Despite its clear advantages, Gibraltar remains largely a well-kept secret.
Despite its clear advantages, Gibraltar remains largely a well-kept secret. It is one secret, however, that the government and local fund administrators, accountants, lawyers and custodians are all keen to share.
‘The single greatest challenge that Gibraltar faces is that it’s not well known. It needs to bring its message out more,’ says Robert Koller, a lawyer with Hassans Funds Department. Joanne Sené, Director of VFS, agrees. ‘We find that sometimes people don’t know much about Gibraltar as a jurisdiction,’ Sené says.
‘If somebody walks into a lawyer’s office in London and asks for a fund, the lawyer will have templates for Cayman, Dublin and Luxembourg funds, but there isn’t normally one for Gibraltar,’ says David Wahnon, Managing Director of Capita Financial Group, Gibraltar. ‘That is Gibraltar’s next challenge given that it has a comparable offering – to be able to be one of those choices, principally in fund centres like London,’ he adds.
‘Gibraltar is quite well known as a jurisdiction in Switzerland, because we have been dealing with the Swiss for a long time,’ says Sené, ‘but the fund industry works in trends worldwide, in that the Americans tend to go to Cayman, the British tend to go to Dublin, the Europeans tend to go to Luxembourg. This is just the way that things have always been done. Our biggest challenge is saying: ‘Here we are, we offer a good product, we have a good infrastructure, we have good regulation, so why don’t you come to Gibraltar?”
Gibraltar’s government is working hard to promote the jurisdiction. Florian Nolte, legal and compliance officer of Swiss Best Invest Asset Management believes that Gibraltar’s government is actively promoting the jurisdiction’s advantages more vigorously than any other government in Europe does for its own funds industry.
‘I understand that governments like Jersey and Ireland have for many years had a very active role in promoting their jurisdiction as a fund centre,’ says Wahnon. ‘The Gibraltar government is now following this kind of initiative and becoming a lot more proactive in marketing the jurisdiction by arranging seminars throughout Europe on an annual basis.’
With the 2008 series of seminars promoting the jurisdiction, the word is starting to get out. The seminar held in London in February of this year was attended by around 150 people. According to James Lasry, a partner with Hassans International Law Firm, this was close to double the number who attended the previous seminar in London around two years ago. Further seminars are planned for Geneva, Lugano and Zurich later in the spring. ‘The people attending are a combination of fund service providers and their lawyers as well as fund managers considering setting up a fund and considering in which jurisdiction to set it up,’ says Lasry.
In spreading the word about Gibraltar, the jurisdiction hopes to continue to grow, however one of its great current advantages stems from its size. ‘Being a small place, Gibraltar’s professionals are a very tight knit community, so it’s very easy to get hold of someone and put something together very quickly,’ says Wahnon. ‘I can pick up the phone now and say to a lawyer we need to meet in 15 minutes, can you arrange a meeting with the Financial Services Commission for this afternoon,’ he adds.
‘It makes it easy to conduct business for all the parties involved because we’re all around the same table, which is sometimes much harder to do in other jurisdictions,’ says Sené. ‘The market is small and quick,’ agrees Nolte.
With both the regulatory regime and the local players willing and able to set funds up quickly, the cost of setting up a fund also tends to be lower in Gibraltar than in many other jurisdictions.
This willingness and ability to work together to meet a client’s often complex requirements quickly and cost-effectively, is a major reason for hedge fund managers to have Gibraltar on their shopping list.
There is no doubt that significant growth in the worldwide fund industry has put considerable pressure on established financial centres such as Dublin, Luxembourg and Cayman. These pressures often result in delays in fund set up and greater selectivity by fund administrators. ‘Jurisdictions which are better established can be more picky,’ says Sené. ‘We find that we get people coming here who have possibly looked at other jurisdictions and have found it difficult to set up their funds there. Because we’ve just got started, we’re more willing to take on more alternative types of funds, or smaller funds,’ she adds.
