Bermuda plays the tax card to lure hedge funds

By added on 25/01/2011

Bermuda shorts, worn three inches above the knee, and long socks could soon become the new uniform for hedgies if the island's campaign to lure London funds to its shores is successful, The Sunday Times reports.

Bermuda, which has long been the preferred offshore home of the insurance sector, is vying with Switzerland and other low-tax regimes for a chunk of the highly mobile hedge fund industry.

Business Bermuda, the inward investment agency, will host a conference for financiers, including hedge funds and insurers, at the Mandarin Oriental hotel in London in April.

Tax will be the trump card.

"Bermuda is a very attractive environment: there is no corporation tax and the maximum payroll tax is 16 per cent," said Cheryl Packwood, chief executive of Business Bermuda.

Historically, hedge funds have domiciled their funds in offshore jurisdictions such as Bermuda and the Cayman Islands for tax reasons, but they have rarely based their operations there.

However, rising income taxes in Britain and higher living costs in Switzerland are driving them away.

Peter Hughes, managing director of Apex Fund Services, a firm that helps hedge funds move, said: "We have already seen some funds move from Geneva to Bermuda."

There are plans to create a "zone" for hedge funds in Hamilton, Bermuda's capital, and the island's regulatory system complies with the new EU directive on hedge funds.