Author Archives: Philip Graham

Philip is a partner and expert on offshore funds at Harneys who puts his ever increasing grey hairs down to three young children, supporting Liverpool Football Club, and being married. In no particular order.

Tax Amnesty heralds increased demand for offshore funds in the Latam region

After a highly educational trip down to Buenos Aires at the end of last year, I couldn’t help but be encapsulated by everything that was going on in Argentina. It absolutely felt like a country that was finally moving in the right direction and the Tax Amnesty was a large part of that. On that basis, I took the time out to interview the head of our Montevideo Office, Horacio Woycik to gauge his views on how 2017 is playing out:

Thanks for taking the time to speak to me Horacio. I noted that on 31 March 2017, Argentina concluded one of the world’s most successful tax amnesties, something of which you must be very proud of as a native Argentinian. Could you tell our blog readers a little more?

Thanks Phil. Although the Argentina Government was cautiously optimistic when announcing the Tax Amnesty on various assets[i] a year ago, the results exceeded all expectations, with $116.8 billion assets declared in total. This is impressive, particularly compared to the $1.7 billion declared under the former government’s Tax Amnesty programme between 2013-2015.

That’s a truly incredible result. What do you put it down to?

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The Education of a Value Investor

We’re told a lot these days about why capitalism has failed us. We’re told that greedy bankers and irresponsible CEOs need to be reined in with more stringent regulations and that wealth should be more aggressively redistributed. Perhaps. But greed can also be a vehicle to something deeper and more soulful.

You would have every right in the current international political and social climate to read these words, written by a very successful investment fund manager and struggle to take them in. I know I did. I almost felt as if the author was setting up an enormous challenge for himself to beat the general stigmas that surround fund managers and certainly I prepared myself to get to the end of his book and conclude that he’d failed.

But how wrong I was.

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Much Ado About Nothing – Mourinho, Ronaldo and the BVI

Ferencvaros vs. Chelsea stadium opening football matchAs a long suffering Liverpool supporter, I can absolutely assure you that I have literally no interest or desire to defend Jose Mourinho or Christian Ronaldo. In fact, I am actually hardwired to positively enjoy any misfortune they may suffer, such is the slightly callous nature of being a football fan.

However, when they recently both appeared on the front pages of various British journalistic publications (rather than adopting their rather comfortable position on the back page about their latest sulk), linked with entities based in my home of the British Virgin Islands, I felt duty bound to comment. Because, once again, some of the rhetoric being used to describe their personal (and frankly, private) tax affairs was in some parts inaccurate and in others categorically misleading to the reader.

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Tiger Woods and the comfort of predictability

After more than 15 months in the wilderness, with goodness knows what to keep him entertained during his recovery from multiple back surgeries, Tiger finally came back to the PGA Tour this weekend and competed in the Hero World Challenge in the Bahamas.

The entire sporting world watched and waited; could he begin down the road to superstardom once again?

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Marcum panel

On the Stump – Sao Paulo & New York

I have had the distinct honour and pleasure of being invited to speak at two excellent conferences recently.

In September I headed down to Sao Paulo to speak at the DMS 6th Annual Investment Funds Summit. I was joined on a panel by fellow Harneys partner Marco Martins, along with two representatives from Maitland and one from DMS. It was a slight concern of mine that every other panellist was fluent in Portuguese but thankfully this illiterate Englishman managed to scrape by.

DMS Panel

Phil Graham, far right, and Marco Martins, centre, of Harneys at the DMS 6th Annual Investment Funds Summit in Sao Paulo in September. No one told Phil to wear red socks, which had him a little preoccupied.

We discussed the latest trends and updates from the offshore world, with Marco touching on the new LLCs in Cayman and I was asked to talk through the incubator and approved funds. It was very interesting indeed for both of us to get a real sense of fascination in the room with not only some in-depth queries during the presentation, but also afterwards and well into the evening whilst we were enjoying our caipirinhas. Given the tax amnesty at the moment, offshore structuring remains incredibly poignant and the use of fund vehicles in particular seemed to be of real interest to budding fund managers looking to take in investments from the high net worths who are bringing their money back into Brazil and wanting to put it to good use.

