Walkers Fundamentals White Paper 2020 – Regional Update: Americas & Middle East

Welcome to Walkers’ 2020 Fundamentals White Paper Series, in which we discuss certain trends identifiable among the hedge funds and private equity funds that we helped our clients launch over the last twelve months.

In last year’s White Paper, published in November 2019, managers and their funds appeared to be positioning themselves for market turbulence in the face of global uncertainties and a volatile economic and financial environment. One year on, with the benefit of hindsight, this was something of an understatement. 2020 has tested all aspects of managers’ businesses, from the boardroom to the back office, and in many parts of the world out of the office altogether. All of this, of course, is not to overlook the broader global context of the pandemic and the significant health, economic and political challenges that 2020 has brought and continues to present.

To visit the other parts of the series, please use the direct links below:



Bermuda is the leading jurisdiction for the creation, support and listing of insurance-linked securities (“ILS”) (with the BSX having almost 95% of market share of global ILS listings) and ILS funds. Investors’ appetite for portfolio diversification and interest in this relatively uncorrelated alternative asset class that is also acknowledged as a sustainable development investment, continues to grow and the total AUM of global ILS investment managers is approximately $100 billion. Many of the largest ILS investment managers have a physical presence in Bermuda.

Bermuda remains the third largest offshore jurisdiction for traditional fund products, in terms of number of funds registered, with a reputation for quality clients and innovative structures.

Bermuda fared remarkably well throughout the COVID-19 pandemic. The Government of Bermuda is now offering a ‘Work from Bermuda’ certificate to allow digital nomads and professionals who normally work from another jurisdiction, a 1-year pass to live and work on the Island instead. The programme is very attractive for those stuck in cities with high infection rates, or working from a home office longer than expected, and is being structured for asset managers in particular.

The introduction of the new Incorporated Segregated Accounts Act legislation has been well received. This builds on the traditional concept of operating segregated accounts that have the benefit of statutory segregation between accounts, allowing a ring-fencing of assets and liabilities, but also introduces the ability for each account to have its own separate legal personality.

As Bermuda already had in place a robust infrastructure for funds that meet international standards, there were no changes to the asset management regulatory landscape during 2020.

Like many financial centres, Bermuda is also seeing a marked increase in private equity activity, and an increase in family offices, looking to take advantage of Bermuda’s safe and stable environment.


Bermuda’s Fintech sector continues to grow. The sector includes a broad range of innovative financial products and services enabled by distrib- uted ledger or blockchain technology. In May 2020, the Digital Asset Issuance Act came into effect, which replaced the ICO regime as the primary legislation for all digital asset offerings in or from Bermuda. The legislation is aimed at prioritising regulatory certainty, investor confidence and compliance with international anti-money laundering standards.

The resulting surge of interest in Bermuda as a jurisdiction for Fintech businesses, means that the island expects to see more investors and venture capitalists looking to Bermuda for new opportunities, particularly given the regulatory certainty and transparency.

The British Virgin Islands

The British Virgin Islands (“BVI”) continues to market itself as the jurisdiction of choice for emerging managers, and the numbers show continued growth in this segment of the market. While the mainstays of the BVI funds offering (the private and professional funds) have seen a minor decline over the past year (private funds are down by 0.3% and professional funds are down by 2% since Q3 2019), we are continuing to see increased interest in the incubator fund, approved fund and approved manager (incubator funds are up by 7%, approved funds are up by 5% and approved managers are up by 7% since Q3 2019).

Both the approved fund and the approved manager offer a cost-efficient and quick-to-launch option for a seeding manager that is looking to establish a track record with investments from either friends and family or a small investment from third-party investors (the approved fund is limited to a maximum of 20 investors and an assets under management limit of US$100 million).

In December 2019, the BVI Government enacted legislation requiring the registration and regulation of closed-ended investment funds. Previously, closed-ended investment funds were not required to be registered in the BVI. It is expected that this development will be particularly attractive to emerging managers in the private equity and venture capital spaces.


Private Debt Becoming Increasingly Attractive

One of the major recent trends has been the increased popularity of private debt as an asset class. In particular, we have seen some of the leading sovereign wealth funds in the Middle East region move into private debt markets to seek higher yields. In doing so, several of these funds have teamed up with leading asset managers.

The deals that have been publicly announced include Mubadala Investment Company and its establishment of a financing platform with Apollo Global Management and the recently announced collaboration between the Qatar Investment Authority and Credit Suisse Asset Management to create a platform to invest into direct lending.

Trends in Other Asset Classes

The COVID-19 global pandemic has of course had an impact on asset allocations. There has been noticeably less activity in the hospitality and F&B sectors.

On the other hand, we have seen increased interest in the healthcare sector, with the global pandemic accelerating what was already a fast-growing industry. A recent KPMG report noted that, in the Gulf region, healthcare-related expenditure grew from $60bn in 2013 to

$76bn in 2019 and is expected to grow to $89bn by 2022. This rep- resents an overall increase of nearly 50% from 2013 to 2022.

In terms of other asset classes, blue chip real estate (for example in the US or UK) continues as a popular low-risk investment option for Middle East based investors. We are seeing in the VC space, that start-ups with an easily scalable platform based, technology-driven business are attracting a lot of interest.

Developing the VC ecosystem

One clear trend we have witnessed is the support being provided to local and regional start-ups by regional governments and sovereign wealth funds.

In Saudi Arabia, for example, we are seeing the likes of the Public Investment Fund and Saudi Venture Capital Company support local asset managers in launching VC funds which have a focus on investing in local and regional start-ups. Entities such as ISSF and Beyond Capital in Jordan are doing likewise.

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