The hedge fund centre on the move - Incisive Media

Notes from the cutting edge
<strong>The</strong> BVI has spread its name as far and as wide as
Asia in its hunt for new business – it is the world’s
second largest investor into China – but as its <strong>hedge</strong>
<strong>fund</strong> practitioners tell Phyllis Feinberg, its efforts at
home include everything from new <strong>fund</strong>s laws to golf
courses being considered…
Financial services providers in
BVI are of the firm opinion that
business on the island in general
and the number of <strong>hedge</strong> <strong>fund</strong>s
that choose it as a domicile in particular,
will increase strongly.
<strong>The</strong> new British Virgin Islands
Securities Investment Bill, which
will change some of the provisions
of the Mutual Funds Act of 1996, is
seen as a positive development and
is expected to balance regulation
with the financial services industry’s
need for flexibility.
“<strong>The</strong> new Act’s regulations and
code are basically just to formalise
modern day procedures,” says Kay
Reddy, managing director of Blenheim
Trust (BVI).
R&R AND THE BVI
<strong>The</strong> BVI also has more pleasures to
offer than its business regulations,
according to Reddy.
She points out that people who
like golf often choose Bermuda as
a domicile because of its beautiful
golf courses. But the BVI could be
about to remedy that. A five-star
resort with a golf course is being
considered on Beef Island, just a
quick ride from the Tortola business
district.
“<strong>The</strong> BVI is trying to position
itself on the cusp of a brand new
dawn,” says Calum McKenzie, a
director of Folio Administrators.
“BVI is becoming more sophisticated
in what it can service. It will
have the new investment law and
it can do anything that any other
place can do.”
According to McKenzie, BVI is
saying, metaphorically, ‘we’re here
and as good as anywhere else.’”
Daniel Cann, marketing director
of Folio, says that “BVI has the
infrastructure, with the expertise
and the personnel, along with a
flexible and entrepreneurial spirit,”
to continue to grow. He adds that
the island also has more capacity,
with some other markets saturated.
Sherri Ortiz, chief operations
officer, BVI International Finance
Centre, says that “some would
say that innovative and progres-
sive legislation combined with the
commercial approach to corporate
governance and regulation have
been the reason for this (the BVI’s)
success, while others would cite
the close collaboration between the
public and private sectors.
“Most would probably agree
that the combination of both has
resulted in a winning formula that
has given rise to this premier offshore
jurisdiction.”
BRAND STRENGTH
She points out that “in Asia particularly,
the BVI brand has become
synonymous with the very concept
of an offshore company. From international
joint ventures looking for
a neutral — but legally secure —
home to smaller businesses eyeing
the benefits of flexible structures
and tax neutrality, the BVI is frequently
the first point of call.
<strong>The</strong> jurisdiction is currently
ranked as the second biggest
investor into China and many
people report that, both there and
in Hong Kong, a reason for not
using a BVI has to be provided
rather than giving a rationale to
use a BVI company. Another factor
that will boost the British Virgin
Islands, according to Ortiz, is that
“it is significantly less expensive
to establish and maintain a <strong>fund</strong>
in the BVI than in its competitor
jurisdictions.
CHEAP BUT NOT NASTY
“Legal fees and organisational
costs to establish equivalent <strong>fund</strong>s
tend to be lower and the current
annual <strong>fund</strong> and corporate registration
fees are considerably less than
the BVI’s main competitors.”
Where cost is a significant factor,
this obviously benefits the BVI and
unquestionably makes it the most
cost effective jurisdiction for small-
to medium-size managers to launch
their <strong>fund</strong>s, she says. “However,
the British Virgin Islands attracts
<strong>hedge</strong> <strong>fund</strong>s of all sizes, because
of the ease of incorporation and
the flexibility of the regulation.”
But Ortiz says that “essential and
sound legislation and prudent regulation
can only go so far.
“It is the on-island professionals
who do the hard work and provide
the necessary expertise on a day to
day basis,” Ortiz says.
LEGAL VIRTUOUS CIRCLE
She points out that the BVI is the
only Caribbean jurisdiction to boast
the presence of all six of the largest
offshore law firms in the region and
the legal profession in the Territory
continues to expand and strengthen
with a steady influx of lawyers,
“In Asia particularly, the BVI brand has become
synonymous with the very concept of an offshore
company.”
Sherri Ortiz, BVI International Finance Centre
barristers and solicitors.
<strong>The</strong> world’s main accounting and
auditing practices are also present
in the BVI and have been for quite
some time. <strong>The</strong>ir professional
service offerings, including not only
the traditional accounting, audit
and risk management practices, but
increasingly specialist areas such
as forensic accounting, corporate
restructuring and insolvency management
services, are being offered
from within the BVI.
In addition there are of course
the many leading international
trust and corporate service providers
who, through their efficient
systems, procedures and people,
have helped build the BVI into
what some dub the world’s corporate
domicile capital, she says.
LEADING EDGE
Ortiz says that all this growth and
success has been supported by the
British Virgin Islands International
Finance Centre which she says has
played a “pivotal role” in the promotion
and marketing of the BVI as a
leading financial <strong>centre</strong>.
<strong>The</strong> British Virgin Islands International
Finance Centre has implemented
a worldwide programme of
roadshows to inform, educate, and
discuss with the international pro-
bvi’s future
fessional and business communities
the opportunities for growth in
financial services in the jurisdiction.
Through this programme, the story
of the British Virgin Islands has
been taken to many of the leading
<strong>centre</strong>s for international business,
including London, New York, Hong
Kong, Singapore, Miami, Geneva,
Zurich and Shanghai, keeping the
image and branding the Territory
in the minds of stakeholders.
Established in 2002, as part of
the government’s commitment
to support the financial services
industry, the aim of the IFC is to
give a voice to all segments of the
finance sector, making sure the Territory
retains the unique balance of
a sound regulatory framework, an
entrepreneurial business community
and innovative legislation.
As such, the International
Finance Centre’s ultimate objective
is to protect and uphold the
integrity, reputation and standing
which the British Virgin Islands
has earned as a place to conduct
international business, according
to Ortiz.
Continuing to spread the positive
and message about the territory’s
competitive advantage is the central
focus of the BVI International
Finance Centre.
Another function of the regulator,
the Financial Services Commission
is to protect the public
interest by providing statements
advising the public against any
dealings with certain persons or
businesses it considers undesirable.
In particular, the Financial Services
Commission may issue statements
for the purposes of protecting
the public, within or outside the
British Virgin Islands, against any
financial loss that may arise from the
dishonesty, incompetence, malpractice
or insolvency of persons that are
engaged in financial services businesses
in the BVI.
It also has as its goal to protect
and enhance the reputation of the
British Virgin Islands as a financial
services center; and reducing crime
and other unlawful activities relating
to the financial services business.
To aid it in this task the Financial
Services Commission welcomes
information from any foreign regulatory
or law enforcement authority in
relation to BVI-regulated entities to
prevent conduct that may hurt the
interests of investors and the public
in general.
<strong>The</strong> source of any such information
will be held in strict confidence,
the authorities note.
www.<strong>hedge</strong><strong>fund</strong>sreview.com October 2007 | british virgin islands supplement <strong>hedge</strong> <strong>fund</strong>s review | S19