Jersey has been an internationally recognised domicile for funds for a number of years, but when the Ucits directive encouraged retail business to move to <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Luxembourg or Dublin, during the 1990s, the local industry focused instead on alternative investments.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

This strategy has been a great success. According to a recent survey, Jersey is now regarded by law firms as the top jurisdiction  for private equity and property funds, and for hedge funds it is now second only to the

Cayman Islands.

The focus on funds geared to institutions and sophisticated investors led to the launch of the Expert Funds Guide in February 2004, following extensive consultations between the industry, local authorities and  regulators. The introduction of a light touch regulatory approach and an approval process that can take as little as three days have made Jersey a credible domicile for hedge funds and an alternative to the  Caribbean jurisdictions that have dominated the industry in recent years.

Of course, there's plenty of competition for the growing amount of hedge fund business, especially in the European market. Guernsey and Dublin have reacted to the launch of the Expert Funds Guide with the

introduction of the Qualified Investor Fund and Professional Investor Fund regimes respectively.

But Jersey is already seeing rapid growth in business. At the end of March there were 261 Jersey hedge funds with a net asset value of just under £23bn, while the number of Expert Funds had grown to 60, including 25 funds launched in the first three months of the year. Overall, Jersey had £103bn in assets under administration at the end of March.

One of the factors driving this growth is an increased emphasis on corporate governance, for funds in general and hedge funds in particular. At the same time, over the past year or so the UK Inland Revenue

has made a number of high-profile challenges to offshore funds, notably on the issue of where management control is being exercised.

The issue is what substance exists behind the structures put in place in offshore jurisdictions. The fund may be domiciled there but often, the Revenue argues, actual management is being carried out from the UK.

Jersey is very well placed to help in this area because it has the experience and expertise of the island's professionals available for the management of fund companies, thanks to the existence of a long-established fund industry and a high quality base of administrators, accountants and lawyers.

This opportunity for fund managers to create substantial activities in Jersey that can stand up to scrutiny by outside tax authorities is being taken a step forward by the initiative to encourage hedge fund managers to themselves relocate to the island.

The island is particularly well placed because in addition to the human resources and infrastructure of a top-class financial centre, Jersey also offers a physical environment and quality of life that rival jurisdictions struggle to match - all within easy reach of the City of London and the rest of the world. No wonder that these days hedge fund managers are as likely to bring their families to Jersey as their funds.