Re-domiciling for funds and firms gathers pace

Hedge fund and private equity investors are actively considering strategic moves to more favourable domiciles as pressures from regulators and investors hike costs.

The practice, called “re-domiciling” or “co-domiciling” is gathering pace, benefiting those countries with more competitive tax regimes, according to a report from research firm Clear Path Analysis.

Emerging regions are particularly appealing as investors and managers consider the business potential of setting up a presence overseas. One estimate from KPMG suggests over half of the UK’s largest companies have considered re-domiciling or co-domiciling.

A general shift towards greater transparency across global financial markets following the 2008 Madoff scandal, and successive waves of regulation are the key drivers behind the trend. AIMA, the trade association for alternative investment managers, estimates that the long-debated and still controversial Alternative Investment Fund Managers Directive (AIFMD) could cost Europe’s hedge fund industry $6bn, forcing managers to move to new jurisdictions.

The report assesses the main decisions funds and firms have to take when considering redomiciling or co-domiciling in Guernsey (non-EU/Europe), Bermuda (non-EU/Caribbean) and Malta (EU). These and other domiciles are increasingly confident about future growth prospects.

Fiona Le Poidevin, Deputy Chief Executive at Guernsey Finance, points out the importance of regulatory changes: “Now is time for managers to look at re-domiciling or co-domiciling. The global financial crisis came to a head in 2008, but more than three years later, the wave of repercussions continues. This is particularly true in the Eurozone but also across global markets.”

“The financial crisis has brought a renewed focus on improved standards including a raft of regulatory proposals e.g. AIFMD. Guernsey’s position outside the EU will enable it to offer a less prescriptive regime for funds not touching this marketplace and this is no doubt helped by the fact that Guernsey has a tax exempt regime for collective investment schemes.”

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