The Citco Banks, engaged in custody and fund trading for financial institutions and fund of funds, have expanded their secondary markets desk for their fund of fund and institutional client base to facilitate investors access to liquidity, as well as helping fund managers reduce the redemption pressure on their funds.
In the midst of the current financial crisis, many fund investors across the globe wishing to redeem their investments discovered that they were unable to retrieve their money due to suspension, gating provisions and lengthy lock up periods.
Citcos secondary markets dealing allow investors wishing to redeem their positions in a fund to find a potential buyer with Citco acting as a broker between buyers and sellers. Buyers and sellers submit their buying and selling interests to Citco. The bids are either matched or added to Citcos supply and demand listings which are regularly sent out to prospective buyers and sellers.
Once a party is interested in a position, they contact Citco, who then negotiates a price between the buyer and seller. Once the terms of the transaction have been agreed, Citco then contacts the underlying fund manager to request approval for the transaction.
Working with Citco Fund Services, a provider of hedge fund services, Citco Bank oversees all elements of the transaction including execution, settlement and recording on the books of the fund. If required, the Citco Banks also offer Special Purpose Vehicles (SPV) to settle the transaction ensuring that it remains confidential between buyers and sellers.
The current financial crisis has created a serious liquidity issue for investors, which is putting enormous pressure on fund managers, says Willem Holst, managing director, Citco Banks. We have expanded our secondary markets dealing team to facilitate existing investors access to liquidity but also to reduce the redemption pressure on funds so that underlying positions do not have to be sold to cover redemption payments.
This is a way of helping to retain capital in the fund and also offers an opportunity to introduce new shareholders to the fund.
We believe in transparency and trust in our dealings with both Managers and Investors, which are critical for Secondary Market dealings, says San Moran, senior vice president, Citco Bank Nederland N.V. Dublin Branch. Even though most of the deals tend to be relatively straightforward, we, at Citco, have vast experience of more complex transactions. We always do our best to come up with workable solutions for all counterparties in the transaction.
L.D.