Bermuda?s loss is Cayman?s gain with that British Overseas Territory boasting on Friday that the 10,000th fund to register with the Cayman Islands Monetary Authority was previously registered here.

The Rutland Fund is among 25 funds ? representing a net asset value of $5.7 billion ? that have left Bermuda since the European Union Directive on Tax Savings was implemented on July 1 this year.

The EUSD requires paying agents to submit information about the savings income of EU citizens who are not resident in the country where they hold their account.

Bermuda and other jurisdictions originally viewed their exclusion from the EUSD as an opportunity to develop their fund business at the expense of included jurisdictions such as Cayman.

However, the opposite has happened because Cayman was able to negotiate to exempt approximately 98 percent of its funds from the reporting obligations of the directive.

According to The Cayman Islands Financial Services Association, Rutland is among some 80 funds to transfer there since July 1.

Currently, funds and collective investment schemes that are domiciled here, which have their paying agents located in countries subject to the directive, have been caught in its scope due to the manner in which some countries, particularly Switzerland, have applied ?their home rules?.

Bermuda?s Ministry of Finance said yesterday it is trying to clarify whether funds registered in Bermuda may be ?exempted in some manner from regulation for the purposes of the Directive.?

Opposition leader Grant Gibbons said however that Bermuda did not do enough due diligence to understand what the full implications of the directive would be or what other jurisdictions were doing to deal with it.

?The Cayman Government clearly understood the EUSD could be a real problem for its fund business and they went to great lengths to not only understand what the implications were but to also negotiate a very favourable position with Britain and the EU,? he said.

The Swiss tax authorities have told Bermuda?s Ministry of Finance that a fund which is regulated will be covered by its home rules while funds which are exempted from regulation are out of scope. As of December 5, there were 1,317 regulated funds domiciled in Bermuda and approximately 100 unregulated funds.

The Ministry of Finance said last night that it has sought clarification of the meaning of ?regulated?.

?The Ministry has made every effort to ensure that Bermuda?s case has been heard and that there have been no missed opportunities,? Finance Minister Paula Cox said in a statement yesterday.

?The Ministry of Finance is actively communicating with various countries and pursuing a number of potential options to resolve how Bermuda registered funds are treated under the home rules of such countries adopted to implement the EUSD. This is a competitive sector and jurisdictions use a number of marketing strategies.?

Paul Scrivener, partner of Solomon Harris, the law firm handling The Rutland Fund?s transfer and registration, told Cayman media 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,? said Mr. Scrivener.

Head of CIMA?s Investments and Securities Division Gary Linford, told Cayman media that the significant number of enquiries CIMA has seen since July are a result of the concessions Cayman secured which 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 Bermudian 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.?

At the end of the second quarter of 2005, the total net asset value of funds in Bermuda was $178.58 billion ? so the 25 funds that have discontinued here represent only 3.5 percent of the total NAV of Bermuda domiciled funds, according to the BMA.

The fund sector is ?still on target with projections for registration this year? and maintains its status as a creditable financial centre,? the Minister of Finance said yesterday adding that her Ministry had received a positive response from the Bermuda investment industry generally to last month?s decision to fast track incorporation process for collective investment schemes as well as other initiatives.

Dr. Gibbons said however that the issue is not about the NAV of those funds that have already left, but rather about the Island?s ability to attract fund business in the future.

?We are now in a less advantageous position competitively to Cayman and other jurisdictions which have negotiated an arrangement with the EUSD and it is our future business which is much more an issue than the funds that may have redomiciled from Bermuda. That is the issue and a lot of that is due to uncertainty. There is certainty in Cayman and there is not certainty here,? he said.

Of the 10,000 funds that have been authorised in Cayman over the years, more than 7,000 are still active and the pace of new authorisations there continues to grow at an average of about 35 per week.