Hedge funds are packing up and heading south. Is this a continuing trend or a brief part of the financial sector's ongoing evolution?
Apex Fund Services -- one of the world's largest independent fund administration companies with more than $20 billion of assets under administration -- recently opened a new office in Miami, Florida. Vincent M. Sarullo, Managing Director of Apex Fund Services in the U.S., told StreetID that his company was drawn to the "significant growth in the south, specifically the South Florida region."
"And more recently, in the past year or so, having a bigger move of managers from Latin America coming into the area and setting up shop and having a presence there, either to attract U.S. investors to invest in Latin America, or bring Latin American investors into the U.S. to take advantage of the U.S. markets," he said. "After seeing that spike, we thought it was only a natural fit to place an office there and serve our clients in the south, whether it's the Carolinas, Florida, Texas. It seemed to be the right fit."
Thalius Hecksher, Global Head of Business Development at Apex Fund Services, believes that the trend will continue and more hedge fund managers will move to Florida.
"Already we are seeing a lot of momentum behind what Florida can offer hedge fund managers," he said. "It's a clear indication -- a lot of the major private banking names are there right now, both North American and South American. Florida and Miami truly is a little bit of a hotspot. We definitely believe it's the right place for Apex to be."
Apex was particularly attracted to the "huge amount of economic development" going on in Latin America. "Brazil has the 2014 Soccer World Cup and the 2016 Olympics," said Hecksher. "It really is making a lot of noise there. In addition to that, the Bahamas has realized that their fund structure has become very attractive to high-net worth individuals based out of Brazil. Again, with the Bahamas being on our doorstep, we're definitely going to see an awful lot of flow coming our way."
Hecksher said that one of the key drivers for Apex is that it functions on a push-and-pull philosophy where its clients "pull us into a territory and we'll push ourselves in."
"Over the last 18 to 20 months we've noticed that we have a couple clients there, and Vince took the view that we could better serve them more locally," Hecksher explained. "As a result of that, we have also [gotten some managers on board] from Brazil and other Latin American countries."
After conducting a number of business trips to Latin America, Hecksher learned that many Latin American hedge fund managers see Miami as the "meeting of the Americas, or a gateway for North America to South America."
"Miami is actually well-positioned for Europe as a very strong hub," he added. "So through Miami, you pretty much get to North America, South America, Asia to a certain extend, and also back to Europe. Thus, it made absolute sense for us to come to Miami."
But it's not just the worldwide gateway that attracts hedge fund managers. "There are also very low taxes here in Florida," said Hecksher. "So we see these as incentives for managers to relocate their business to Florida. We see the opportunity and have decided to take an early adopter's approach in Miami and demonstrate that we have taken the step to serve this market."
"Also, in the past couple years we have been working with the Florida Alternative Investment Association," Sarullo added. "We found that the association, plus the state, has been making a conscious effort to attract investment managers to the area, assisting them in making that move. One of the things that I kept on hearing was that the need to have an adequate supply of service providers who specialize in the industry in the area in order to serve these managers. There are a limited number of service providers in Florida that fill that need."
Looking ahead, Sarullo thinks that the Florida lifestyle could inspire the formation of new funds.
"I think you might see as a byproduct of the retirement side -- people going there later in life -- is that you're gonna find a lot of asset managers that have been working in organizations for a long time," said Sarullo. "[They] decide, 'Well, I'm gonna cut back and retire or cut back my schedule,' and go down there. Being the personality and nature of the people that they are, they're gonna say, 'You know what, I'm bored. I want to do something. I'm gonna go back to what I do and set up a small fund here.'"
"I imagine Miami will work as a launching pad for our next emerging market when we choose to launch another office," Hecksher added. "It will, more than likely, be somewhere in the Latin American market. So it works for us as a very good hub and a very good foundation for managers."