My only disappointment, as you will see from the photo, is that no one provided me with the memo about wearing a pair of bright red socks. Next time.

Phil Graham and Larry Kudlow

Phil Graham and Larry Kudlow at the Marcum Alternative Investment Manager Forum

Not long after I unpacked my bags, I was getting down the suitcase again to fly up to one of our very regular stomping grounds of New York to speak at the Marcum Alternative Investment Manager Forum Dennis Schall put on a truly masterful event which included a keynote speech from Larry Kudlow which was one of the most impressive I have ever heard. A room full of rather loud elephants was hushed into silence by some unbelievably simplistic and yet incredibly brilliant economic policies that led to a standing ovation at the end. Given he acted as senior economic adviser to President-elect Trump throughout his campaign, there is potentially reason to be a little more optimistic than the outlook a number of the political commentators are currently expressing.

Whilst it was far from ideal to speak in and around such an impressive orator, it was great to help emerging managers with both the rationale behind using their service providers in the most efficient manner and then set out the various structures that can be used in our industry to maximise the manager’s goals. Dennis had put together some great panellists indeed and not only do I think we added a little bit of insight, but there was a touch of humour too as you will see demonstrated from my photo with Larry.

Boy, didn’t he look like he was just bubbling with enthusiasm to be seen standing next to the offshore guy…

We bag ourselves a HFM hatrick

I was of course overjoyed with the news that my colleagues in our London office and Hong Kong office had been hugely successful in their respective HFM Awards Ceremonies as HFM is a leading global publication covering the hedge fund industry and these high profile awards (which are judged on the basis of client feedback) are undoubtedly very well regarded in the industry.

But, and I can shamefully admit to this fact only now, another part of me was a touch envious.

The feeling is comparable to the one of sitting on a substitute’s bench and watching your team romp home to a glorious victory without you. Whilst of course externally you smile and whoop with delight, there is another part of you that wishes you could just get a chance to run onto the field and contribute in some way to the success.

Well, our chance to do that very thing came when we found out a few weeks ago that we had been nominated in the US as well and so finally the BVI, Cayman and Vancouver offices had their potential opportunity; could we come on in the 80th minute and bang home the third and final goal? Continue reading

Smoke on the Horizon: investment into Cuba

USA and CUBA currency

One of my favourite aspects of working in the offshore environment is that we get to speak to fund managers based all over the world about the latest hot and trendy investment opportunities. Over the last few years we have dealt with enquiries about bitcoin, crowd-funding, acquiring a portfolio of oil tankers and real estate opportunities in Puerto Rico to name but a few of the more intriguing conversations. It constantly keeps the team on our (permanently parked under the desk) toes and there is no doubt that recently we have been part of a very regular trickle of Cuba based conversations and how to maximise the gradual opening of the borders.

When Raul Castro took over from his brother as President of Cuba in 2008, he began a long-anticipated process of political and economic reform. As a result of his strategy, the stagnant economy has been gradually coming to life, galvanised by a fledgling private sector. Diplomatic advances have been made, animosities are thawing and, slowly but surely, relations with overseas nations are being restored. With this sea change comes the possibility of direct foreign investment, a prospect historically laden with regulatory obstacles and risks – from both sides.

It is easy to see why there is excitement surrounding Cuba’s development. The tourism industry is set to explode and the relaxation in travel restrictions for Americans opens a previously-untapped market of over 300 million potential visitors. Such a vast influx of people will require utilities, hotels, ports, roads and telecoms; truly massive investment is required to improve the current infrastructure and there is cautious optimism from sponsors eager to participate in the process and Cubans looking forward to the resulting developments.

Indeed, it is the tourism sector that US News largely focused on in the following article as the best way to invest in Cuba as a US citizen:

http://money.usnews.com/investing/articles/2016-03-21/7-ways-to-invest-in-cuba

But rather than related company stock-picking, what about direct foreign investment? Is there a way for US based investors to capitalise directly on some of the infrastructure opportunities for example?

