GUERNSEY (CHANNEL ISLANDS)

Futures funds can be set up in Guernsey as unit trusts or investment companies, either closed- or open-ended. Open-ended funds are regulated by the Guernsey Financial Services Commission (FSC) under the Protection of Investors (Bailiwick of Guernsey) Law 1987.

Closed-ended funds are regulated by the Advisory and Finance Committee under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989, although the FSC looks after all funds on a day-to-day basis.

Guernsey’s FSC has a wide responsibility, including protecting and developing Guernsey’s shares of the lucrative financial services industry. This means that only fund management businesses with pedigree and track record will be allowed to establish funds. Read more »

Posted: February 10th, 2008 under Future Fund.
Comments: 5

This article covers the regulatory environment for managed futures funds in a selection of European offshore centers:

• Gibraltar;
• Isle of Man;
• Guernsey;
• Jersey.

GIBRALTAR

There are no specific regulations for futures funds in Gibraltar, but the Financial Services (Collective Investment Schemes) Regulations, 1991 apply to futures funds established in Gibraltar in addition to the Part III of the Financial Services Ordinance.

The regulator of the financial industry in Gibraltar is the Financial Services Commission (FSC) which may impose specific further requirements on particular funds under its discretionary powers. Read more »

Posted: February 10th, 2008 under Future Fund, Future Investing.
Comments: 6

Marketing of Offshore Futures Funds in Norway

The marketing of shares in an offshore futures fund in Norway is largely prohibited. If an investor approaches an intermediary and asks to invest in an offshore futures fund, the intermediary may help; but marketing using a prospectus, advertisement or other promotional material, including by way of a private placement, is prohibited.

Legislation

Current legislation for funds in Portugal is based on the Decree-Law 229-C/88, and allows for the formation of both open-ended and closed-ended funds in contractual form.

Such funds cannot at present invest in futures, although a review of the legislation is under way to incorporate the UCITS directive, and this may allow the use of futures in domestic funds for hedging purposes only. Read more »

Posted: February 8th, 2008 under Future Fund, Future Investing.
Comments: 5

Offshore Futures Funds

If the IML gives its approval, shares in offshore futures funds can be sold in Luxembourg, as long as they comply with domestic marketing rules on consumer protection and canvassing market practices. Approval will only be given if the offshore fund concerned is regulated, in the jurisdiction in which it is established, by a supervisory authority set up by law to ensure the protection of investors.

A private offering of an offshore fund can be made in Luxembourg without registering the fund or seeking a listing in Luxembourg. To qualify as a private placement, there must be no public solicitation or advertising in Luxembourg.

Offers may only be made to a limited number of institutional investors including banks, non-banking financial institutions, brokers, mutual fund agents and professionals engaged in the marketing of mutual funds and authorised as such in Luxembourg. There is no specific limit as to the number of investors to whom such a private placement can be made, although offers should not be made to other funds otherwise the offering will be deemed to be a public offering (that is, to all the investors of the fund). There are no unsolicited calls or similar rules. Read more »

Posted: February 8th, 2008 under Future Fund, Future Investing.
Comments: 4

Legislation

The Unit Trusts Act 1990 and Part XIII of the Companies Act 1990, brought in on 20 December 1990 and 1 February 1991 respectively, allow Irish unit trusts and open-ended investment companies to invest in futures and options, not just for hedging purposes but also as investments in their own right.

Authorization of Managed Futures Funds

Managed futures funds must be authorized by the Central Bank of Ireland and fulfil conditions including restrictions on investment, contents of their prospectuses, supervisory requirements and reporting requirements.

Funds for Professional Investors

The Central Bank may lift its investment restrictions in the case of funds which sell to professional investors only, and these are deemed to be funds which have a minimum subscription of IRf£ 200 000. Read more »

Posted: February 7th, 2008 under Future Fund, Future Investing.
Comments: 4

The Rules for Intermediaries

There are no requirements for an intermediary selling an offshore futures fund in Denmark to have a licence or other approval.

