Hedge fund and private equity managers are actively considering moving to more favorable domiciles, especially emerging markets or regions, as the cost burden of new regulation rises in Europe, according to a report by Clear Path Analysis.
Managers are increasingly reviewing the business potential of setting up a presence overseas, the firm says, following tightened regulations since the financial crisis and the Madoff scandal.
According to a survey published by KPMG, more than half of the UKs largest companies have looked at or are actively considering the prospect of leaving the UK.
Clear Path Analysis suggests this is due to the costs associated with regulation, the Alternative Investment Fund Mangers Directive (AIFMD) in particular, which is estimated by the Alternative Investment Management Association (AIMA) to cost managers $6 billion. The same paper suggests AIFMD may force hedge funds to consider re-domiciling to new jurisdictions to mitigate the cost impact.
The result is that domiciles such as Guernsey, Bermuda and Malta are becoming increasingly attractive for managers, the firm says.
The financial crisis has brought a renewed focus on improved standards including a raft of regulatory proposals, e.g. AIFMD, says Fiona Le Poidevin, deputy CEO at Guernsey Finance. Guernseys 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.
Bermuda is growing, too. The combined net asset value of Bermuda-domiciled funds has grown to $183.61 billion, compared to $147.3 billion in 2009, according to figures from the Bermuda Monetary Authority. Meanwhile, in Malta, There is flexibility in Maltas regulatory framework, allowing a range of fund types and fund structures, says Emaliese Lofaro, manager of the Regulatory Development Unit at Malta Financial Services Authority. Lofaro says redomiciliation into Malta by real estate and securities firms is on the rise.
AIFMD is the proposed law that will give the European Union authority to regulate hedge funds and private equity funds.
(CG)