Monthly Archives: August 2015

How I Learned to Stop Worrying and Love the Market Turmoil

I had an interesting conversation today. First some background. You may have noticed that, over the last week, world equity markets have undergone substantial amounts of selling that have driven share prices down to a degree where words like “fear” and “panic” and “market turmoil” seemed to be appearing in the press and media with alarming regularity – only to then rise strongly again over the last day or two[1].

Basically, everyone seems to be freaking out that the Chinese economy is going to implode and pull the rest of the global economy down with it, or maybe not.

But back to my interesting conversation. Somebody asked me what I thought all of the above would mean for the hedge fund industry[2]. This got me to thinking about what a hedge fund actually is. See, I told you this was going to be interesting.

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Converting a Cayman 4(4) Fund to a 4(3) Fund

So, your fund is up and running, your portfolio performance is in the upper quartile for your asset group, you’re attracting more and more interest. Your own marketing (or your newly appointed marketing team) is beginning to gain traction and you are now at the stage where you are bringing in more investors. In fact, you have a closing in just over two weeks which will significantly bump up your asset under management figure. Is it time to break out the next bottle of Cristal (or whatever your preferred choice is – Highland Park single malt is always a popular choice of your average Cayman attorney and we’re always happy to help celebrate your success)?

Whilst you’re basking in the slight glow of your success, you stop and think. Wait. Is there a Cayman regulatory issue I have to deal with? Wasn’t there a magical number set out in the offering memorandum that I have to think about?

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