The rise in alternative investments in emerging markets

The quest for yield in today’s challenging market environment is pushing investors towards more diverse offshore investment strategies. 

With interest rates on the decline and stubborn inflation worldwide, investors are looking beyond traditional stocks and bonds. 

They are using offshore investment strategies to build varied portfolios that include alternatives like private equity, real estate, hedge funds and cryptocurrencies – all in search of better returns in tough market conditions.

The approaches to offshore investing are also shifting amid heightened regulatory scrutiny. The US government has tightened its oversight on offshore tax evasion through the Foreign Account Tax Compliance Act (FATCA), which requires American citizens to report any money they hold abroad. Meanwhile, international bodies – including the Organisation for Economic Cooperation and Development (OECD) and the World Trade Organisation (WTO) – are urging banks to increase transparency regarding their foreign clients.

Despite these changes, emerging markets in Latin America, Africa and Southeast Asia are gaining significant traction and attracting investors.

The Cayman Islands Stock Exchange (CSX), for example, has benefited from a surge in interest from investment funds seeking to list there. That exchange was the preferred listing venue for 95 percent of all Special Purpose Acquisition Companies (SPACs) launched in 2024, a significant rise from just 33 percent in 2020.

International law firm Ogier says it has been tracking these developments and recalibrating its strategy accordingly.

“We’ve been focused on adapting our services to meet the growing interest in alternative investments across Asia, including growing our teams to bring a diversity of skill sets,” says Kate Hodson, partner and head of ESG (Legal) at Ogier. 

“Our strategy has been to integrate dedicated, multi-disciplinary sector teams, which allows us to provide specialised and comprehensive support to our clients.”

Coordinated legal support across global markets

The growing complexity of alternative investment structures requires coordinated legal support across global markets. Ogier has positioned its experts in key financial hubs, including Hong Kong, BVI, Cayman Islands, Guernsey, Ireland, Jersey and Luxembourg, to handle complex cross-border deals.

“This geographic spread means we have experts on the ground who are well versed in local regulations,” says Hodson. “Regulatory requirements can be dense and difficult to understand, so we ensure that our advice is to the point – explaining things in plain language and offering practical steps our clients can take.”

Alternative investments surge to historic levels

When it comes to digital assets, where regulatory frameworks differ greatly across jurisdictions, global presence is a key advantage.“The world of cryptocurrency, blockchain, and other innovative technologies is transforming not just financial services but how we live and do business,” says Alan Wong, group partner (BVI) at Ogier.

In the context of setting up funds with a digital asset-related strategy, Ogier caters to both “crypto natives” who are new to asset management and traditional fund managers who are exploring digital assets for the first time.

“We are here to bridge the gap — bringing insights on asset and fund management to crypto-native fund managers, while translating new and novel concepts in the crypto space into terms that resonate within the traditional finance space,” explains Wong.

Alternative investments have surged to historic levels, with US$22 trillion – or 15 percent of global assets under management – now allocated to this sector. To serve this expanding market, Ogier’s integrated teams now combine corporate, regulatory and compliance expertise to ensure no stone is left unturned.

Take private equity. “Our private equity team understands the full journey of private equity investments,” says Hodson. “We offer a range of services, from fund formation, venture capital funds, and capital raising to downstream transactions and fund wind-downs.”

In terms of environmental, social, and governance (ESG) considerations, environmentally conscious investors are betting big on sustainability. In the third quarter of 2024, investments in sustainable funds jumped to US$10.4 billion, a significant increase from US$6.3 billion in the previous quarter.

“We recognise that for many of our clients, integrating environmental and / or social, and governance factors into investment strategies has become another part of doing business,” says Hodson. “The emphasis varies between clients, and indeed, there have been strong headwinds against integrating such concepts in certain parts of the world."

For clients seeking ESG guidance, Ogier offers targeted services from structuring loan or bond documentation with environmental KPIs, to ensuring compliance with regulations like the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy.

"As a law firm, we do not provide investment advice,” says Wong. “What we do focus on is highlighting the legal and regulatory risks, ensuring that our clients can make well-informed decisions.”

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice