By Cheryl Packwood – The past few years have been a difficult period for the global alternative fund industry. In most jurisdictions – China is an exception – the number of new funds established has been in decline. Everywhere fund managers are facing new regulatory requirements as well as increased demands from clients for greater transparency over their investments.
During the industry’s heyday in the early to mid-2000s, Bermuda’s decades-long adherence to the principle of sound regulation and effective oversight cost the jurisdiction business to rivals whose regulatory approach was less rigorous. But in today’s environment, the new focus on prudential supervision, effective anti-money laundering measures and tax information exchange agreements stand to benefit Bermuda as a fund domicile and servicing hub of quality.
It has been easier for Bermuda to adapt to the changed global climate because bringing its rulebook into line with the latest international standards has involved adherence to its existing philosophy. Today, with the reputation of jurisdictions an important factor in local decisions, the territory is attracting business from other offshore centres.
Bermuda’s position in the forefront of the offshore world is reinforced by its involvement in the global standard-setting process. For example, the island is a vice-chair of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes; it wields influence within the International Organization of Securities Commissions, and it also works closely with the International Financial Centres Forum.
Offshore centres have had to work hard to ensure that policy-makers onshore truly understand their business model, their role in the global financial system and their adherence to international standards. Now there are signs that the message is starting to get through. For example, Bermuda’s recent stellar review by the OECD’s peer review group demonstrates the jurisdiction’s progress and leadership in tax transparency, illustrated by the 35 tax information exchange and double taxation agreements the territory has signed to date.
Bermuda has long sought to engender greater understanding of its role among opinion-formers in the United States. An important tool is the annual Economic Impact Study commissioned by Business Bermuda, the most recent of which found that more than 300,000 US jobs had been created directly by Bermuda-based companies.
The jurisdiction’s long and strong economic links throughout the world include the domiciliation of Hong Kong-based companies since the 1990s and the listing of Bermudian companies on the Hong Kong and Singapore stock exchanges. Today its efforts to develop new business relationships are more focused than ever, with initiatives targeting Latin America, especially Brazil, China and other Asian countries, and southern Africa.
In addition, at a time when countries from the Middle East are increasingly their weight in the global economy, the island is positioning itself as a centre of Islamic finance expertise. Bermuda-headquartered Apex Fund Services has created a Shariah-compliant platform in partnership with Conyers Dill & Pearman and KPMG. Bermuda law firms and fund administrators have established offices in Bahrain and Dubai. Again, these efforts have been built on business relationships that in some cases date back several decades.
Islamic finance is just one area in which Bermuda’s cluster of specialist knowledge, backed by a deep pool of human talent and a solid services infrastructure, including the Bermuda Stock Exchange, has enabled it to develop a global role. Another is insurance-linked securities, a field that combines the island’s fund expertise with global leadership in reinsurance – and one where Bermuda’s reputation for probity and excellence is an invaluable asset.
Cheryl Packwood is chief executive of Business Bermuda