For Wahnon, Gibraltar offers a fund the chance to be more than a small fish in a big pond. ‘We’re tending to see now that, for example, if you look at Dublin as a centre, companies have clients which they’ve maybe had for 20 years. They may have had them on a fairly low fee and the administrator is finding that they have tons of business – very large funds with lots of money – and they’re not interested in their smaller clients any more. So either they are increasing their fees dramatically or their service is quite poor, with the small funds not being given any preference. It’s not a massive move at the moment, but business is trickling this way. I am told that in Dublin no-one looks at anything under EUR 200 million, so there’s a huge market there to be tapped into,’ he says.
Lasry sees this as a chance for Gibraltar to meet the growing fund industry’s need for additional capacity. ‘When I started in the fund industry people were complaining that in Luxembourg they wouldn’t look at you if you were under EUR 50 million,’ he says, ‘now that’s gone to about EUR 300-EUR 500 million for top tier service providers. And it’s the same for Ireland. Ireland exists because Luxembourg couldn’t handle all their work. Gibraltar is not competing with Ireland. We’re just hoping to provide a run-off of the Irish and Luxembourg work.’
Growth is undeniably starting to happen in Gibraltar. Employment in the financial services industry rose by 14 per cent in 2006, and in 2007 the sector accounted for 14.3 per cent of all jobs in Gibraltar’s economy.
Growth brings its own challenges, but Gibraltar is well aware of this and is well-positioned to be able to cope with the increasing demands that growth will bring. With a land mass of only 6.8 square km and a population of just under 28,000 (as at July 2007), the ability to provide sufficient office space and an increasing number of highly trained and experienced staff to accommodate a growing fund service industry are two of the jurisdiction’s greatest challenges.
Raymond Joubaud, Director of VFS believes that the issue of office space issue will be resolved within the next two to three years. ‘There is a lot of building going on, both residential and commercial,’ he says. ‘We are never going to be as big as centres like Dublin because we don’t have the space,’ adds Sené, ‘but we will go for quality rather than quantity.’
When it comes to attracting and retaining qualified staff, Gibraltar has plenty going for it. Indeed Sené says that the past few months have seen her receive a constant stream of cvs from people in the fund administration industry, currently based in the Isle of Man or Jersey, who want to move to Gibraltar. ‘It’s a lifestyle choice more than anything,’ she says. ‘We have 300 days of sunshine and we have 10 golf courses within 25 km of Gibraltar,’ she adds.
Wahnon agrees: ‘One thing we can offer is quality of life,’ he says. ‘We have everything we need in a relatively small area: good weather, you can play any sport under the sun: there’s watersports; there’s a ski resort two hours up the road; and at the same time it’s quite easy to live across the border in Spain. The cost of living in Spain is lower – you can rent a very plush property at a fairly reasonable price – and because the distances are short, after your working day you still have a life,’ he says. And once people move to Gibraltar, they tend to stay. ‘It’s not difficult to retain good people,’ says Joubaud. ‘When people come here from Switzerland, it’s very difficult to send them back to Switzerland,’ he adds.
As well as incomers, Gibraltar has, according to Sené, a very well-educated population. ‘We have very good schools in Gibraltar and we have a lot of people who go away to study for qualifications and then come back – lawyers, accountants, bankers,’ she says.
When Gibraltar is no longer a secret and people take the trouble to look at Gibraltar, according to Sené, they realise that it has a lot going for it, with an excellent regulatory regime and infrastructure, a close-knit group of highly experienced fund-savvy professionals and very competitive prices.
Lasry highlights a recent example of a conversation with a fund sponsor. ‘I had to explain to them what our constitutional position is, where we are in relation to the European Union and what our legal system is,’ he says. ‘Gibraltar is just not well known, and it takes some explaining, but once you’ve crossed that hurdle, everything is fine,’ he adds.
Gibraltar may have been one of the best-kept secrets in the fund industry, but now the secret is well and truly out.