Hedge Funds Snag Bigger Share of Assets from Sovereign Funds: SEC
Sovereign wealth funds have been among the fastest-growing groups of investors at large hedge funds over the past decade, according to new data from the Securities and Exchange Commission.
That growth dovetails with a hiring surge by hedge fund managers in recent years for their offices in the Middle East, and particularly in the Gulf states.
According to a recent analysis of Form PF filings by the SEC, sovereign wealth funds and foreign official institutions accounted for 7.5% of the aggregate net asset value, or NAV, at so-called qualifying hedge funds in 2023, up from 5.3% in 2013. A qualifying hedge fund manager has at least $500 million in assets.
“You’ve got similar benefits to like if you were to incorporate a fund in the Cayman Islands. There are tax benefits being in a financial center, like the [Dubai International Financial Centre],” said David Goldstein, director of fund services at STP Investment Service.
Having a local presence also can help unlock new mandates, he said.
“If you have a sovereign wealth fund, especially a Gulf state sovereign wealth fund that’s looking to make investments, they probably rather do it through a Gulf state incorporated vehicle, rather than a Cayman vehicle,” Goldstein said. “It keeps things closer to home. The tax advantages are probably similar or the same, plus it increases employment in their area.”
Read what David and other subject matter experts had to say in FundFire here.
