Listed Hedge Funds
Hedge Funds on Stock Exchanges
Quick Link: Geographical Hedge Fund Guides
There is a vibrant Listed Investment Company community on the Australian Stock Exchange that includes companies managing Australian equities, overseas equities and other specialist funds. Is there a value in listing hedge funds as an alternative to offering hedge funds as retail managed funds?
In other markets, such as Ireland and Singapore, listing is offered as an alternative "structure of convenience" to allow investors to participate that might otherwise be constrained by an unlisted vehicle or the jurisdiction of the particular fund company, particularly if it is located in a non-tax treaty country such as the Cayman Islands.
What happens in practice in these situations is little different from the unlisted model. Applications and redemptions occur at the posted price for the day rather than a market price struck by the meeting of buyers and sellers as is generally the case in listed markets. As a result, there are net applications and redemptions on a day that are managed by the fund administrator. Prices are published by the exchange, but little additional investor comfort is gained from the listing.
It is possible to list a Cayman fund for example on the Irish Stock Exchange (ISE). This can be done with little additional documentation than required to establish the fund registered with the Cayman Monetary Authority. If the fund has already commenced, trading an Audited Statement of Net Assets will be required at the time of listing, otherwise no accompanying financials are required. Once the fund is listed, the day-to-day operation of the fund is usually the responsibility of the Administrator. This will include the calculation of Rel=”nofollow” target=”_blank” the net asset value and processing the subscription and redemption applications.
Because it is not possible to subscribe or redeem shares at any other price other than the net asset value, there is no opportunity for investors to exploit pricing differences ie there is no secondary market for investment funds on the ISE, so a listed fund on the ISE is not actively traded.
The listing of an investment fund on such exchanges as the ISE or Singapore Stock Exchange are simply a "technical listings"; marketing tools to assist a fund access a wider investor base. For example, it is useful where a fund seeks to target institutional investors. A listing can facilitate distribution because some such investors are often prohibited from investing in unlisted securities.
By Rick Steele