Article: Island hedge funds hold US$107 billion

Bermuda has a staggering total of just under $110 billion invested in its hedge funds — that is, according to the latest issue of Tax Notes.

The article by Martin Sullivan, contributing editor to Tax Notes' parent company Tax Analysts, revealed that investors have put in a total of $262.8 billion in Caribbean region hedge funds, which include those domiciled in Bermuda.

The article forms part of the Tax Analysts Offshore Project, which works out the assets that non-resident individuals are investing in financial sectors around the world, and, potentially avoiding taxes in their home country.

"More than half of the world's hedge funds are legally domiciled offshore, and the four offshore leaders are the Cayman Islands, the British Virgin Islands, the Bahamas and Bermuda," Mr Sullivan wrote.

Estimates from the Hedge Fund Research Inc (HFR) Industry Report — Year End 2006 show that Bermuda has $107 billion in hedge fund assets under management, representing 7.7 percent of the world total and 11 percent globally not including the US, which itself accounts for 30.1 percent of the world total.

This is a sizeable amount when compared with the world total which grew from $456.4 billion at the end of 1996 to $1.43 trillion at the end of 2006 as the total number of hedge funds expanded from 3,616 to 9,462 over the same period.

It also compares favourably with the Bahamas on $24 billion, but falls short of the totals invested in the Cayman Islands and the British Virgin Islands, which represent $470.5 billion and $129.4 billion respectively. All of the 'big four' Caribbean jurisdictions, in turn, make up 52.3 percent of the world total and 74.9 percent of the hedge funds domiciled outside the US.

Other findings, this time by the Hennessee Hedge Fund Advisory Group, estimated a different figure for hedge fund industry assets of $1.535 trillion at the end of 2006, eight percent more than that estimated by HFR.

Furthermore, research by the Lipper TASS Hedge Fund Database, revealed that, according to the 2,873 funds with total assets reporting in December 2006, Bermuda has $64.3 billion in estimated assets out of a non-US total of $976.1 billion, with 116 funds, making up 6.4 percent of that total of 1,818 funds domiciled outside the US, and $27 billion in assets, representing 6.6 percent of the non-US figure of $409.9 billion assets for the end of 2006.

The average of the two methods of research shows Bermuda to have $85.7 billion in hedge fund assets under management.

Source: Royal Gazette article by Alex Wright, 16th January 2008