Dennise Williams, Staff Reporter
CHEN
JAMAICA COULD be a part of the offshore mutual fund world with high-paying jobs for accountants, lawyers and administrators said, Oliver Chen, vice-president of GK Funds.
The full development of the managed fund industry can create career paths for the masses of highly-educated Jamaicans who normally look to other countries for well-paid positions, he said. He was speaking at the Jamaica Conference Centre on July 29, while speaking at the seminar on mutual and hedge funds put on by Edutact Limited.
"Both mutual and hedge funds are pooled investments and both charge management fees and can be bought and sold through investment dealers. However, mutual funds' performance is compared to a relevant index or other mutual funds while a hedge fund is expected to deliver absolute returns because their strategy is to make profits under all circumstances," George Roper, senior director of securities at the Financial Services Commission (FSC) said.
JA FIRST TO START SCHEME
And Jamaica has mainly had a history with mutual funds. Mr. Chen said, "The collective investment scheme industry started with the Jamaica Unit Trust, formed in 1972. It was the first Unit Trust in the English-speaking Caribbean."
However, with such a great start, Jamaica has been totally eclipsed by the Cayman Islands.
Mr. Roper said: "There are currently 14 overseas incorporated mutual funds that are registered in Jamaica through licensed securities dealers which are regulated by the FSC, and an additional 40 overseas regulated funds that have recently been approved for registration with the FSC."
The Cayman Islands registers almost 35 new funds per week.
Gary Linford, head of the Investment and Securities Division of the Cayman Islands Monetary Authority spoke on the Cayman success story. "We are the domicile of choice for approximately eight out of 10 of the world's hedge funds.
"Approximately 6,500 funds based out of the Cayman Islands are considered hedge funds. In 2004, nearly 1,400 new funds were set up in the Cayman Islands. In 2003, we registered 10 new funds per week, then 27 new funds per week in 2004 and now we up to almost 35 funds per week."
At least two funds sold in Jamaica were registered in Cayman - JMMB Securities Index Fund and GraceKennedy's GK Funds. Additionally, when Capital and Credit Financial Group bought the Jamaica Unit Trust (now Capital and Credit Fund Managers) they also acquired a license to set up a fund in the Cayman Islands.
So why do so many managed funds, whether mutual, index or hedge funds, flock to the Cayman Islands?
Mr. Linford says the government decision to accommodate the investment industry is the answer.
He explains: "We have no regulatory restrictions on investment policies or strategies or the choice of service providers. We offer speed of formation. We are tax neutral with no direct corporation. We have a recognised and respected legal system derived from English common law; it works and everyone knows it."
SUITABLE TAX REGIME
But in Jamaica, Mr. Roper said, "There are a number of anomalies in the new Companies Act in respect of the formation and operation of mutual funds. The FSC has been very proactive and has made a formal request that mutual fund companies be exempted from provisions of the act that would hinder the efficient operation of mutual fund companies."
In addition, the FSC will be working closely with the Office of the Registrar of Companies to develop suitable measures that will facilitate the smooth incorporation and registration of mutual fund companies.
Another major obstacle to which much attention is being given is the suitable tax regime for mutual fund companies. The FSC has recommended to the Ministry of Finance an appropriate taxation treatment that is at parity with that of similar investment products. Without taxation parity, the operation of local mutual funds may be unattractive to investors and uncompetitive for the operators of these funds.
Mr. Roper says his organisation understands why sorting out the legal and tax issues are so very important. "The growth of professionally managed funds creates an increase in the demand for capital. This demand for capital drives the price of capital upward, which makes the securities market very attractive to both local and foreign investors. As a result, in countries such as the Cayman Islands, mutual funds have become one of the fastest-growing sectors."
