Facilitating investment in emerging markets
By Peter Todd - The British Virgin Islands has been a leading player in the international fund industry for years thanks to strengths that include a relatively light regulatory touch, but one that is robust enough to stand up to international scrutiny. The introduction last year of new rules under the Securities and Investment Business Act has delivered the degree of regulation and standard of reputation that global practitioners now insist upon.
The competitiveness of the BVI as a domicile for sophisticated funds has been enhanced significantly in recent years by the growth in the jurisdiction of major offshore law firms such as Ogier, Conyers and Walkers. At the same time, the territory is home to various administration firms, including Drake Fund Advisors, which in many cases draw on resources outside the jurisdiction in order to complement the pool of locally-based staff.
Drake is part of the Osiris International group, which has been headquartered in the BVI since 1999. The firm acts as an adviser to firms investing in emerging markets as well as providing investment services to high net worth individuals and families, specialising in establishing funds including private investment vehicles and providing board directors.
Two years ago, Drake started offering fund administration and accounting services in response to demand from existing clients, both to provide a seamless service for newly established funds and to provide a local servicing solution for BVI funds – although the firm also provides administration to Cayman- and Anguilla-domiciled funds where this is the preference of the promoter.
Currently Drake services around 36 funds, which include bespoke vehicles, often domiciled in Anguilla, for high net worth families, as well as a number of property-related funds, some of them AIM-listed, investing in the UK and Europe. In many cases the firm has been involved in setting up the management company as well as the fund.
In addition to the BVI and its Anguillan presence, Drake has offices in London, the Philippines and Johannesburg, and most recently opened an office in Dublin, where the firm is in the process of being licensed as a fund administrator. In addition to drawing on Ireland’s position as a centre of expertise in the servicing of offshore funds, the ability to establish Qualifying Investor Funds will offer clients an alternative to offshore vehicles.
One of Drake’s core client markets consists of South African institutions looking to invest outside the country. In addition, the country’s new international headquarters regime has made it an alternative to Mauritius or Botswana as a base for private equity investment throughout the African continent as a whole.
The new regime offers a comprehensive range of tax benefits for companies structured to make pan-African investments. For qualifying companies, these include exemptions from exchange controls, capital requirements, corporate income tax and withholding tax, as well as enabling investors to take advantage of a tax treaty network including around double the number of double-taxation treaties with African countries concluded by Mauritius.
In a global environment in which investors are requiring greater transparency and onshore jurisdictions insist on international standards in areas such as exchange of tax information, offshore centres such as the BVI are still well placed to thrive, thanks to the greater ease of establishment of funds and ongoing regulatory flexibility. Although the SIBA legislation may raise the cost of doing business, the territory’s heightened regulatory standards send an important signal to the international marketplace.
Peter Todd is a director of Drake Fund Advisors and of Osiris International Trustees
Click here to download a copy of the Hedgeweek Special Report: BVI Hedge Fund Services 2011
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