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The London Stock Exchange today announced that it will launch a dedicated new market for issuers of specialist funds. The Specialist Fund Market will meet demand from both issuers and institutional and other professional investors for a quotation on a regulated market in London that provides sufficient flexibility for specialist vehicles such as single strategy hedge funds and private equity vehicles. This will satisfy a market need which will exist between AIM and the Main Market once the FSA’s new Unitary Regime is introduced.
Martin Graham, Director of Markets at the London Stock Exchange said:
“Hedge funds and private equity are an increasingly important asset class that pension funds and other institutional investors want access to in order to diversify their overall portfolios and improve their returns.
“We already offer investors and issuers a choice of routes to market according to the types of investors that issuers wish to target and the risk premiums sought by investors. The introduction of the Specialist Fund Market enhances that choice by creating a separate, clearly-labelled market for alternative assets such as single strategy hedge funds and private equity vehicles. It will enable the London markets to continue to meet what we know is a strong demand among issuers and investors for a regulated market quotation suitable for these more complex entities, while remaining clearly delineated as a professional market.”
The Specialist Fund Market will be open to both UK and international funds, and will be complementary to the FSA’s proposed Unitary Regime for investment entities listing on the Main Market. Issuers that wish to market funds to a wider audience, including retail investors, will continue to have access to the Main Market, which offers the potential for inclusion in index tracker funds and to AIM, and which has been very successful in attracting investment entities, primarily property funds or other conventional investment funds.
The Specialist Fund Market will be a Regulated Market operated in accordance with EU Directives. The FSA will approve issuers’ prospectuses in line with the Prospectus Directive and monitor issuers’ conformity on an ongoing basis with the Transparency Directive, Market Abuse Directive and other EU requirements. Once approved by the UKLA, securities must also meet the Exchange’s Admission and Disclosure Standards in order to be admitted to trading on dedicated segments of the Exchange’s next-generation trading services, SETS and SETSqx. Specialist Fund Market securities will not be included in the FTSE UK Index Series and will therefore not be included in index tracker funds.
Industry Comment Follows Below:
Steven Whittaker, Partner, Simmons & Simmons:
“We believe this is a very positive step forward for both issuers and investors. Establishing a separate market for sophisticated structures such as single strategy hedge funds and feeder funds provides the sophisticated investors who want to access these strategies with the ability to do so through London’s highly liquid markets, while at the same time ensuring a clarity about the regulatory standards and potential risks that does not prevail on other markets currently open to UK investors.”
Julie Spellman Sweet, Partner, Cravath, Swaine & Moore LLP:
"We are excited to offer Cravath's U.S. and international clients the opportunity to effect a London-based offering and trade over the London Stock Exchange's new Specialist Fund Market. This innovative platform will have numerous advantages for private equity and hedge fund sponsors seeking a flexible, liquid market."
Jonathan Baird, Partner, Freshfields Bruckhaus Deringer:
“The new Specialist Fund Market is a significant innovation by the London Stock Exchange and will be very interesting for investment companies and managers seeking to raise capital from sophisticated investors, including many who may not currently be actively considering London as a trading market.”
Nigel Farr, Partner, Herbert Smith LLP:
"We believe this is a positive and pragmatic step forward. It recognises that there will be managers proposing to launch private equity funds, hedge funds and funds of hedge funds who wish to access the highly liquid London markets but need the regulatory flexibility that the EU standards allow, and that there will be institutional and professional investors willing to invest on this basis."
Tim Harvey-Samuel, Managing Director, Equity Capital Markets, Citi:
"We are aware of substantial demand amongst international issuers who want to raise money in London given the investor concentration and liquidity here. The new Specialist Fund Market offers them that opportunity and should prove of considerable interest. "