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Long Live The King: Why LeBron James Helps Justify Performance Fees

For those that are not aware, LeBron James just transcended his sport. Playing against a team that some have described as the best ever and down 3-1 in the Finals (a position that no other team in NBA history has ever come back from), he produced some of the greatest basketball the world has ever seen. Hell, some of the greatest sporting performances the world has ever seen.

He threw up numbers that are mind-boggling and yet he was far more than that. Leading a decidedly average supporting cast, there was something about this Cavaliers team that clearly just kept on believing in their superstar.

Because that’s what he is.

One of the tired narratives that you regularly hear when discussing sport is why people who throw/kick/catch a ball for a living deserve to be paid such ridiculous sums of money. Continue reading

Fear and Loathing in Las Vegas

When our global funds partners decided to meet in the Entertainment Capital of the World, there was a great deal of scepticism from the rest of the firm as to how constructive our collective output from the meetings might be.

One of our kindly litigation partners even had the temerity to question whether given the performance of the hedge funds sector in 2016 so far, we would be better suited meeting at a Holiday Inn in Blackpool (for those not familiar with this UK city, try and keep it that way).

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The Offshore Funds Blog: First Year in Review

The international press has picked up on many stories during the last twelve months; we’ve seen a bailout of Greece, an American Flag raised in Cuba, Leicester winning the Premier League in England and Beyoncé and Kim Kardashian battling to be the first one to break the internet.

Well we here at the Offshore Funds Blog very much hope they don’t succeed. As our loyal followers will know, we’ve been in existence since May 2015 and to help celebrate our first year, our clever people behind the scenes have pulled together a list of the top five most-read blog posts just in case you missed them first time around.

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Why offshore? A lesson from David (and Ian) Cameron

As we saw today in the House of Commons, David Cameron is quite capable of defending himself over his ownership of shares in an investment fund before he became Prime Minister and so this blog is certainly not intending to act as cheerleader or critic of the points he made. But his circumstances create a valuable “teaching moment” for this blog and for those that question why investment funds are traditionally set up offshore in the first place.

Blairmore Holdings Inc, the entity in which he held shares from 1997 through to 2010, is an investment fund. Originally incorporated in Panama, it was operated out of the Bahamas and moved to Ireland in 2010. It invests in global equities and has a minimum subscription amount of US$100,000. Interestingly, it also has a mandate ensuring that almost all the fund’s income from its underlying investments should be paid out every year, rather than stored within the fund indefinitely, resulting in every single investor in that fund paying the appropriate level of tax on the relevant gains in their home jurisdiction, which Mr. Cameron duly did.

Therefore, investing in this type of fund structure doesn’t even amount to lawful tax avoidance, let alone illegal tax evasion. So why use “offshore” structures for these types of fund vehicles in the first place if there is not a “tax” angle to it?

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Can this David really beat multiple Goliaths?

With humble apologies for the slight tangent, something quite incredible is happening in the English Premier League right now. This time last year, Leicester City were firmly rooted at the bottom of the table and with only nine games to go, they were certainties for relegation. Despite managing to scrape their way through to eventual survival (which was an impressive feat in itself), with relatively minimal expenditure on new players in the summer of 2015, they entered this season as the least favoured team in the entire division and their odds of winning the league were set at 5000-1, which, to give some form of comparison, are precisely the same odds you can get on Elvis being alive.

Well my friends, dust off those blue suede shoes and start believing in the return of the King once again.

With only six games to go, Leicester are seven points clear at the top of the table. A large number of the nineteen clubs below them have, on paper, much better teams. They have spent a lot more money for starters. They have more experienced coaches. They have a much wider fan base and therefore generate a much higher revenue. They have so called world-class players that have been brought in from across the globe with a pedigree to enable them to win things for their employers. And yet the Leicester City juggernaut continues to roll, but (spoiler alert) unlike the film “Duel”, this truck does not look remotely likely to fall off a cliff*.

So, Phil, with this of course being (mildly) interesting (to you), why on earth is this relevant to this blog?

