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.

Hedge Funds Care offers funding to support BVI children

We are very excited to be able to share the news that the BVI branch of Hedge Funds Care is now in a position to be able to work with and fund BVI projects aimed at preventing and treating child abuse on our islands.

Our plans to reach out to the community were delayed when we were rudely interrupted by the visits of hurricanes Irma and Maria in September 2017.  But after taking a moment to dust ourselves off, Help For Children BVI this week went public with a call for proposals from charities, not-for-profits and child-serving agencies in the British Virgin Islands. The call for funding proposals seeks to support programs and initiatives related to child protection, safe–guarding, well-being and child abuse prevention and treatment as the community continues to recover and rebuild from last year’s hurricanes.

I am very grateful to fellow blogger Natalie Bell and the fabulous team at Hedge Funds Care without whom we would not have reached this point. Now we look forward to seeing the vision manifest into something meaningful for BVI children!

Click here to read more about Harneys’ involvement with Help For Children BVI, and how the project got started.

DREAMING THE IMPOSSIBLE DREAM

Something quite magical happened yesterday morning.

Kyron McMaster, born and raised in the British Virgin Islands (population circa 30,000) qualified for the 400m hurdle finals at the Commonwealth Games. Now, given he would have been competing against the very best athletes from the likes of Canada (population circa 36mil), Great Britain (population circa 60mil) and India (population circa 1.3bil), this very humble 21 year old truly should have had no chance.

When you then throw in the fact that his coach was tragically killed back in September last year due to the passing of Hurricane Irma, this really was impossible. Continue reading

Cryptocurrency subscriptions through the eyes of the taxman

As the world of cryptocurrency changes pretty much as regularly as I change my underwear (just to be clear mum, that is a lot, I promise), one of the very common questions we are asked by prospective managers looking to set up a new crypto focused fund is whether they can take in subscriptions in a digital currency of some form, whether that is from their own wallet or from an outside investor’s stash.

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Thoughts in Crypto Custody – Part One

In today’s environment of high-profile hacks and cyber security breaches, it’s not a huge surprise to me that the majority of my fund manager clients who trade digital-assets have a distrust of institutions that claim that they can safeguard their assets. In addition, despite the exponential growth of managers trading digital-assets over the past few years, there is still a dearth of service providers willing and able to service the industry (custodians included) which means the prices that institutional custodians currently charge are not yet at levels that can be tolerated by emerging managers. Finally, there’s the question of frequency of trading; by placing their digital-assets with a third party, many managers feel that this will slow down their ability to react to market volatility and take advantage of arbitrage opportunities between different exchanges.

The combination of these factors (perceived security risks, high costs and a reduced speed of trading) means that the majority of my fund manager clients trading digital-assets prefer to safeguard their own assets through the use of cold storage e.g. by sharding their private keys, putting them on individual thumb drives and, sometimes, even placing them in different safety deposit boxes in various locations. The number one question I get asked by my clients at the beginning of any engagement is can they self-custody their assets and, if so, should they do this? With this mind, I thought it would be helpful to set out the regulatory requirements (from a BVI and Cayman law perspective) together with what we see as current market practice.

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A solid investment – the BVI as a home for collective funds

As Chair of the BVI Investment Funds Association, I eagerly awaited the publication of the Capital Economics Report like a kid in the run-up to Christmas.

The BVI has a long-standing reputation in this industry for excellence, dating back to the publication of the Mutual Funds Act in 1996, but we have never had the statistics to back up every practitioners’ firm belief in the jurisdiction that we have one of the globe’s largest and most flexible fund jurisdictions.

Until now.

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New York, New York

It has been a real pleasure to spend a lot of time recently in New York, one of my favourite cities in the world. This is undoubtedly the best time of year to see it as well as the leaves start to change colour, the festive lights start to twinkle and it is impossible to resist getting the running trainers on and heading out for a plod around the majestic Central Park.

Until you get up there and realise that the entire city runs faster than you.

The first call to arms was a true honour; our global funds team had been shortlisted for the Offshore Law Firm of the Year in the very prestigious HFM Week Awards and so I trooped up to firstly buy something to wear (it was decided that “Hurricane Chic” was not the right look) and then secondly to attend the awards at the fantastic Cipriani on 42nd Street.

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Irma leaves love in her wake

I have stared at this blank screen for twenty minutes now.
Desperately wanting to write a blog, but simply not knowing where to start or what possible words I can use to accurately describe the “experience”.
For those that are not aware, the British Virgin Islands was hit head on by Hurricane Irma earlier this month. It became the largest storm the Atlantic had ever seen and the eye of the storm absolutely swallowed up and spat out our beautiful islands.
You can read a lot of narratives online already and view the truly disturbing photos and videos that are apparently everywhere.

I have to admit, I have barely looked at nor read anything at all in the last few weeks. I don’t need to. It’s all there, burned into the retina.
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Pride and Prejudice in the British Virgin Islands

I am not just the black sheep of my family; I am the black sheep who stormed out of the farm, sought out the neighbourhood wolf pack and then asked if he might be able to join.

I come from a family of doctors, nurses and teachers who have spent their lives working exclusively in either the truly incredible and freely available British National Health Service or the state sponsored comprehensive school system, which provides a free education to anyone and everyone in the UK. All of these roles are incredibly noble and I remain very proud of the careers my family have chosen.

So it is safe to say that when I elected to go down the path to becoming a lawyer, there were a few furrowed brows. When I then mentioned I wanted to start by assisting major corporations with their legal affairs before moving onto the investment funds industry, frowns began to form. And when I finally announced that I was going to take this vocation into the offshore environment, the tears began to flow accordingly. The sheep in wolf’s clothing had arrived.

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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