Hedge Fund Industry Trends in 2020

By Gregory Zoraian

The hedge fund industry is incredibly dynamic and fast moving, with the rise and fall of stocks sometimes altering conditions overnight. Still, general economic trends, as well as previous patterns of growth and decline, allow experts to predict some overall shifts in the industry, and it is vital for hedge fund managers and investors to understand these predicted trends to help them prepare for likely changes. Several well-known global hedge fund consulting and marketing firms release yearly industry analysis after polling thousands of hedge fund organizations and investors. Below are top hedge fund industry guidelines for 2020.

  1. Hedge Fund Assets Continue to Grow

In 2020, we expect to see overall asset growth and industry consolidation, with hedge fund assets anticipated to continue the sustainable growth they’ve shown over the last decade (despite scares and drops such as the turbulence we’ve seen from Coronavirus fears). Despite some negative predictions from economists stating a general hedge fund decline, many experts believe it is a good time to invest. Hedge fund assets are expected to increase by 3% in 2020, mainly resulting from market performance. It should be noted, however, that this growth won’t offset declining fees from reduced overall revenue.

  1. U.K. Hedge Funds will Look to U.S. and Canada

Post-Brexit, U.K. hedge fund managers are expected to turn their attention toward American and Canadian investors. The U.K. is the second largest hedge fund market in the world, but after leaving the EU they face many obstacles in dealing with Europe’s hedge fund industry regulations. As the EU was created to promote internal free trade and to put non-EU member states at a disadvantage, Britain is expected to focus more on North American investors and less on those in neighboring European countries.

  1. ESG Factors Become Increasingly Important in Investor Decisions

Originally a niche activity, the hedge fund industry is rapidly reinventing itself due to evolving, increasingly powerful technology and the fact that ESG (environmental, social and governance) factors are more and more important for potential investors when assessing a company’s future financial performance, or risk and reward. ESG factors can help investors sidestep businesses with potential future financial risk, and many brokerage firms, mutual funds and financial advisors now offer products and services that utilize ESG criteria. Over the next year, investors and managers will seek to integrate ESG criteria across investment products and it will become an increasingly common requirement in regulatory disclosure.

  1. New Technology will Change How Hedge Funds Operate

Several recent surveys of the hedge fund industry found that new statistical and computational tools, cutting-edge management software, and the increasing use of AI (artificial intelligence) in evaluating industry data will soon require hedge funds to reassess how they operate. More than ever, technology is critical to analyze the overabundance of available data as well as to comply with increasing regulation on how that data is used. Throughout the next decade, hedge fund managers are expected to implement alternative data – companies and software that collect, clean, analyze and interpret data – and start utilizing AI capabilities to inform their investment decisions.

To learn more about hedge fund trends predicted for 2020, and to learn how we can put our hedge fund expertise to work for you, please contact our team.

U.S. Business, Brexit and the British Financial Market

By: Alan Sasserath and George Batas

Brexit has officially happened: as of January 31, 2020, the U.K. is no longer a member of the European Union (EU). To many Americans, Brexit may seem like a distant event “across the pond” of no significance to their world, but there are several important ramifications and opportunities for U.S. businesses.

What is Brexit? Brexit is the abbreviation for a British exit from the EU. The EU is an economic and political set of treaties existing between 28 European countries allowing, among other things, free trade and free movement of people between member countries. In June 2016, after a public referendum in the U.K. during which 17.4 million people (or 52% of the population) voted to leave, the process for exiting the EU, or Brexit, began. For many British nationals, the decision to leave came from the belief that the freedom to negotiate their own trade deals with countries would eventually allow access to more wealth and opportunities for British citizens and businesses.

From January 31 through December 31, 2020, the U.K. will be in a transition period, during which they will negotiate a new trade agreement with the EU, as well as with other countries around the world who have no existing EU deals. One of those countries is expected to be the U.S., with both sides stating such a trade deal could be negotiated simultaneously with the deal being discussed between the U.K. and the EU.

For U.S. businesses, this means that during the transition period, the U.K. must obey EU rules and trade regulations; however, they are now allowed to hold formal trade negotiations with countries such as the U.S. and Australia for both goods and services. Any new trade agreements would start at the end of the 2020 transition period, and although the U.K. seeks to remain aligned with EU regulations in such areas as the motor vehicle and chemical industries, their government states that they are open to modification if it is in the best economic interests of the country to do so – for instance, to reach a new trade deal with the U.S.

