Caymans seek hedge fund families in growth push
LONDON (Reuters) - The Cayman Islands hope more hedge fund managers and their families will move to the off-shore centre as it seeks to boost tax revenues, the Caribbean territory's prime minister told Reuters.
The British overseas territory -- legal home to most of the world's hedge funds, but with less than 50 managers actually based there -- wants to attract more financial firms as it struggles with a budget deficit.
"It's what I encourage, it's a new drive. You bring your children," premier McKeeva Bush said in an interview on Monday.
Politicians have demanded tighter regulation of financial havens across the globe, and the Cayman islands in August joined the global "white list" of countries using internationally recognised tax standards, as defined by the OECD.
Nearly 10,000 funds are based in the Cayman Islands, a group of three islands to the south of Cuba, attracted by its light-touch regulatory framework, and financial services account for up to 70 percent of its economy.
But with the crisis, the territory has seen its public finances fall into the red and it is now looking for means to make economic growth more sustainable.
The islands will make it easier to secure work permits for family members and domestic staff of financial professionals seeking to relocate, he said.
"People are running from the UK and metropolitan areas because of the tax regime," he said. He said he hopes for $2.7 billion (1.6 billion pounds) of investment over the next three years.
Most of the world's hedge fund managers currently operate out of the United States or Britain, while domiciling funds in the Cayman Islands helps avoid double taxation.
Paul Byles, consultant to the Ministry of Financial Services, said in the same interview that the number of hedge funds domiciled in Cayman had seen a "small drop" during the credit crisis from around 10,000 to 9,800.
Cayman also hopes to diversify the range of economic activity to bring in more reinsurance companies, conventional investment managers, accountancy firms and other support services, Bush said.
He rejected suggestions that the islands might need a bailout from the UK following pressure on financial services during the credit crisis.
"The UK has never contributed, I don't want the UK to give us anything... We are aiming to increase activity to make the revenue base more sustainable," he said.
Last month a UK government sponsored report said Britain's overseas financial havens, including the Cayman Islands, should increase taxes to wean their economies off financial services.
"To be pushed to increase taxes in a downturn is not a good idea," Byles said.
(To read the Reuters Hedge Fund Blog click on blogs.reuters.com/hedgehub; for the Global Investing Blog click here)