Legislation

There are no regulations for domestic managed futures funds in Finland and under the Investment Funds Act of 1987, Finnish funds generally are not allowed to invest in futures or options contracts. A revision of the Investment Funds Act is being worked on at the moment which would allow investment funds to invest in futures and options for efficient portfolio management purposes.

Selling Offshore Managed Futures Funds

The Investment Funds Act does not apply to offshore funds and consequently not to offshore managed futures funds and so the sale of such funds is subject only to compliance with the provisions of the Securities Market Act of 1989.

This regulates the marketing of shares; it prohibits, in particular, the giving of false or misleading information and requires that investors be given enough information for them to be able to judge the merits of an investment in a fund. Read more »

Posted: February 7th, 2008 under Future Fund, Future Investing.
Comments: 5

The Structure of Belgian Funds

The law refers to both open-ended and closed-ended investment funds, whether `fonds commun de placement’ (FCPs) which have a contractual form, or the corporate `societe d’investissement’. (A more detailed definition of FCPs is provided in the section on France.)

When formed, these funds have to choose one of seven categories of allowed investments. As individual categories, these include investments in futures and options contracts on commodities, or on securities, stock exchange indexes and currencies. This means that as yet, there is no regulation for a fund investing in all types of futures and options.

A royal decree is required for the provisions of the law relating to domestic futures funds to be implemented and, at the time of writing, there seems to be no particular pressure to get this decree adopted. The decree would provide for the setting-up of managed futures funds, but probably only in the corporate structure in view of the equal protection afforded to creditors under the bankruptcy law, which would apply to companies, but not to other types of fund structure. Read more »

Posted: February 7th, 2008 under Future Fund.
Comments: 5

Regulatory Prohibitions/Exchange Controls

It should not be forgotten that some countries continue to impose foreign exchange and other controls that effectively prevent residents from investing in any kind of offshore fund. In Western Europe, Greece is the only country to retain some form of exchange control. However, for comparison purposes only, in the Middle East, such restrictions apply in Israel and Saudi Arabia; South Africa has particularly strict controls; and certain Central and South American countries have similar restrictions. For instance, Mexican laws prohibit investment in any non-Mexican funds and provide that only Mexican institutions and brokers may deal in securities.

Nevertheless, in practice, investors resident in such countries may be permitted to invest in overseas funds—for example, if they have access to legitimate funds outside of the local jurisdiction and the transaction takes place offshore. Read more »

Posted: February 6th, 2008 under Future Fund.
Comments: 6

Most managed futures funds have a CPO, an institutional fund manager, who in setting up the fund appoints either one or a selection of CTAs who actually advise on the management of the money. Some funds have a trading manager as well, a specialist who advises the CPO on the selection of the CTAs. The number of CTAs used within a fund differs, largely depending on fashion. Multi- adviser funds were considered, for a long while, to achieve diversification of risk and lower volatility. Now the fashion is coming back to single adviser funds again as mathematical systems of trading become more complex. CPOs are also responsible for organising the back-office administration of a fund, the trustee and custodian functions, the marketing and sales of the fund and so on. While this is always extremely important in the working of a fund, it is particularly important in managed futures funds where supervision of margin or premium is essential to controlling a fund’s exposure to risk. Read more »

Posted: February 4th, 2008 under Future Broker, Future Fund, Managed Futures.
Comments: 4

Jack D. Schwager, director of Futures Research and Trading Strategy at Prudential Bache Securities in New York has written a very popular book based on research and interviews with successful traders in an effort to find out what they are doing right. In Market Wizards: Interviews with Top Traders, Schwager found that despite the fact that the approach in trading styles varies dramatically between types of traders, there were some features of trading which were common to all.

It is in Schwager’s book that one finds the tales of extraordinary investment performance which encourage many investors to join in the futures markets. Schwager tells of a trader, Read more »

Posted: February 3rd, 2008 under Future Fund, Futures Market.
Comments: 3