Many U.S. economic experts believe that Britain’s departure from the EU creates a host of opportunities for U.S. businesses, as well as a chance to deepen historically important economic ties between the U.S. and U.K. Although the two English-speaking countries already have one of the strongest economic partnerships in the world – exceeding a total annual trade revenue of $260 billion in 2019 – heavy EU regulations over the past few decades greatly inhibited the flow of trade in financial services, the telecommunications sector, the motor vehicles industry and in professional services. Furthermore, under EU regulations the U.S. faced a steep 11% tariff for agricultural exports. The U.S. is the world’s largest food exporter and the most efficient producer of food in the world. The U.K.’s exit from the EU presents a great opportunity for American businesses in the food export industry. As two of the most technologically and medically innovative countries in the world, huge opportunities are expected to open up for U.S. and U.K. businesses in these industries as well.

Other U.S. experts believe that Brexit heralds the end of multilateral economic growth, with many countries coming together to chart a common economic course, and that nationalism and bilateral trade agreements will become more common. For U.S. business owners interested in expanding overseas, this will mean carefully weighing the pros and cons of where to set up bases of operation in order to best take advantage of specific markets.

For U.S. businesses post-Brexit, a powerful U.S.–U.K. pact which eliminates or greatly reduces most tariffs, expands market access and writes new rules for digital trade could decrease costs and compliance burdens for businesses in almost every industry while also leading to billions in investment on both sides of the Atlantic. For American businesses already operating in the U.K. and concerned about less access to EU markets, such benefits are expected to help offset any potential economic consequences. An alternate suggestion would be to maintain operations in the U.K. while also expanding to another country within the E.U.

Please see our ongoing series of articles discussing the merits of various countries as a base of operations overseas, the first of which, Ireland, can be found here: http://bit.ly/2v46VC1.

Rarely does the U.S. have the chance to create a trade deal with a country so deeply alike to our own. As the world’s fifth-largest economy, the U.K.’s exit from the EU presents both opportunities and challenges for U.S. business owners.

If you are interested in additional information regarding Brexit and international tax implications, or if you are a business owner operating in the U.K. or the EU, please contact our team to learn more.


Ireland as a Business Gateway for U.S. Companies Expanding Overseas

By: Alan Sasserath & Marie Bradley

If you’re a U.S. business owner interested in expanding overseas, your first question is likely: where do I start? At Sasserath & Zoraian, LLP, we maintain several longstanding relationships with overseas firms to assist our clients as they navigate the complex world of international tax and international business. As a result, we’ve noticed that many U.S. businesses interested in cross-border expansion are unsure which location would be best to lay a foundation for their multinational company. This article is the first in a series highlighting some of our top picks.

The Republic of Ireland is an excellent location for businesses from startups to more established multinational organizations. Many U.S. businesses find Ireland an attractive base of operations due to its geographic location as midway between the United States and Asia; its membership in the European Union (EU), which allows simple and quick access to the rest of Europe; and the fact that English is spoken there, thus allowing an ease in communication appreciated by many Americans heading overseas for the first time. In fact, Ireland is the only English-speaking member of the EU that is on the Euro standard of currency, enabling businesses to avoid any exchange rate issues when dealing with other EU member states.

Ireland attracts huge amounts of foreign direct investment (FDI), second only to Singapore, which is due in part to government tax incentives and other public assistance available for high-growth companies. In 2013, Forbes ranked Ireland as one of the best countries for growing multinational businesses. The World Bank has ranked Ireland as number 23 out of 190 measured economies for ease of doing business, with its pro-business policy framework promoting a competitive business environment. Ireland’s 12.5% corporate tax rate is one of the lowest in the world.  Attractive tax incentives are also available to intellectual property and research and development companies.  Ireland has signed comprehensive Double Taxation Agreements (DTAs) with 74 countries and 73 are in effect.

Ireland has successfully attracted foreign investment since the 1980s.  It has a well-educated, highly skilled workforce complemented by its ability to attract non-nationals to study and work. This talented workforce is one of the youngest in Europe and is experienced in assisting multinational companies. Significant government spending on education, Dublin’s reputation as a key destination for international students studying abroad, and Ireland’s growing reputation as Europe’s “Silicon Valley” indicate that talented individuals will continue to seek opportunities in Ireland.

Ireland has an impressive foreign direct investment track record and is home to some of the biggest names in the technology, financial services, and pharmaceutical industries. Fifty percent of the world’s top banks, the top five global software companies, 18 out of 25 top financial services companies, and 24 out of 25 of the top biotech and pharmaceutical companies are located in Ireland. One-third of multinational companies in Ireland have had operations in the country for over two decades, and recently many foreign social media and online gaming companies have also chosen Ireland as a base for foreign operations. Finally, Ireland has fast-growing indigenous businesses, including medical technology companies, a software sector that exports to both the U.K. and U.S., and a competitive food and drinks sector.

