| Mcguiness: new asset managers “need to show investors they’ve got a proper infrastructure” |
Hedge fund proliferation is set to continue for some time, or so the services offered by the latest support business setting up in London seem to suggest.
Aspiring alternative asset management boutiques without substantial financial clout are being targeted by the start-up, HedgeSupport, which helps get them up and running and also provides back-office support. “A lot of people set up without huge amounts of money,” says HedgeSupport co-founder and managing director Steve McGuinness. “They need to show investors they’ve got a proper infrastructure.”
McGuinness says clients can outsource as little or as much of their non-core activities to his firm as they need. HedgeSupport aims to help with Financial Services Authority regulation and IT requirements, while providing back-office support on site. This leaves funds free to concentrate on marketing and fund management.
HedgeSupport opened new offices in London last month, having launched in January last year, and is taking a number of its first clients into its offices. The plan is to create an environment akin to that of a bigger financial institution.
The firm has expertise in FSA regulation and offers collective buying power, enabling clients to take advantage of group discounts on, for example, IT set-up and insurance.
Clients located outside London can still take advantage of HedgeSupport’s set-up and back-office services. Winton Capital, a managed futures and hedge fund manager with $250 million under management, has been doing so since April. Martin Hunt, Winton’s director of operations, says: “We outsource as much UK regulatory compliance as we can.”
Hunt says HedgeSupport has saved Winton time and money. “Louisa Gjertsen [a director at HedgeSupport] spent about five days here going through all aspects of the business from personnel through to customer compliance in light of changes when the FSA took over,” he says.
The FSA took over from the SFA (Securities & Futures Authority) in 2001 and introduced changes to existing regulatory requirements, known as N2. Hunt says: “Some [of these] involved a lot of work.” The
other option for Winton would have been to “employ a compliance officer, which would have been incredibly expensive”, Hunt says.
McGuinness and Gjertsen, who co-founded HedgeSupport, had worked together as chief operating officer and compliance officer respectively at start-up volatility hedge fund manager, Desmond Fitzgerald, between 1993 and 1997. McGuinness is a qualified accountant with wide experience in senior middle-office and finance roles. Immediately before founding HedgeSupport he was senior financial officer of the UK-regulated businesses of Crédit Lyonnais. Gjertsen worked in the corporate authorization department at the FSA for three years before setting up and therefore has a good understanding of N2.
HedgeSupport has three hedge fund clients and several more are agreeing terms. Also on board are two property companies, a fund of funds, a few marketers and two equity brokers.
The support company does not feel it is in direct competition with prime brokers. “Prime brokers provide a short-list of office space,” says McGuinness. “Mostly, prime brokers refer clients to people like us.”
In the future, HedgeSupport might also consider aiding alternative managers in raising capital.
