Isle of Man Treasury Minister Allan Bell has unveiled a report on the island's fund industry that sets out a blueprint for the continued growth of the sector and in particular to boost its role as a centre for administration of alternative funds.
Delivering his 2007 budget speech to the parliament Tynwald, Bell said a steering group chaired by Paul Smith, the former global head of HSBC's Alternative Fund Services division, had identified 'huge potential for growth' for the fund industry. It is set to be followed by similar high-level reviews of the island's banking and captive insurance sectors.
The Smith review is one of several measures announced by Bell in his budget statement that are designed to advance further the Isle of Man's economy over the next five years to build on the existing success of its financial sector.
According to Bell, the island has seen a range of positive effects, including a surge in company incorporation, since the implementation of its package of measures to attract business, comprising introduction of a zero per cent standard corporate income tax rate, a GBP100,000 per annum cap on personal income tax, and the modernisation and streamlining of the Isle of Man Companies Act.
Fund assets under management rose by 50 per cent between 2005 and 2006, from GBP15bn to around GBP21bn. The Smith report identifies factors on which the island can capitalise to achieve further growth in the international investment funds arena, including the institutionalisation of alternative asset management.
Says Smith: 'This review represents a major industry initiative, which I believe will be critical in determining the future size and shape of the island's funds industry and in achieving the ambitious funds growth targets envisaged.'
The review was instituted last September by the Funds Review Steering Group and carried out under the auspices of Isle of Man Finance. The group comprised both public and private sector representatives, including members of the Isle of Man Fund Managers Association.
Its terms of reference included consideration of the legal, regulatory and fiscal framework for the establishment, domicile, management and administration of funds in the Isle of Man, together with the co-ordination and future structuring of the marketing and promotion of the island's fund sector internationally.
The report seeks to position the Isle of Man as a premier location for the domiciliation of specialist institutional funds in the alternative and closed-ended sectors as well as to make the island the preferred location for the establishment of front and middle office operations for global fund managers.
Key recommendations include the introduction of a new specialist fund category, withy a USD100m initial subscription, the ability to base management and/or administration in other acceptable jurisdictions, with no restrictions on investment strategy and a light touch regulatory approach.
The report also recommends that the administration sector focus on a target market of front-and middle-office functions for London-based alternative fund managers, as well as managers in other key investment management centres, and proposes a revised offering to fund managers to include a tailored business proposition for location to the island, and a set-up assistance package.
'In order to secure the future, each sector of the economy needs to take a strategic view of the opportunities and threats it faces and define its vision and strategic direction,' Bell said. 'The Smith report demonstrates the huge potential for growth that exists in the Isle of Man for the funds sector and makes a number of far-reaching recommendations. I look forward to working with the industry to help secure its vision of having USD100bn in funds under administration and USD50bn in funds under management on the island by 2010.'