Staying relevant in an era of consolidation

Thirteen years on from its inception, the GAIM Ops Cayman conference has flourished, despite the financial crisis and years of meagre returns which had left the hedge fund industry questioning its very role in financial markets.

With its core focus on operational due diligence, the regulatory onslaught we have witnessed in recent years has served only to strengthen GAIM’s offering, as leading practitioners in the industry converge on the Cayman Islands annually to seek guidance and best practice to meet the challenges of an industry in need of reinvention, as operational costs soar and alpha becomes ever more elusive.

“The industry has been resilient,” commented Odette Samson, partner with audit firm Deloitte and an event veteran, having attended every year since 2005.

“Since the financial crisis we have seen a fair amount of regulatory fatigue, but I think we are past that now,” she said. “Now when we get new regulations, people are rolling up their sleeves to see how we can find a solution.”

This attitude is not the only change Samson has noticed in the conference hall among delegates.

“We are seeing more dialogue between managers and investors, as investors demand more transparency and the mood is more forward-looking, reflected by the tech-focused agenda.

“You can’t have a conversation today without mentioning blockchain and the big takeaway here is the transformative nature of the technology and the commercial aspect in terms of what we need to do to be competitive,” she said.

“Funds are trying to make sure they stay relevant in an era of consolidation and rising compliance costs and they are looking inward for efficiencies on the ops side.”

The importance of the operational and due diligence side of the funds business can’t be overstated because, as Samson said, it can make or break an institutional investor’s decision on investing.

As in any domicile, funds in Cayman are chasing returns and a reflection of that is the growth in private equity which is being seen across the board, representing sophisticated investors with a long-term outlook.

Cybersecurity remains a topic at the forefront of any discussion in the funds sector and Deloitte recently completed its ISO 27001 certification, representing the global standard in data protection.

“Our clients have been asking us what we are doing with their data and how we can ensure there won’t be a breach,” Samson said. “It’s been a gruelling exercise and it’s ongoing because we are tested every year.

“More organisations can look to invest at that level and clients are also interested in your vendor’s practices because you can do all you can in house, but most breaches are through the back door, and the increase in data points makes everyone vulnerable.”

For Cayman as a jurisdiction, the challenge remains one of educating the outside world and the public about the strength of intent to go above and beyond required standards of global compliance.

“We are setting the standards for anti-money laundering legislation. The struggle is to make sure people outside our industry understand, but we are getting smarter and proactively addressing these concerns,” Samson said.