The British territory of Gibraltar is stepping up its campaign to promote itself as a low-cost funds domicile to Asia-based managers seeking to gain access to the EU single market.
Passing through Hong Kong this month to raise the jurisdiction’s profile was Albert Isola, minister of financial services and gaming for the Gibraltar government. He also serves as senior adviser for funds and asset management.
“We want to get fund managers to think about Gibraltar when they think about Europe,” Isola told AsianInvestor in an interview. It opened its representative office in Hong Kong this May, with Jason Cruz as chief executive.
Gibraltar’s funds industry is nascent, having only started in 2007. At present it has about 250 products with a combined AUM of $4 billion, Isola noted.
That pails by comparison with the European fund hubs of Luxembourg at €2.6 trillion ($3.4 trillion) and Ireland at €1.16 trillion, according to figures from Cerulli Associates. London is next biggest with €1.1 trillion.
Isola affirms that Gibraltar will focus on attracting niche managers to set up and base product in the territory, on the understanding that larger institutional providers will continue to focus on the key European hubs.
He expressed admiration for what Luxembourg had achieved, managing to make Ucits (undertakings for collective investment in transferrable securities) appear to be a Luxembourg funds scheme.
But he outlined how he sees hope for Gibraltar, with regulation such as the Alternative Investment Fund Managers Directive (AIFMD) having challenged non-EU businesses to access the bloc.
“We are offering a solution [for non-EU managers] to access the single [European] market,” said Isola. “We have been working with Switzerland in complying with EU solutions for non EU funds.”
He said that Gibraltar sees London, Hong Kong and Switzerland as the core markets it wants to focus on, although it has been advised to look at Beijing and Shanghai as well.
“The message we get from everyone is the same, there is a herd mentality [when domiciling funds in Europe],” he said. “But it only takes one or two larger players to change that. We are talking to institutions and making progress.”
Isola highlighted what he sees as the benefits of Gibraltar. The British territory enjoys a special status with the European Union. When the UK joined the European Economic Community in 1973, Gibraltar was included in the treaty.
But it is exempted from common market provisions, most notably VAT. There is also no capital gains tax, no double taxation on profits and no withholding tax. Gibraltar's corporate tax rate is 10% and the maximum effective rate for individuals is 25%.
Isola also pointed to speed to market, with applications for fund launches reviewed by the Gibraltar Financial Services Commission within 14 days.
Funds are required to have a Gibraltar-based administrator and auditor, two authorised European investment fund directors approved by the regulator and a custodian or prime broker (located anywhere in the world).
Gibraltar is expected to have a stock exchange up and running by the end of this year. Initially only funds will be listed. In a second phase bonds and insurance-linked securities will be added, with equities last in line to be included on the bourse.
Isola stressed the strength of Gibraltar’s economy, pointing to average GDP growth of 7.8% since 2008, with annual economic surplus and an unemployment rate of 2%.
“In terms of managing the economy we have done very well,” he explained. “The main areas are shipping and tourism, as we have 12 million visitors a year.
Gibraltar is also very well known for online gaming, with 27 Gibraltar-based operators handling 75% of bets made in the UK. "Now we are looking at areas of the economy that have not fully exploited their potential, one of which is funds,” said Isola.
But he was at pains to point out that Gibraltar was not presenting itself as a regulation-light tax haven.
“We are the only EU jurisdiction to have transposed all the [regulatory] directives and have signed 135 tax information exchange agreements with about 80 countries, including US Fatca [Foreign Account Tax Compliance Act],” he stated. “Regulation is a big advantage for us, as is our commitment to equal standards and compliance.”