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Harneys advises Aquamarine Fund on innovative zero management fee share class

19 October 2017

Harneys recently advised Aquamarine Fund on an innovative offering memorandum featuring a zero management fee and a cumulative hurdle on the performance fee.  

Aquamarine Fund has been domiciled in the BVI for more than 20 years and has one of the longest records of outperformance of any investment vehicle globally. The fund is managed by Guy Spier and focuses on global, long-term, value focused investments. 

The Harneys fund team advising on the new share classes included Partner Philip Graham and Counsel Nadia Menezes

Nadia Menezes, who has worked with Aquamarine since 2006, said: “We like to think that all of our clients are fair to their investors, but the zero management fee concept is extraordinarily fair. It goes above and beyond.” 

Guy Spier, the Zurich-based manager of the Aquamarine Fund said, “Most professional investors agree that the Warren Buffett’s arrangement with his limited partners of a 0 per cent management fee and a 6 per cent cumulative hurdle management is the right way to go, but so few actually implement it. It’s been a long road for me to get there, but I’m glad to finally be there.

“Even though I failed to understand Amazon as an investment, I believe that many in the fund management industry would benefit from implementing the Bezos ethos of delivering great value at rock bottom prices when it comes to management fees and performance. That is what I am aiming for at the Aquamarine Fund. As is the case with businesses that I admire like Amazon, Costco, and Ikea, I want to keep driving down the cost of investing with me while (hopefully) continuing to deliver market-beating performance.  

“I am also grateful to Harneys and to the culture of innovation in financial services that the BVI provides. While this would have been possible in the United States, Financial Service Professionals in the BVI are more willing to think outside of the box.”

Mark Chapman, a director at the Aquamarine Fund said, “This is an extraordinary deal for investors. In practice, it’s a very hard thing to pull off – and most professional investors do not manage it. Based on my recent study, funds that do not charge a management fee comprise less than one tenth of 1 per cent.”

The recent project was completed just weeks following the passage of Hurricanes Irma and Maria, which caused considerable damage to the British Virgin Islands. The storms, however, did not impact the project’s timeline or completion.

Philip Graham, Partner at Harneys said, “We are pleased that due to our robust business continuity arrangements, Harneys was able to continue to operate throughout the challenging conditions brought on by the hurricanes of Irma and Maria and continued to deliver innovative and prompt service to our clients.”
 
Hon. Dr. D Orlando Smith, OBE, Premier of the BVI said, “I am proud of our islands and of the various providers who work in the financial services sector. No hurricane is going to stop our indomitable spirit. The BVI was, and is open for business, and continues to innovate in the financial services sector.”

The BVI is one of the largest jurisdictions for regulated investment funds in the world with over 2,000 registered and recognised funds with an estimated value of US$300 billion. Harneys’ market-leading BVI funds team is part of its global investment funds practice which advises on all aspects of the life of a BVI or Cayman fund including formation, restructuring and closure, both in distressed and planned scenarios.