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Building on financial tradition

The Isle of Man has a long tradition in international financial services, primarily as a centre for international banking and life insurance business, but more recently in providing hedge fund services. The hedge fund industry in the island is focused on providing a servicing alternative to centres such as Dublin based on a highquality personal service, and following the introduction of new legislation in 2002, there has been significant growth in the number of non-Manx hedge fund structures (typically Cayman or BVI) being serviced in the Isle of Man.

The island offers a number of distinct advantages. These include the continuity of personnel which providers here can offer as a result of significantly lower levels of staff turnover compared with other centres. In addition, the Isle of Man has a generally lower cost of operations and cost of living compared with most big cities, not to mention lower levels of personal and corporate taxation, and these contribute to the cost-effectiveness of the Manx fund services offering.

It should not be overlooked that the technical infrastructure in the Isle of Man, vital to the efficiency of service providers and their communications, is second to none. The island has benefited greatly from its role as a test-bed for innovations in communications technology before their rollout in the United Kingdom. This has given the island a head start in adopting and capitalising on developments such as 3G mobile technology and broadband internet. State-of-the-art technology has also played an important role in attracting businesses such as online gaming, which relies entirely on the quality and resilience of the technical infrastructure, and where the Isle of Man is a recognised world leader. It has also interested certain Caribbean based service providers, including Caledonian, who, with regulatory approval, use the Isle of Man as a primary disaster recovery location for their Caribbean operations.

The island enjoys a high reputation for the rigour yet flexibility of its regulatory structure, which offers comfort to investors without adversely affecting managers and promoters of funds with unnecessary bureaucratic burdens. For example, there is no additional regulatory burden placed on funds domiciled in Cayman or the BVI resulting from their being administered in the Isle of Man, an important consideration when assessing the merits of different fund servicing options. Ultimately though, the attraction of the island is primarily about the service providers and people that operate in the fund services sector and the skills and experience they possess. It is therefore an important question for jurisdictions such as the Isle of Man to answer whether they can scale up and add capacity as demand from managers of alternative funds continues to grow. In this regard, it should not be overlooked that the island enjoys much more available space than many of its competitors as well as a single property market, open to all.

This, combined with a progressive immigration system that balances the needs of industry as well as encouraging the development of the local workforce, means that the issues of attracting and maintaining the necessary expertise are not as complicated in the Isle of Man as they are in various other hedge fund servicing centres. What this means is that as the hedge fund industry continues to grow, the island is capable of meeting new demand with expertise and a level of quality that is increasingly recognised throughout the fund industry worldwide.

By Gordon Wilson - managing director of Caledonian Fund Services (Europe)

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