Bermuda has come under the spotlight in a front-page article in the prestigious New York Times highlighting the use of the Island by US hedge fund managers who have pumped millions into presidential campaigns.

The article said that hedge fund magnates like Daniel Loeb, Louis Moore Bacon and Steven Cohen have “exploited an esoteric tax loophole that saved them millions in taxes.

“The trick? Route the money to Bermuda and back.”

The article said that Mr Loeb and Mr Cohen are both heavy backers of the Republicans, while billionaire George Soros is a major contributor to the Democrats, while all use tax loopholes to minimise their tax burden in the US.

The New York Times article said that wealthy US citizens use the law to minimise tax, while also being major supporters of political candidates.

Jared Bernstein, a senior fellow at the Centre on Budget and Policy Priorities, said: “There’s this notion that the wealthy use their money to buy politicians, more accurately, it’s that they can buy policy and specifically tax policy.

“That’s why these egregious loopholes exist and why it’s so hard to close them.”

Mr Loeb has invested in Bermuda-based reinsurer Third Point Re, while the hedge fund manages the reinsurer’s investment portfolio.

The Times said that transforms profits from short-term bets in the market, which is subject to a 40 per cent US tax rate, into long-term profits or capital gains, which are taxed at around half that rate.

Mr Cohen’s SAC Re was sold off in 2013 after Mr Cohen’s hedge fund, which managed the Bermuda firm’s assets, was fined a record $1.8 billion for insider trading.

The hedge fund admitted responsibility for criminal behaviour by at least six of its employees. Mr Cohen was not personally charged in the indictment.

The industry in Bermuda has mounted a defence against a bid by the US Internal Revenue Service to tighten up on the use of reinsurance companies by US hedge funds.