16/06/2010 Author: Elana Margulies

Zais to move Cayman funds to Lux

Zais Group, the New Jersey-based $8bn distressed and illiquid credit manager, is moving around $500m of assets held across three separate fund structures in the Cayman Islands to the European jurisdiction of Luxembourg, HFMWeek has discovered.

The fund manager will move all its funds with European investors away from the offshore Cayman Islands because of the encroaching regulation that will place restrictions on funds marketing to European investors. Zais’s $8bn is managed through around 20 different fund structures.

Luxembourg is becoming an increasingly popular destination with fund managers. Last week, HFMWeek reported that SkyBridge Capital was considering creating Luxembourg Sicav versions of two Cayman-based funds of hedge funds (FoHFs).
 
As funds consider reshuffling their structures to conform to the AIFM Directive’s restrictions on the marketing of US managed hedge funds to European investors, Cayman looks set to suffer the biggest impact, should hedge funds and their European investors decide to migrate their holdings away from the island.

Despite the enforced changes, Zais continues to expand its offering to US and non-US investors. The New Jersey manager will receive two allocations for separate mandates that run pari passu to its flagship Zais Opportunity Fund, which invests in high-yielding illiquid corporate credit.

According to a source familiar with the manager’s plans, Zais will secure two $100m investments from non-US investors in the next three months. Potentially, it will create more separate portfolios if it redomiciles from the Cayman Islands to Luxembourg. Since last June, when Zais set up a Sicav to launch individual compartments for institutional investors, it has raised $700m in segregated mandates. So far, Zais has four for non-US investors.  

Zais Group is also in the process of investigating options to create a permanent capital vehicle to meet liquidity, transparency and regulatory requirements that the industry has demanded. The idea would be for Zais to invest its own capital first and then staff the vehicle as an operating company.