Friday, 19 September 2014
Last updated 11 hours ago
Feb 20 2013 | 12:32pm ET
Reinsurance firms businesses have proven a popular way for hedge funds to raise permanent capital. They also can help hedge fund managers avoid paying U.S. taxes.
While the Internal Revenue Service penalizes companies who set up "passive foreign investment companies," it considers insurers to be active. And although it has said that insurers and reinsurers can't have a capital pool much greater than they need to back the insurance they sell, the IRS has never set thresholds, Bloomberg News reports.
Paulson & Co.'s PaCRE, for instance, sold reinsurance coverage amounting to just 1.6% of its initial $500 million in equity, $450 million of which came from Paulson executives. The average for a Bermuda-based reinsurer is 47%.
Other hedge fund-backed reinsurers, including those set up by SAC Capital Advisors and Third Point, aren't quite as penurious. The former has targeted sales equaling 30% of assets, and the latter 19%. Both also employ their own underwriters, while PaCRE outsources its underwriting, employs no one and uses another insurance's company's offices as its address.
Using a Bermudan reinsurer could save a hedge fund manager more than one-third in taxes, according to Bloomberg.
Aug 25 2014 | 11:21am ET
As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…
Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.