U.S. businesses typically establish operations in Ireland for the following reasons:

1) setting up an EMEA headquarter or an Irish holding company;

2) undertaking research and development activities and/or setting up shared services centers; or

3) using Ireland as a low-tax hub to expand internationally into Europe and Asia while also maximizing tax returns.

Contact our team with any questions you may have, as well as to get started expanding overseas to Ireland!

About the Authors

Alan Sasserath, CPA is a Partner and Co-Founder of S&Z. He has over 30 years of public accounting experience and a broad background in accounting, tax, audit and financial planning. A member of International Tax Practitioners, a global group of experienced CPAs, accountants and lawyers, he is one of S&Z’s go-to resources for international tax concerns.

Alan specializes in international tax planning and compliance, transfer pricing review, transactional advisory, expatriate tax services, international business advisory and international outsourcing. He works with businesses and high net worth individuals regarding matters of both domestic and international tax.

Alan can be reached at alan@sz-cpas.com or +1 631-368-3110


Marie Bradley is Managing Director of Bradley Tax Consulting. She has broad experience in advising personal and corporate clients having previously worked in the taxation departments of PricewaterhouseCoopers and KPMG advising Irish and foreign multinational companies.

Marie is a highly experienced tax professional having particular expertise in the areas of Irish and international corporate acquisitions, foreign direct investment into Ireland and cross border tax planning for Irish companies expanding abroad.  She is a Fellow and past president of the Irish Taxation Institute.

Marie can be reached at marie.bradley@bradleytaxconsulting.ieLearn more about Bradley Tax Consulting at www.bradleytaxconsulting.ie



How California and EU Data Protection Laws Impact Your New York Business

By: John McClung

Data privacy is one of the most important business and cultural issues of the 21st century. Universal access to all kinds of personal information is now at unprecedented levels due to the instant communication provided by smartphones and the internet. As a result, identity theft, fraudulent credit card charges, and solicitation from businesses based on consumer spending habits have risen dramatically. Technology and cybersecurity entrepreneurs have scrambled to find ways to make online accounts and transactions more secure, and lawmakers are now following suit. So what does this mean for your business?

In May 2018, the EU’s General Data Protection Regulation (GDPR) went into effect. Created to protect an individual’s online information and simplify the rules for international business, the GDPR imposes tough rules for securing personal data of private individuals, enforces strict penalties for non-compliance, and redefined the way many U.S. companies operating overseas conducted business. This past January, California’s own data privacy law, the California Consumer Privacy Act (CCPA), took effect, borrowing some elements from the GDPR and bringing the U.S. closer to its EU counterparts. It is also the nation’s first statewide data privacy law.

Even if your New York business doesn’t interact with California residents, the CCPA will still affect you. Due to California’s population size as well as their economic and political importance, the CCPA will effectively become the nationwide standard for all U.S. businesses, at least until a federal law for data privacy is passed. Washington lawmakers are looking at California’s new legislation as they consider such a proposal, as setting a single legal standard for data privacy would be more efficient and cheaper for businesses and cybersecurity firms to implement in the long run.

And for those New York businesses that do business with California residents, the impact is more immediate. Those businesses must now, among other requirements, disclose what personal data has been collected and delete the data or stop selling it to outside sources if the customer requests. The CCPA, and the GDPR before it, have also legally broadened the definition of “personal information” to include any information which can “directly or indirectly” identify a person. This includes such things as biometric data, browsing history, employment and education data, consumer preferences, psychological trends, preferences, aptitudes, and other data which can be used to create a profile of the individual.

The CCPA applies to all companies that supply or serve California residents and: (1) have at least $25 million in annual revenue, or (2) have personal data on at least 50,000 people, or (3) collect more than half their revenue through the sale of personal data. Companies don’t have to be based in California or the U.S., or even have a physical presence in California, to be subject to CCPA regulations under the law.

Many New York businesses that operate in California also operate in Europe and have already had to make changes to comply with the GDPR. However, many New York firms, especially smaller firms that don’t operate overseas, have not. To comply with both the GDPR and CCPA, New York businesses should make sure their entire executive team is on board with new data privacy regulations. Businesses should designate one person within the company to ensure that all obligations under the law are being met. Operational implementation is key, and third-party vendors should be thoroughly researched before they are hired. Additionally, annual data protection training should be mandatory for all employees and be built into new-hire training.

