A casual conversation at a hedge fund conference highlighted a telling difference between Bermuda and some rival offshore jurisdictions and showed why Bermuda continues to be held in higher regard than many competing financial jurisdictions as an orderly and attractive place to do business.

A more intense spotlight has been shone on the regulation of hedge funds following the collapse of the Connecticut-based hedge fund Amaranth Advisors after it lost billions of dollars speculating on gas prices.

At a hedge fund conference in an unnamed "jurisdiction which frequently identifies Bermuda as one of its major competitors" a hedge fund compliance officer was asked by a Bermuda group why the fund had chosen the rival domicile over Bermuda.

Cheryl Packwood, chief executive officer of the Bermuda International Business Association (BIBA), who was amongst the group, said: "We pressed him as to why he chose the particular jurisdiction he was domiciled in over Bermuda. His response was simple, 'no regulation'.

"We were delighted to point out that, in fact, Bermuda's regulations were less onerous and more efficient but he stopped us cold with a simple statement. He said, 'Sorry, I know all about the difference in regulations, but I should have said, 'There is no enforcement of regulation where I am domiciled'.

"Guess what? We are delighted with his choice of domiciles. Those who do business in Bermuda are carefully chosen and of the calibre that we are comfortable and secure having as part of our client-base. This legitimacy too, is why many individuals and corporations choose Bermuda — jurisdictional comfort is what we refer to.

"In fact, many countries have begun to approach us to tailor our regulations to meet the more stringent regulatory needs that today's world is more actively seeking."

Ms Packwood made the observation as she gave a speech to delegates at the Bermuda Compliance Summit this week, which brought together officers from compliance organisations around the world for a two-day conference at the Fairmont Southampton Hotel.

She said striking the balance between regulation of financial institutions and allowing them enough space to operate commercially was key to Bermuda's continued success as an alternative financial jurisdiction.

Ms Packwood told delegates the Island's willingness to develop and enforce regulations was paramount to preserving and enhancing Bermuda's reputation as an orderly and attractive place for international businesses to operate.

"From the onset our approach to business has been based on rigorous up-front vetting of the individuals and the business propositions brought to us. This is something that has stood us in very good stead in enabling us to avoid many of the problems encountered by those who have taken a less robust stance," she said, addressing the topic of Bermuda's reputation, challenges and concerns.

On hedge funds specifically, she said: "There is no doubt that today we operate in an environment characterised by increasing regulation within the financial services industry, on both national and international levels.

"National and regional governments are consistently looking to enhance their regulatory regimes to be even more responsive to evolving international standards, dynamic business conditions and threats of possible failures that exist within their markets. A very recent example of such failures is the of the collapse of Amaranth Advisors. This event has thrown into question the strength of the current system, and prompted policymakers to rethink the regulation of hedge funds in the US.

"Although the financial system appears to have absorbed the Amaranth losses without significant interruption, reportedly questions remain as to whether or not the system could handle yet another hedge fund blow-up that could possibly have a broader domino effect."

Ms Packwood added: "It is clear there is a need for some level of oversight for the hedge fund sector. However, we do believe it is important generally for regulators to try and strike the right balance when maintaining effective regulatory frameworks.

"Our frameworks should be aligned to international standards, while avoiding requirements that stifle business growth and development. And the development of common international standards does not diminish the requirement for national supervisors to develop appropriate and practical regulatory requirements that take into account the nature of particular businesses in their markets and their related different levels of risk.

Getting the right balance is at the core of Bermuda's continuing regulatory development, said the BIBA chief.

"Growth in hedge funds in Bermuda, as elsewhere, has occurred against a background of the continuing evolution of regulatory standards and approaches occurring over recent years," said Ms Packwood.

"As with our other regulated sectors, Bermuda has kept our regulatory provisions for investment business and for collective investment schemes under regular review, as international standards have developed and been refined."