Marketing of hedge funds to German investors
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Andreas Steck* was born in 1968 and graduated from the Albert-Ludwig-Universita¨t Freiburg in 1994, undertaking his clerkship at the Landgericht (District Court) in Karlsruhe. He then worked for KPMG Frankfurt, Financial Services Tax and Legal, until joining Linklaters Oppenhoff & Ra¨dler in 2000 (then named Oppenhoff & Ra¨dler) as an Attorney-at-Law. He specialises in Banking Law and Insurance Supervisory Law, advising on banking regulatory matters, financial services regulation, derivatives and financial products, structured products, private banking matters, electronic banking and Internet related issues, custody, clearing and settlement issues, repo and securities lending transactions, and on asset management of ‘Kapitalanlagegesellschaften’ (German investment companies) and insurance companies. *Linklaters Oppenhoff & Ra¨ddler, Rechtsanwalt, Mainzer Landstrae 16, D-60325 Frankfurt am Main, Germany. Tel: ⫹49 69 71003 185; Fax: ⫹49 69 71003 333; e-mail: [email protected]
Abstract The direct marketing and distribution of hedge funds in Germany face regulatory and tax legal difficulties. As a result, alternative repackaging structures have recently been developed by German banks. In this paper, the author explains how repackaging structures lead to reduced selling restrictions and an optimised tax treatment of the product. The paper goes on to describe how hedge fund repackaging can be used in order to make hedge funds an eligible investment for restricted institutional investors (such as insurance companies). Keywords: Germany; hedge fund; selling restrictions; tax treatment; repackaging; insurance regulations
Introduction As volatility in the world’s major financial markets increases, investors are taking a closer look at alternative investments which promise an attractive yield, while providing for risk minimisation from a risk diversification perspective. Hedge funds meet both requirements: firstly, hedge funds often significantly out-perform conservatively managed funds by leveraging their investments through third party debt financing, short sales, derivatives transactions and securities lending or repo transactions. Secondly, in theory at least, they are thereby benefiting in bull or bear markets. They are, therefore, seen as more resistant to severe market
366
Journal of Asset Management
downturns than other investment vehicles. The direct marketing and distribution of hedge funds in Germany faces regulatory and tax legal difficulties. As a result, alternative structures have recently been developed by German banks. Deutsche Bank began this process when it issued its new popular ‘XAVEX — Selected Hedge Fund Certificate’, and other major German banks, including HypoVereinsbank and Commerzbank, have followed. This paper considers the general aspects and problems connected with direct marketing of hedge funds into Germany, alternative marketing and product structures and the types of
Vol. 1, 4, 366–373
䉷 Henry Stewart Publications 1470-8272 (2001)
Marketing of hedge funds
investors to wh
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