An additional suggestion is to use encrypted emails and email accounts. Emails with end-to-end encryption meet the GDPR data protection-by-design standards and implementing zero-access encryption through your email provider means that the provider doesn’t have access to your email content while also limiting vulnerability and liability from any potential data breaches.

When examining your firm’s data collection policy, it is important to keep in mind your client obligations under the GDPR and CCPA, while at the same time understanding that not all businesses operate the same way and may not require the same level of restructuring. Here at Sasserath & Zoraian, LLP for instance, we have always taken client privacy and security very seriously, and unless required by a court-ordered subpoena, all client information remains confidential.

Please contact our team with any questions you may have.

Risks and Rewards of Investing in Biotech Hedge Funds

By John Zoraian

In the last two decades, the U.S. biotech sector has grown to become one of the stock market’s top performing sectors. Due to its rapid growth and potential for high rate of return, there has been a recent wave of investor interest in biotechnology and biotech hedge funds. Many new investors in the biotech sector are excited for fast-growing investment funds capable of generating double- and triple-digit returns. Yet other investors remain wary, stating the high risks, potential for massive loses and the lackluster performance of the average hedge fund in current years as deciding negative factors.

So, what exactly are the risks and rewards of biotechnology-focused hedge funds, and should you be interested?

Biotechnology, broadly speaking, is any technological application that makes or modifies products or processes using biological systems. Currently, there are over 500 biotech companies in the U.S., making it the world’s hub for innovation in the biotechnology field; however, only approximately 20 of these 500 are turning a profit. This is due to the uncertain nature of the biotech sector. High overhead costs, long periods of research and testing, plus the uncertainty of final regulatory approval by the FDA (Food and Drug Administration) mean that, in terms of stock market valuations, it’s very difficult for investors to predict with any certainty which biotech companies will strike it big and which will fall by the wayside.

For the biotech industry, while politicians and the political climate have some impact on drug pricing, due to “high intra-industry variance,” biotech stock prices chiefly rise and fall based on a drug passing or failing its clinical trials. This makes the biotech sector extremely volatile and unpredictable at best for most investors and uninvestable, at worst, for others. However, therein lies the opportunity for those willing to bear the risk.

Yet some hedge fund veterans, like Joseph Edelman who founded Perceptive Advisors and its flagship hedge fund, Perceptive Life Sciences Fund, back in 1999, have struck big by specializing in small- and mid-cap biotech companies. Since inception, the fund has generated annualized gains of 30% net of fees, with an astounding 41% net gain realized in 2017. Edelman has thrived in the most volatile sector of the stock market by being highly diversified with the companies he backs; avoiding big pharmaceutical companies, insurance conglomerates and hospital chains, instead backing small companies whose fate typically hinges on a single drug passing or failing the clinical trials – a high-risk strategy that returns big rewards if successful; by maintaining risk tolerance and timing his purchase of stocks accurately between Phase 1 clinical trials and, often, Phase 3 clinical trials; and understanding the major innovations currently taking place in the biotech field.  His unique background, which includes a degree in psychology from UC, San Diego, and a father who was a professor of biochemistry and later chair of the molecular chemistry and biophysics department at Columbia University certainly helped develop his industry acumen.

Edelman says of his own strategy that careful research into the companies he selects, taken together with the ability to understand and psychologically analyze corporate events within the biotech sector, is the driving factor behind his alpha generation.

This correlates with what researchers have found when studying rate of returns within the biotech sector. It is healthcare specific hedge funds, those with background knowledge of biotech or those specifically focused on the health care and biotech sectors, which statistically have the most success in accurately predicting which drugs and companies will succeed and which will fail.

If you are interested in learning more about biotech focused hedge funds, or hedge funds in general, please contact our team.

Expatriates and Taxes: Four Things to Keep in Mind Before Filing

By Alan Sasserath and Michael O’Brien

Working abroad is an opportunity many adventurous Americans find glamorous and exciting, with the chance to live and explore a foreign country often viewed like a working vacation. Taxes have to be filed, work has to be done, and meetings must be attended, but everything feels a bit more enjoyable than back in the States

Americans who live and work overseas are colloquially known as expatriates. For tax purposes, expatriates, or expats, are generally defined as U.S. citizens or resident aliens who temporarily, or for an extended period of time, reside in a foreign country. Expatriates who voluntarily give up their U.S. citizenship or greencard status are much less common and are subject to special rules. For an expatriate on foreign work assignment, the question of yearly taxes – what to file, where to file, and what can be excluded or deducted due to living abroad – can be one of the most complicated and stressful parts of living abroad. But it doesn’t have to be. Continue reading “Expatriates and Taxes: Four Things to Keep in Mind Before Filing”