Rutland, formally domiciled in Bermuda, is one of at least 80 such funds that CIMA has authorised since 1 July when the EUSD took effect. Head of CIMA's Investments and Securities Division Gary Linford, says the Authority has also been dealing with a significant number of enquiries since July.

Under the terms negotiated for the application of the EUSD to funds domiciled in Cayman, approximately 98 percent of such funds are exempt from the reporting obligations of the directive. The EUSD obligations require that paying agents provide information for EU tax authorities on the amount of interest payments on savings income to or for an individual who is a tax resident of an EU member state, together with details of the recipient. However, persons who are not resident for tax purposes within the EU, and other entities, including certain trusts and partnerships, corporate structures, other investment vehicles and institutions that do not fall within the narrow scope of the definition, are unaffected.

These specific exemptions have increased Cayman's attractiveness as a fund domicile compared to jurisdictions like Bermuda and the Bahamas that are not subject to the EUSD.

Paul Scrivener, partner of Solomon Harris, the law firm handling The Rutland Fund's transfer and registration, says that developments in Switzerland have, ironically, helped to boost the Cayman fund sector at the expense of jurisdictions outside of the directive, such as Bermuda.

"Switzerland's rules as to how the directive is applied mean that it is far easier for Swiss banks to invest in jurisdictions that are subject to the directive," explains Mr. Scrivener.

He added that:

"This is because the concessions agreed by the Cayman Islands with the EU take hedge funds in particular outside the scope of the directive and therefore remove significant burdens on the Swiss banks under the Swiss rules.

"Since Swiss banks are major investors in offshore hedge funds, the Swiss rules have led to many Bermudan and some Bahamian funds being left with no option but to relocate to Cayman, resulting in a steady stream of redomicilations that has kept both CIMA and the Cayman law firms busy since the summer."

Of the 10,000 funds that have been authorised over the years, more than 7,000 are still active, says Mr. Linford, and the pace of new authorisations, not only from Bermuda and the Bahamas but from elsewhere, continues to grow at an average of about 35 per week.

Both men agree that a large part of Cayman's attractiveness as a domicile for hedge funds is the jurisdiction's approach to the regulation of these funds. "Cayman's regulatory environment is ideally suited for the flexibility that hedge fund managers need," says Mr. Linford. "That and the strength of our professional infrastructure place us in an enviable position compared to our closest rivals."

"The requirements are not onerous," Mr. Scrivener confirms. "For a fund wishing to transfer to this jurisdiction, discussions with CIMA at the outset are a definite benefit."