With a rather small population of about 33,000 people on a rather small territory of 2.5 square miles, Gibraltar has managed to built a well diversified financial industry. Gibraltar is a self-governing, self-financing UK Overseas Territory to which all EU treaties and European law applies, except for agriculture, fishery and VAT, which is not applied in Gibraltar.
As of 2015, Gibraltar has 10 licensed fund administrators, 13 authorized investment dealers, 18 investment managers and currently four authorized alternative investment fund managers. Out of 14 authorized banks, four of which are Swiss, we also find licensed AIFM depositories, which compared to other smaller jurisdictions within the EU is a decisive advantage. Gibraltar also has a very strong e-gaming sector that now employs 3000 people, 63 licensed insurance companies – a significant percentage of the UK motor insurance market is written by Gibraltar insurance companies – and a lively family office and philanthropy sector. Staying true to the industry’s pledge to be at the forefront of innovation, Gibraltar is currently also evaluating how to get involved with virtual currencies.
Lower cost jurisdiction offering access to Europe
Gibraltar positioned itself as a European entry point for jurisdictions like Hong Kong, Singapore, as well as the US and Switzerland. Although Europe's population is “only” 500 million, accounting for only about 7% of the global population, the continent accounts for 23.8% of global wealth. China, for example, accounts for 19% of the population, but only 12.2% of global wealth.
This means that fund promoters and managers cannot ignore Europe. Of course, as managers feel over-regulated already, so when looking at a framework like AIFMD, 90% are still relying on reverse solicitation. However, by 2018, private placement will fall away in the EU, and reverse solicitation is certainly not a sustainable marketing strategy. Experts say that the only long-term future for the distribution of alternative investment funds is within an AIFM framework.
Gibraltar is fully compliant with all EU laws and directives, including AIFMD. There are now delegation arrangements that allow foreign managers to use Gibraltar AIFM providers to delegate the portfolio management function to a business in Hong Kong, Switzerland or wherever it might be, in accordance with the MOU. This is particularly interesting for smaller and newer managers, a group who traditionally are attracted to Gibraltar for many reasons. They benefit from a fast turn around (a Gibraltar Experienced Investor Fund can launch in a matter of days, depending on the relevant circumstances), quality services, and lower costs.
Why Gibraltar's new stock exchange is a game changer
Since 2015, Gibraltar also has its own stock exchange - GSX - offering technical listings of open-ended funds and later closed ended funds and exchange traded instruments (EITs).
Managers domiciled in any of the main global financial centres running for example an open-ended alternative Cayman fund can list their fund on GSX, so in a way dipping their toe into the European swimming pool without actually making that big decision about whether to come onshore. A listing on GSX is fast and economic, and there is no requirement to come onshore. More, from December 2015 GSX will also start listing Exchange Traded Instruments. Securitized Special purpose Vehicles (SpVs), on which the ETIs are based, are regulated by European Central bank regulations, not AIFMD. In sum, ETIs offer an alternative, fast to market, flexible, and economic solution for managers of assets. ETIs listed on GSX with approved prospectuses qualify for EU passporting rights. This gives small to medium managers a structural footprint in the EU at significantly lower cost than full compliance with AIFMD.
The Gibraltar Roundtable took place end of September 2015 at the office of Gibraltar Finance with:
Vicente Mancheno – CIO, Hyperion Wealth Management and manager, Margaux Fund PCC Limited
Philip Canessa – Gibraltar Finance Centre
The group also discussed:
Why are family offices “impressed” by the Gibraltar offering?
What does it mean if a fund is either in scope of AIFMD or out-of scope?
Benefits of the Gibraltar Experienced Investor Fund (EIF)
Swiss regulations: The burden of compliance but potentially without the benefit of passporting and being able to offer their services throughout Europe.
Why 3,000 small Swiss independent asset managers, who for the first time are brought within the scope of full financial regulation, may want to look at Gibraltar.
From constraint to strategic advantage: The paradigm has changed -- more and more players are seeking to operate under European regulations
Why Gibraltar's new stock exchange GSX is a game changer: Benefits of fund listings and EITs.
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