initiatives are you considering or - Initiatives to develop capabilties and resources implementing in the next year? Choose as many • A range of developments to investment fund offerings as apply are taking place Table 6: How are you planning to develop your offshore fund - Expanding investment coverage is a key priority for offering in the next two years? Choose only the three offshore fund managers most important - A hefty proportion of fund managers are looking to develop Table 7: What are the most pressing concerns for your managers selection capabilities business at present? Choose up to three • Leading competitors are identified by their peers Table 8: Forecast offshore fund assets by center, 2004-2007f • Data tables Table 9: Do you think client interest in offshore fund management will increase or decrease in the next two FUTURE OUTLOOK years? • Introduction Table 10: What will make it hardest for competitors in your • Market forecasts look healthy for offshore fund business jurisdiction to gain more fund management clients in - Client interest in offshore fund management is strongly the next two years? anticipated to increase Table 11: In your experience, what are the most effective - Datamonitor forecasts the offshore fund sector to reach customer acquisition techniques for retail offshore nearly EUR 5 trillion by 2007 investment management clients? Choose up to three - Large fund centers are set to lead the way in terms of Table 12: What are your main areas of concern in controlling medium term growth your offshore cost base? Choose up to three • Fund managers face a number of issues for the future Table 13: All regions: Please indicate where your company - The pursuit of new business revenues will have its stands on outsourcing the following aspects of your challenges business: • Competition from offshore will be the biggest barrier to Table 14: Do you think that alternative investments (e.g. hedge gaining new clients funds, property, structured or capital protected • Targeting new retail business is best done via referrals products, etc) will become as important as traditional - Cost-base concerns will be centered on compliance and investments managed in your jurisdiction in the next staff salaries two years? - Outsourcing is set to increase although firms resistance to Table 15: All Regions: To what extent do you believe the the concept remains strong in many areas following statements to be true? Alternative - Alternative investments are set to have a long-term impact investments... • Alternative investments are expected to become Table 16: Channel Islands/Isle of Man: To what extent do you mainstream asset classes according to offshore fund believe the following statements to be true? managers Alternative investments... • HNW and institutional investors are the key target Table 17: Caribbean: To what extent do you believe the markets following statements to be true? Alternative • Asset managers are heavily promoting alternative investments... investments Table 18: Switzerland/Luxembourg: To what extent do you • Future priorities for fund managers believe the following statements to be true? • Data tables Alternative investments... Table 19: Detail of Offshore Fund Managers Survey sample APPENDIX FIGURES TABLES Figure 1: Luxembourg was the largest hub for offshore mutual Table 1: Geographical scope of the EU Savings Tax Directive funds as at the end 2004 Table 2: Comparison of growth in total onshore and offshore Figure 2: A three-tiered competitive picture exists within the mutual fund assets, 2000-2004 offshore fund market Table 3: Offshore fund assets by offshore center, 2000-2004 Figure 3: Offshore fund assets are forecast to reach just under Table 4: Total onshore European mutual fund assets, by EUR 5 trillion by 2007 country, 2000-2004 “...The legal structures for funds and the tax and other incentives offered by different offshore jurisdiction have an important impact on the nature of the products fund managers can design and the price at which they can offer that product...” Datamonitor Senior Analyst
  6. 6. Offshore Fund Management 2005 DMFS1801 Figure 4: Luxembourg was the largest hub for offshore mutual Figure 26: In your understanding or experience to what extent do funds as at the end 2004 you believe the following to be true? Alternative Figure 5: The value of assets held in offshore funds has investments... significantly outgrown those in onshore funds in recent Figure 27: In your understanding or experience to what extent do years, 2000-2004 you believe the following to be true? Alternative Figure 6: Drivers behind the growth in the offshore fund market investments... Figure 7: Bermuda has seen exceptionally strong growth in funds both over the short and long term, 2000-2004 Figure 8: Breakdown of offshore fund assets by client type, end 2004 Figure 9: Percentage of global offshore fund assets by source country/region, end 2004 Figure 10: Percentage breakdown of offshore fund assets by source region for 12 major offshore centers, end 2004 Figure 11: A three-tiered competitive picture exists within the offshore fund market Figure 12: Regulatory pressures are the most pressing concern for fund managers across all jurisdictions Figure 13: Marketing and branding efforts are the major initiatives dedicated to new business acquisition Figure 14: CRM systems rank over efforts to change the relationship model in terms of initiatives targeted at existing clients Figure 15: Fund Managers have focused on a range of initiatives to enhance capabilities and resources Figure 16: Marketing and CRM efforts are the strategic priorities for offshore fund managers Figure 17: Emerging market coverage is a key axis of development for Channel Islands/Isle of Man fund managers Figure 18: Client interest in offshore funds is strongly anticipated to increase Figure 19: Offshore fund assets are forecast to reach just under EUR 5 trillion by 2007 Figure 20: Luxembourg is expected to grow fastest on the back of the UCITS rulings and other pro-active initiatives Figure 21: Competing offshore players are considered the key threat to new client acquisition Figure 22: Referrals are a key source of retail client business for offshore fund managers Figure 23: Staff salaries are a key concern for the cost base in the Channel Islands and the Isle of Man Figure 24: Outsourcing is not high on the strategic agenda with the exception of IT systems development Figure 25: Alternative investments are anticipated to become as significant as traditional asset classes for some managers Contact us... From Europe: tel: +44 20 7675 7366 fax: +44 20 7675 7016 email: fsinfo@datamonitor.com From Germany: tel: +49 69 9750 3119 fax: +49 69 9750 3320 email: deinfo@datamonitor.com From the US: tel: +1 212 686 7400 fax: +1 646 365 3362 email: usinfo@datamonitor.com From Asia Pacific: tel: +61 2 9006 1526 fax: +61 2 9006 1559 email: apinfo@datamonitor.com
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  8. 8. Offshore Fund Management 2005 DMFS1801 Interested in this topic? Datamonitor's Savings and Investments SPP provides the rigorous analysis and actionable recommendations any deposit-taker, asset manager, wealth manager or private bank needs to compete in the increasingly complex and competitive investments industry. Changes in levels and distribution of wealth, market consolidation and new ventures, regulatory pressure and government initiatives, product development and changing distribution channels are combining to fundamentally reshape the savings and investments environment. Other reports available in this series Hedge Funds in Europe 2005 The European Hedge fund market is going through a period of expodential growth. This report draws on Datamonitor's European Asset Management survey to deliver insights into the development of this market. Published: Nov-05 Product code: DMFS1745 Property Investment in Europe 2005 Analyses the current status and future development of the market for property investments in five European countries based on a unique B2B survey of asset managers. Published: Nov-05 Product code: DMFS1746 European Investment Management Interactive Database 2005 The European Investment Management Database is Datamonitor's flagship asset management market product in Europe. It includes market sizing, forecasts and analysis of mutual fund, non-life, life and pension and self adminstered pension assets. Published: Oct-05 Product code: IMFS0122 For more information on reports and briefs go to: www.datamonitor.com/financial Subscribe to Monitor A monthly update of Datamonitor's new products, delivered to you by email. Email: monitor@datamonitor.com
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