The Primary Development Fund, as it is being called, was unveiled the other evening in the Mayfair offices of Barclays Wealth, which through its Isle of Man operation is one of five corporate entities that are providing their services to the project.
Other companies involved in the venture include brokers MF Global Direct; the Cayman Islands-based office of auditors Baker Tilly; and the Cayman Islands-based Solomon Harris law firm.
In Adler’s words the PDF exists to “provide a cost-effective structure that permits traders to have the opportunity to have a controlled and regulated environment in which to manage money” – without having to worry themselves about such burdensome regulatory details as capital adequacy requirements, or having to fill out thousands of forms.
“The Primary Development Fund gives investors a structure that’s fully regulated, in which they can build up a track record as a money manager,” Adler, an entrepreneur with a 35-year career in financial services, said.
Adler and Bratchie founded Ifina in 1997. They describe it as a “multi-jurisdictional group of companies” catering for investment funds domiciled in such major offshore centres as Britain, the British Virgin Islands, Cayman, the US, Malta, Switzerland, Austria and Panama.
Similar to KMG Sicav-SIF
The Primary Development Fund concept is similar to one used by such other operators as Luxembourg-based KMG Sicav-SIF SA, involving the creation of a fund platform that enables third parties to launch their own funds quickly, more cheaply and with less red tape than if they were to do so directly in the same jurisdiction.
According to Adler, the PDF product is cheaper than its rivals because it its cost base is cheaper, in part because the Cayman Islands is less pricey than Luxembourg and also because its partner companies have agreed to provide their services at a sizeable discount (see chart, below).
That said, he admitted that although the minimum amount a fund must have to be included on the PDF platform is €1m, most investors would want to see that brought up to €4m fairly soon in order for it to make sense once annual fees are added in. Otherwise another type of investment would likely provide a better return.
Still, he noted that the set-up charge is around 40% to 50% cheaper than would typically be the case if Ifina were to set up a stand-alone Cayman fund for a client, while the auditors’ and directors’ fees being provided to PDF clients are 50% lower than they would be on the open market.
Key to the business model is the fact that in Cayman, fund managers are not obliged to be regulated – rather, the regulatory burden is placed on the fund’s administrator, which in the case of sub-funds of the Primary Development Fund would be Adler and Bratchie’s firm, Ifina, Adler said.
Adler and Bratchie say they intend to keep a close eye on any funds under their stewardship, as they do with other funds they now oversee, reconciling their investment managers’ trades every day against what their brokers say was traded.
“We have no qualms about pulling the plug on any fund, even at the risk of being sued, if we detect or are unhappy about something that a trading adviser or investment manager did, which was not correct in some way,” Adler said.
|One-time stablishment charge||€13,000|
|Audit fee (per year)||€ 6,500|
|Annual admin charge||€24,000 *|
|Annual directors’ fees (two directors provided)||€ 4,000|
|Total:||€ 47,500, of which annual charges are €35,500|