Mon, 02/06/2008 - 17:18
PricewaterhouseCoopers has had an office in the Isle of Man since the firm's days as Coopers & Lybrand, and as a key provider of advisory and audit services to the financial sector has monitored the growth of the island's fund industry from a relatively small business in the 1990s to a well respected and skilled provider of services to funds from all over the world.
It's perhaps slightly unfortunate for the island that the comprehensive retooling and relaunch of its fund legislation and regulatory platform, whose blueprint was set out by Paul Smith's report last year, should have taken place against the backdrop of the US sub-prime meltdown, the credit crunch and the knock-on effects for various types of alternative funds and strategies.
During the first couple of months of this year the industry experienced a more sedate rate of growth with fewer new fund launches, although since then the pace of activity has again picked up. With the credit crunch seemingly pushing fund promoters toward more innovative strategies and the role of leverage in generating returns decreasing, the highly specialised funds that have been a staple of the jurisdiction appear well placed to flourish.
However, there is no doubt that the efforts made by the island's government, regulator and industry members to equip the sector for the future requirements of international fund promoters and investors will stand the Isle of Man in very good stead in what may be for some time a less favourable economic environment.
Unlike many island jurisdictions, the Isle of Man does not face particularly severe constraints on space, people and natural resources and is probably better placed than many of its offshore competitors to meet an increase in fund services business, for example by taking on work that centres such as Dublin are funding it difficult to service satisfactorily.
Clients report that the sheer growth of Dublin over the past few years has resulted in rising costs and staff shortages, undermining the quality of service of some providers, while larger administrators have become increasingly reluctant to take on smaller funds. By contrast, Isle of Man administrators remain ready to service funds with less than USD100m in assets, knowing from experience that today's small fund managers can become tomorrow's industry giants.
In physical terms the 200-square mile island is capable of accommodating a larger population than it does at present, and - partly as a consequence - benefits from lower accommodation and office space costs than some of its rivals. As a result, the island has been increasing its share of administration work for funds domiciled in other jurisdictions, such as the Cayman Islands, where costs are higher and the capacity for growth more constrained.
There has been no need for a restrictive housing regime that could hamper the ability of firms to bring in specialist personnel to help meet client demand, and the work permit system is a formality these days. However, the Isle of Man also enjoys home-grown talent in individuals who now have an attractive range of job opportunities in the island after completing university or professional qualifications.
The immediate task before the island and industry practitioners is to capitalise on the opportunities offered by the Smith Report and the new fund legislation, for example by spreading the message more effectively to a global audience. Fund administrators, lawyers and accountants are all ready to play their part.
Mike Simpson is a partner with PricewaterhouseCoopers in the Isle of Man
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