Bermuda, a tiny archipelago outcropping in the mid-Atlantic 590 miles east of North Carolina, is only a speck on the world map. On a global economic scale, however, Bermuda has long been recognised as a leading offshore financial centre. International business now contributes greater than 50% of Bermuda's GDP, allowing Bermuda to have one of the highest incomes per capita in the world.

Bermuda has also emerged as one of the leading centres for the establishment of offshore mutual funds, with several hundred mutual fund companies registered, in addition to unit trusts and limited partnerships. Bermuda attracts international business because of its stable economic and political environment, excellent communications, secure legal framework for financial and insurance operations, favourable tax structure, and the quality of service of its financial institutions.

There are many reasons for the continued and growing popularity of Bermuda as an offshore business centre including:

  • easy accessibility through major gateway airports;
  • its strategic geographic hub position between the US, UK, Europe and the Caribbean;
  • convenient Atlantic time zone (one hour ahead of Eastern Time Zone);
  • a stable, democratic British Dependent Territory governed by the United Bermuda Party, in power since 1968;
  • a legal system based on British Common Law;
  • an advanced telecommunications system; and
  • a pristine physical and economic environment.

Bermuda is a member of the Organisation for Economic Cooperation and Development (OECD), through its relationship with the UK as a dependent territory and has Designated Territory Status under Section 87 of the UK Financial Services Act 1986.

These factors, combined with its strong and highly regulated and professional infrastructure consisting of advanced banking, trust and investment services, and the absence of income or capital gains tax for exempt companies, serve to make Bermuda an extremely attractive location for establishing an exempt corporate entity.

Bermuda has an excellent professional infrastructure with each of the big five accounting firms present. A wealth of legal counsel is also available with in excess of 150 lawyers, most of whom specialise in international company activity. These professional and banking firms are members of the Bermuda International Business Association (BIBA) which plays a major role in preserving Bermuda's integrity, competitiveness, and working with the Government to ensure growth through quality and non burdensome regulations.

Butterfield Corporate Services Ltd (BCSL) is a wholly owned subsidiary of The Bank of N T Butterfield & Son Limited (BNTB), established in 1858 and Bermuda's first bank. Incorporated in 1970, BCSL provides full administration services primarily to offshore mutual funds. BCSL's long standing relationship with a particular fund dates back to 1969 and we are proud to continue to serve this client. The investment fund industry in Bermuda began in the late fifties with the formation of the Bermuda's first mutual fund. The three Bermuda banks have played a primary role in the progressive evolution of the mutual fund industry in Bermuda. Bank of Butterfield has nine of its own internally managed fund products, marketed in Bermuda and abroad. The Bank's proprietary money market fund, which several of our third party fund clients use for cash management was awarded Micropal's first prize as the best performing money market fund over the last five years in the offshore group (which includes 91 other offshore money market funds). This AAA rated money market fund is managed, invested and administered solely by Butterfield personnel who reside in Bermuda and the custody, accounting and all other services are provided by BCSL. BCSL also provides administration services to the other Bank of Butterfield proprietary funds as well as to third party funds. In addition to Bermuda, administration services are also available in Butterfield's Cayman, Hong Kong and Guernsey offices.

The formation and operation of mutual funds in Bermuda is predominantly governed by the 1981 Companies Act. The principal body responsible for the regulation of mutual funds is the Bermuda Monetary Authority (BMA). All applications to incorporate companies must be reviewed by the BMA. If the funds' shares are to be offered to the public, the prospectus or offer document must be submitted to the BMA for review. The BMA, in conjunction with Bermuda mutual fund service providers created a Code of Conduct for Collective Investment Schemes in December 1994, which provided a formal summary of existing standards and criteria pertinent to the creation and operation of mutual funds in Bermuda, with a view to protecting the interests of the shareholders and the reputation of the jurisdiction. The Code was formalised in Bermuda's Collection Investment Scheme Classification Regulations, 1998.

BCSL's administrative services for offshore funds, unit trusts and other invest-ment vehicles include corporate and general administration, shareholder services, registrar and transfer agent, valuation accounting and reporting, company secretarial services and management company services, directorships, custody and cash management. We also offer, through a BTNB subsidiary, sponsorship services for Bermuda Stock Exchange listings.

The funds, which BCSL administers, comprise closed and opened-ended unit trust and investment companies both quoted and unquoted. The types of investments are widely varied covering everything from money market instruments to hedge funds, commodities and futures and to more traditional bonds and equities.


The Bermuda Monetary Authority (BMA) regulates mutual funds primarily by ensuring, at the formation stage, that certain pre-conditions of published policies are complied with. In addition, a prospectus law requires ongoing annual complying prospectuses to be filed with Bermuda's Registrar of Companies, although a fast-track procedure exists where funds are listed on certain of the major recognised world exchanges. Material changes in the particulars mentioned in a registered prospectus must be published in supplementary form and filed with the Registrar of Companies.

A mutual fund industry code of conduct was introduced in December 1994 to consolidate many existing standards and procedures. Bermuda offers an optional set of funds regulations which grant standards of investment protection and regulation deemed by the UK to be equivalent to those applicable in the UK and which, if chosen, enable Bermuda open-ended companies to be promoted to the general public in the UK. This does not, however, afford access to the "Single Passport" UCITS Directive in the EU, only access to the UK market itself. It does, however, gain access to a fast-track approval procedure by Hong Kong's Securities and Futures Commission for approval for distribution in Hong Kong.

A Code of Business Practice and Standards of Professional Conduct for Investment Advisors dealing with the general public in Bermuda was promulgated by the Bermuda Monetary Authority in late 1993. This Code, however, does not apply to mutual funds themselves, only to investment advisors actually dealing with the public in Bermuda.

Bermuda's Minister of Finance in early 1994 announced that additional securities laws would be passed to regulate investment advisory and management activities in Bermuda, responsive to the needs of the private sector which is seeing more and more investment and dealing activity handled from a Bermuda base. The investment advisors' Code is, therefore, seen as an interim step only.

One of the keys to Bermuda's success as a mutual fund jurisdiction is the close relationship which exists between the Government and the private sector. Historically, both parties have worked as partners in the development of the industry. For some time, Bermuda has demonstrated that its regulatory framework is effective and workable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to