Well, I couldn’t help but read Oliver’s message from the Emerging Manager’s Forum and think there is actually a comparison to be made here. Whilst it goes without saying that those managers who have access to the deepest resources, the very best management, the stellar principals, the most high-tech infrastructure and the widest market spread set themselves up for having the best possible chance of success, there is absolutely no reason that the smaller, emerging manager cannot take a leaf out of Leicester City’s book. They have brought in a manager who has a clear vision as to how the club should be run. They have invested prudently and wisely within their means and ensured that they have a structure that allows the vision to flourish. When you combine that with an incredible level of hard work, a sprinkling of good fortune and a belief that they can achieve something special, they are suddenly able to take on the very best in their industry.

So, smaller football clubs, just because you can’t afford Lionel Messi and you don’t have 100,000 people coming to watch you every week, it does not mean that you cannot rise to the top. And as for you emerging managers, just because you are not George Soros and don’t have US$100 billion AUM, it does not mean you cannot find a way to develop your strategy and attract the very best investors. Find your focus, build an infrastructure to appropriately supplement your strategy within the financial boundaries in which you are placed and above all else, believe in yourself and those advisers you have placed around you.

Everything else will follow. Including Elvis.

* This article comes with a huge apology in advance to all of the Leicester City fans whose magical story I have clearly just jinxed.

Guest post: Internet search visibility tips for fund managers

Lewis and I had the great pleasure of attending the annual Hedge Funds Care seasonal event in New York last month, which is a fantastic cause that we feel very strongly about here at Harneys. For any of you that are not aware of their work, here are some further details: http://hfc.org/

We met a wide variety of professionals within the industry and had a number of fascinating conversations, although unsurprisingly Donald Trump seemed to feature in an awful lot of them.

One person we met was Grant Greenberg, a Director at Lumentus who gave us some really interesting statistics and advice that we thought the readership here might appreciate, and so without further ado, here it is:

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BVI shaping up to compete with the Cayman Islands

https://www.youtube.com/watch?v=YUYpx3Akuno

The Cayman Islands may offer sleek Ferrari style products but the BVI has packed on some muscle recently and, like the Mustang GT in this YouTube clip, is giving Cayman some competition.

Philip Graham comments on Thalius Hecksher’s recent guest blog and explains why he thinks the British Virgin Islands is like a Mustang GT. 

It was with great excitement in the blog headquarters (think Dr Evil’s underground lair with far more lawyers and far less sharks with laser beams on their heads) that we posted our first guest blog this week that was written by Thalius Hecksher of Trident Fund Services. I would hope you agree that Thalius demonstrates some tremendous insight regarding the trends in the global funds industry right now and we very much thank him for taking the time to set it out so clearly and concisely.

He makes a number of fascinating points, but the key stand out for us in the BVI office was the statement that “Cayman is definitely still number one, but BVI is in its rear view mirror.

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Back to the Future of BVI Funds

Seminar examines past, present and future of BVI funds on Back to the Future Day

Ollie and I just wrapped up a very interesting presentation today to a cross-section of the BVI funds industry.

We chose 21 October 2015 because it is Back to the Future Day – the day that Marty McFly travelled back to the future in in the eponymous film — and we decided to capitalise on this date by looking at the past, present and future of the funds industry. This meant a lot of discussion of the global financial crisis as well as a look ahead at the future areas of growth for the BVI funds industry.

One point which came out quite clearly from the discussion is the BVI’s growing profile as the offshore jurisdiction of choice for the emerging fund manager. We are seeing a great deal of polarisation within the funds industry – recent data suggest that 11% of active fund managers account for over 90% of total assets under management – as well as increasing fee and regulatory pressure on fund managers. This translates into a challenging road for start-up managers and this is the precise market sector which BVI had in mind when it created its new incubator and approved funds. Both of these products are designed to help different types of start-up managers get off the ground with minimal red tape and build a track record at the same time.

We have written about these fund products before, and will continue to do so in the future.

For now, however, cheers to Marty McFly and Dr Emmett Brown. Great Scott! Where has the time gone?