Outsourcing model offers capacity for growth
Capita Financial Group's Gibraltar office is part of an international network also comprising Dublin, Jersey, Guernsey and London as well as an outsourced back office processing centre in Exeter.
The Gibraltar business offers administration services to hedge funds as well as other alternative investment vehicles, notably private equity and property funds, and is the sole administrator in Gibraltar with the capacity and in-house expertise to service Ucits funds - something that may become a more important part of the jurisdiction's fund industry once it has adopted the European Union's Ucits IV directive.
Gibraltar's fund business was kick-started by the introduction of the Experienced Investor Fund regulations in mid-2005. Previously fund promoters had a choice only of private funds made available to a restricted number of investors and retail funds, but EIFs are aimed at experienced investors, defined as those with more than EUR1m in assets or that can invest EUR100,000 into the fund.
The EIF requires two locally-registered directors, a local administrator and a local auditor, but otherwise the structure is fairly flexible in that neither custodian nor broker have to be in Gibraltar, the fund does not need to appoint an investment manager - the directors can act in that capacity - and certain types of vehicle such as closed-ended funds are not required to appoint a custodian at all.
The legislation has had a huge impact on the Gibraltar fund services industry. From just two fund administrators before 2005, the sector has now grown to 10 firms, although Capita Financial Group is the only international business in the jurisdiction, and the number of funds and assets under administration have increased sharply. The EIF has given market participants including lawyers, bankers and auditors as well as administrators the opportunity to promote Gibraltar to international fund promoters.
Gibraltar's position as a well-regulated centre within Europe is a particular advantage. The jurisdiction is attractive to European fund promoters, which are anxious to demonstrate effective corporate governance and substantial activities within the location where their funds are domiciled. And as a full member of the European Union, Gibraltar benefits from passporting of financial services and the application of the EU Parent-Subsidiary Directive.
Gibraltar's size and scale bring advantages as well as constraints. As a small community, most professionals know each other and enjoy close working relationships that make it possible to provide solutions to investors or introducers at very short notice. The industry also pulls together to promote the jurisdiction at international events, and works with the regulator to develop new legislation that can help the sector grow - like the EIF, which was devised by local professionals and then endorsed by the government.
However, while the industry contains a great deal of expertise and experience, there are obvious obstacles - the limitations of Gibraltar's size, population and skill base - to building up a large, labour-intensive operation, so Capita Financial Group's model draws upon the scalability of our Exeter office, which is much bigger and has access to a much broader labour pool. This will allow the business to grow without being subject to constraints in terms of office space or staff numbers, and to be able to service funds of any size, from the smallest start-ups to billion-dollar vehicles.
David Wahnon is managing director of Capita Financial Administrators (Gibraltar)
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