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Funds
Slow down prompts study of new business fronts
He maintains: “The inertia that remains in place with the global service providers was always going to be a challenge to overcome as choosing a new jurisdiction over long-standing existing locations requires a degree of risk - the proof of concept - which must be outweighed by the benefits. We believe that we are seeing the start of the Gibraltar effect.”
Joanne Beiso, head of conduct business supervision at the Financial Service Commission, notes: “EIF directors have to take seriously their corporate governance responsibilities. Some serious issues have been exposed; some quite basic failings around not conducting enquiries properly before taking on a fund.”
Although a majority of EIF Directors were good, “we have too many – maybe 20 of 98 - who do not take their duties seriously.
Our focus now is on education, a series of seminars and workshops on our expectation of EIF Directors before the end of the year.” There were some EIF Directors “letting the side down and the reputation of Gibraltar”.
Areview of Gibraltar’s overseas funds marketing as a gateway into Europe is underway by government and the industry to offset a significant slow down in new funds business generally.
The review involves changes to legislation and possible opening of new fronts, such as crowd funding and new ways to market overseas funds within Europe using the jurisdiction’s stock exchange, GSX. It coincides with a crackdown on directors of regulated entities, particularly of flagship Experienced Investor Funds (EIF) that have a form of self-certification to fast track Regulatory approval.
Nick Cowen, managing director of the 10-month old GSX, admits: “The placing of open ended funds with us so far has been less than expected.” Only one has been listed on the exchange, but GSX says it hopes for
around 25 by year-end; nine have been lodged with the FSC and four waiting approval.
The European Alternative Investment Fund Managers Directive (AIFMD) is part of the problem: “Only 15% of US hedge fund managers and a quarter of firms across Asia and rest of world are currently AIFMD compliant, he maintains. “The costs of compliance are higher than expected and 40% of firms with less than $100m Assets Under Management (AUM) have made the strategic decision to not market a fund within the EU at all.
“Managers prefer to avoid the extra compliance costs, the risks that occur due to regulatory uncertainty and lack of guidance surrounding the Directive.” However, Cowen reports rising funds interest latterly this year.
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