Hedge Funds Increase Use of Unit Trusts

Hedge Funds Increase Use of Unit Trusts

October 31, 2006

Favorite Vehicle of Japanese Investors Expands to New Markets, Says Walkers

    GEORGE TOWN, Grand Cayman, Oct. 31 /Xinhua-PRNewswire/
-- Walkers, the global offshore law firm of choice for
investment managers, financial organizations, and
international law firms, said today that hedge fund
managers are increasing their use of unit trusts in
structuring hedge funds.  While these vehicles have been
favoured by Japanese investors for years, fund managers in
other markets are now incorporating them into new funds to
attract Asian investors.

    "As the number of hedge funds continues to break
records, fund managers are looking for innovative ways to
structure funds, and unit trusts are becoming an
increasingly popular option," Ingrid Pierce, head of
Walkers' Commercial Trusts Group, said.  "We are
seeing more applications for hedge funds -- from use by
pension funds to convergence with private equity and mutual
funds.  The unit trust structure is extremely flexible and
can be tailored to suit the client's demands.  The overall
increase in the use of unit trusts is indicative of the
maturity of the hedge fund market, which now has a much
broader investor base as Japanese investors becoming
increasingly active in global markets.  Unit trusts are a
great vehicle to encourage these investors."

    According to a recent survey by the Daiwa Institute of
Research, almost two-thirds of Japanese pension funds are
investing in hedge funds.  Japan saw an almost 13 percent
jump in the number of pension funds using alternative asset
managers over the last year.  The Daiwa report stated that
Japanese pension fund managers liked the diversification
that hedge funds allowed in their investment portfolios. 
Given the appeal of the unit trust for Japanese investors,
the use of these trusts in fund structures signals further
growth in this area.  According to analysts, Japanese
investors have about $USD 50billion in hedge fund assets. 

    "While we continue to see our Japanese clients
using unit trusts, we are also seeing more complex
structures.  We fully expect this trend to continue,"
Carol Hall, a partner in Walkers' Hong Kong office, said. 
"Arrangements such as the 'master feeder' structure,
continue to be popular and are a flexible means of adding
on to existing structures to accommodate other investor
groups.  With these multi-level funds, it's critical that
investors and trustees are working with attorneys who
understand the issues and ramifications of these types of
structures."

    Compared to the numbers in the Cayman Islands, there
are only a small group of administrators in Asia that are
prepared to act as trustee in a unit trust structure
because of the attendant fiduciary obligations.  In recent
years there have been a number of high profile hedge fund
collapses which have highlighted the concern for service
providers who provide trustee services, said Walkers. 

    "We predict that we will see more changes being
requested to unit trust structures to address the concerns
of trustees in particular.  It remains to be seen how the
courts will interpret the role of the manager who is party
to a bilateral trust deed under which it assumes
obligations that traditionally were assumed by a trustee. 
However, it is clear that the safeguards being sought by
trustees and their affiliated administrators are a
commercial fact of doing business using a unit trust
structure in Asia," said Ms. Hall.

    About Walkers and Walkers SPV

    Based in the Cayman Islands with offices in the British
Virgin Islands, Dubai, Hong Kong, Jersey, and London,
Walkers offers high-level skills across the legal spectrum.
 Walkers was named by HedgeWorld Limited as the top law firm
for hedge funds by total assets of funds and assets of
non-U.S. funds, as well as the 2006 Who's Who Legal Law
Firm of the Year: Cayman Islands, the PLC Which Lawyer?
Yearbook 2006 Leading Cayman Islands Law Firm, The Lawyer's
2006 Offshore Law Firm of the Year, and one of two firms
honored as "Offshore Legal Team of the Year" by
the Society of Trust and Estate Practitioners (STEP) in
2006. 

    Walkers acts for a wide range of clients including
major financial institutions, investment banks, leading law
and accounting firms, major corporations of all kinds,
partnerships, trust companies and other fiduciaries
representing almost every country in the world.  The firm's
aim is to provide clear, concise and practical advice based
on an in-depth knowledge of the legal, regulatory and
commercial environment in the Cayman Islands, the BVI, and
Jersey.  Walkers is experienced in all types of
international and cross-border transactions and welcomes a
close working relationship with clients and other
professional advisers. 

    Walkers SPV Limited is a licensed trust company and
mutual fund administrator, wholly-owned by Walkers, with a
branch office in Tokyo.  It provides experienced and expert
management and administration of Special Purpose Vehicles
(SPVs), Directorship and Trustee services to
Cayman-domiciled investment funds, as well as registered
office and secretarial services for many companies and
partnerships of all types.  

    For more information on Walkers or Walkers SPV, visit
us on the Web at http://www.walkersglobal.com or contact us
by e-mail at [e-mail].  To contact Walkers by
phone, call our Cayman Islands office at [phone] or
our Hong Kong office at [phone]. 

    For more information, please contact:

     Melissa Maslar Arnoff 
     Levick Strategic Communications
     Tel:    [phone]
     Mobile: [phone]
     Email:  [e-mail]

SOURCE  Walkers