January 16, 2011 5:36 pm

Dublin finds hedge fund favour

The proportion of the world’s more than 9,000 hedge funds domiciled in Ireland doubled to 7.4 per cent last year, underlining the extent to which onshore regulated structures are coming into vogue in the industry.

By the close of the third quarter of 2010, as many as 680 of the 9,175 hedge funds and funds of hedge funds were run from Dublin, according to data from Chicago-based Hedge Fund Research

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Assets held in all Dublin-domiciled funds also hit a fresh high of €950.2bn ($1,268bn) in November of last year, according to the most recent data from the Central Bank of Ireland, surpassing the €808bn held within them when markets peaked in 2007.

Ireland is the domicile of choice for 63 per cent of all European-domiciled hedge funds, according to the Irish Funds Industry Association, with prominent managers such as London-based Marshall Wace opting to move to the country from the Cayman Islands last year.

The hedge fund industry’s drift away from the Cayman Islands to onshore locations in Europe has been accelerated by the passage of the European Union’s controversial Alternative Investment Fund Manager directive. Regulations place stringent restrictions on the marketing of funds domiciled outside the EU to European investors.

News of growing interest in Ireland as a hedge fund domicile coincides with a new poll from SEI, a global financial services provider, and Greenwich Associates that suggests more than 54 per cent of the 111 institutional investors surveyed plan to increase their target allocations to hedge funds in the next 12 months. This represents a sharp pick-up in interest from 2009 when investors remained cautious, choosing hedge funds mainly for diversification or absolute returns.

However, concerns about disclosure linger, with 70 per cent of investors naming a lack of transparency and 58 per cent listing liquidity risks as their chief concerns.

While the attractions of single-manager funds are improving, they tend to be bought by big funds. Only 40 per cent of investors with less than $500m in assets use single-manager funds compared with 81 per cent of large investors with at least $5bn.

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