Fund Domiciles

The fund management industry in Bahrain can trace its origins to the mid 1980s, with the first locally established funds going back as far as 1984. Today there are over 2,636 funds authorised for distribution in Bahrain with assets of over $20 billion. Assets under management by Bahrain's mutual funds industry surged by nearly 115% to $20.14 billion during the period from June 2007 to June 2008, according to Central Bank of Bahrain (CBB) statistics.

In comparison, the number of registered funds as at June 2007 was 2,374, with assets under management totalling $9.37 billion. And at the end of 2002 there were 1,377 funds in Bahrain, with assets of $4 billion. Amongst the funds that are registered in Bahrain are 57 hedge funds. There are also a number of the organisations that providing custody and fund administration that have operations in Bahrain. The latest to start is Citibank. Apex, the specialist alternative fund administrator, also has recently opened an office in Bahrain.

The most recent update of Bahrain's regulatory position came in mid 2007. The CBB revamped the CIU regulation, recognizing the importance of addressing key areas such as transparency.  This is an acknowledgement to the fact that investors are becoming more conscious of the necessity for CIU products to be transparent. The regulations also catered for expert schemes as well as developments on the retail side of the market. The new regulations also created a category of professional, or accredited investor, under an exempt scheme. So now hedge funds or other similar vehicles can be launched from Bahrain. Funds can be set up as an investment trust or SPV. Also last year's regulatory changes created a category of Shariah compliant funds and there are now 99 of these vehicles, with $0.5 bn in assets in Bahrain. "This is the highest concentration of Shariah compliant funds in the world," says Abdul Rahman Mohammed Al-Baker, Executive Director of Financial Institutions Supervision in Bahrain.

Of the total assets of the fund industry, assets of foreign funds registered in Bahrain for sale rose 134 percent to $13.34 billion in June 2008, compared with $5.69 billion in June 2007. The number of such funds totalled 2,502 in June 2008, compared with 2,266 in June 2007.

"We are observing a growing interest from regional specialized financial institutions that are actively involved in the structuring of mutual fund products in particular.  While many of which are focused on investments based in the region, they find an added value in utilizing the Bahraini CIU regulatory framework for the establishment of their CIU investment vehicles.  This is due to the fact that the Bahraini CIU domiciled vehicle has established a reasonably tested track record for its efficiency and suitability", says Mohammed Ayman Al Tajer, Director, Financial Institutions Supervision, at the CBB.