Do you think the regulatory requirements between jurisdictions – both on and offshore – will narrow? Will there be growing convergence between onshore and offshore documents and regulation of funds?

“There will always be differences between the approaches,” prosaically comments Henry Smith in the Cayman Islands office of Maples and Calder. Offshore hedge funds and their main service providers are already well regulated in the leading jurisdictions, he points out. “The success of the Cayman model means that other offshore jurisdictions gravitate towards a similar model. This does lead to a degree of convergence of regulation among the offshore jurisdictions,” he says.

However, Cayman Island laws are to some extent drafted to dovetail with onshore statutes. This has led to some convergence.

Jonathan Tonge at Walkers expects regulatory requirements between jurisdictions to narrow to the extent that there will be “growing convergence between onshore and offshore”.

At Conyers Dill & Pearman in the Cayman Islands, Tania Dons and Richard Finlay agree that offshore regulators will take a lead from the final form that regulation of funds and their managers in the major onshore jurisdictions will take.

In Bermuda partner Dawn Griffiths says it is inevitable that there will be a narrowing of regulation. “The challenge will be for offshore regulators to continue to apply the pragmatic approach to fund regulation that they have evinced in the past,” she notes.

Gray Smith at Appleby agrees the “gap is not that wide at the moment when analysed properly”. He says the trend where jurisdictions were keen to say ‘we are almost as easy to do business with as Cayman’ has changed overnight to ‘we are much more regulated’. “The idea that regulation is a cure-all is misconceived. We are probably at a high watermark right now,” he adds.

Ogier’s Simon Schilder in the BVI is certain “we will continue to see regulatory convergence both between onshore and offshore jurisdictions and also between offshore jurisdictions.” He believes the days of regulatory arbitrage are gone.

“We expect that all jurisdictions intending to participate on the top table of international finance will need to have in place laws and regulations that satisfy the new global standards demanded by regulators, financial institutions and investors,” he concludes.

His colleague Frances Watson in Guernsey agrees. “Documentation is beginning to converge particularly among law firms who operate in a number of jurisdictions. Regulatory convergence may be a byproduct of the present market conditions.”

At Sadis & Goldberg in New York, Ron Geffner takes a slightly different stance. “It is too early to determine whether differences between jurisdictions will narrow,” he says. “It is a function of survival of the fittest.”

In London the mood is different. Nora Bullock and Simon Atiyah at Lovells think a trend of ‘onshoring’ may develop as investors take more comfort investing in onshore structures and enhanced regulation and associated disclosure requirements. Managers are likely to have to adapt as a result, they say.

Simon Firth at Kaye Scholer also believes offshore centres “will have to become more regulated and transparent to access onshore markets and onshore markets will permit the sale of alternative products as a quid pro quo.”

“From a tax perspective, offshore jurisdictions have, of course, been popular because they offered tax-free gross roll-up of returns, although historically this has been limited by tax regimes such as the UK’s offshore funds legislation,” says John Langan at Withers.