Bermuda continues to lose out to the Cayman Islands as a hedge fund domicile, industry insiders at a two-day conference on the Island heard yesterday.

Some 600 high net-worth investors and fund managers, as well as fund administrators who provide support services to the trillion-dollar industry were on the Island Monday and Tuesday for the annual MARHedge World Wealth Summit at the Fairmont Southampton.

In a special session on offshore domiciles yesterday, an accountant, a lawyer, a fund administrator and an industry consultant broke down the attributes of several offshore domiciles ? Bermuda, Cayman, British Virgin Islands and the Netherlands Antilles (Curacao) ? for a hedge fund audience.None of the panel participants were based in Bermuda or the Cayman Islands,while B.V.I. and Curacao were each represented by residents.

Boris Onefater, who is based in New York as national director of accounting giant Deloitte & Touche?s hedge fund practice, said while there were only minimal differences between Bermuda and the Cayman Islands, the latter continued to attract the bulk of hedge fund incorporations because the industry?s US lawyers are in the habit of recommending it.

Although data is sketchy on the level of assets offshore hedge funds have under management, the Cayman Islands Financial Services Association in June said that the jurisdiction was grabbing eight out of every ten hedge funds in the world.

The number of hedge funds ? privately owned, cash-rich investment vehicles boasting high returns ? has doubled in recent years bringing funds under management to more than $1 trillion.

?In many respects Bermuda and the Caymans are very similar jurisdictions,? Mr. Onefater said, dating back 30 years when both attracted hedge funds as the then fledgling industry got off the ground.

By now, he said, Cayman easily attracts 45 percent to 65 percent of all funds registered. ?Bermuda is not anywhere near that,? he said.

Bermuda and the Cayman Islands both boast educated work forces, friendly tax regimes, strong communication structures (although Bermuda?s is stronger because it is no longer under a monopoly structure), and have proven they can recover from devastating hurricanes, Mr. Onefater said.

Both have the handicap of restrictive immigration policies, he added, although Bermuda is seen, between the two jurisdictions, as having the stricter policies on expatriate work permits.

But law changes are easier to get through in the Cayman Islands, according to the panel.

Members of the panel said lawyers have more ?pull? with legislators, and can act within as little as a week if legislation is needed to protect the jurisdiction?s advantage as a hedge fund domicile.

Bermuda?s legal amendments, it was said, take time because of ??over-consultation? and consideration, as well as the time it takes for Government?s weigh-in. Collective investment scheme legislation was cited as an example with Bermuda having worked, but not yet enacted, this promised law, after several years working on it.

Bermuda lawyers, it has been complained, want to give a legal opinion in contrast to their Cayman counterparts who do little more than formally sign off on the work of a New York lawyer representing the hedge fund manager or founders.

In May, 2004, Joel Press, a senior partner with Ernst & Young in New York and head of the top four accounting firm?s global hedge fund practice, said during a Bermuda address: ?Cayman lawyers don?t try and put their own print,? on contracts, and praised an ?efficient sign-off process?.

He said other domiciles had a ?pretty cookie-cutter? legal approach, but Bermuda lawyers often wanted to add input that proved to be of little value. And he said regulatory approval also took longer in Bermuda than it did in the Caymans.

Earlier this year Government announced it was cutting the red tape surrounding investment funds setting up on the Island, in a bid to ?streamline processes and pare down unnecessary bureaucracy?.

Government?s steps, which followed a lengthy consultation with industry stakeholders,were likely taken in a bid to attract greater business from the mutual fund and hedge fund sectors.

The net effect of the change is that funds incorporating in Bermuda no longer need the Minister?s permission to get up and running, and they no longer have to go through the full classification process before incorporation. The changes moved Bermuda?s approach in line with rival offshore domiciles like Cayman.

But yesterday Bermuda continued to be cited as the jurisdiction where hedgefunds find it takes the longest to get off the ground.

One domicile, the Netherlands Antilles, was said to be able to incorporate new funds in as little as a day, according to Mai Liem, legal officer for SS&C Fund Services NV.

Curacao-based funds also have more choice in service providers with outside audit and administration firms cleared to work with funds in the jurisdiction. Restrictions in the Cayman Islands mean a local accountant must be retained for the fund?s audit, and Bermuda requires that a local fund administrator be used, according to the panel.

Ms Liem said the country, which is a Dutch territory, has never been blacklisted as a tax haven, offers lower costs and restrictions than rival domiciles and was ?expat friendly?. The country is an associate member of the European Union.

One member of the audience said despite the advantages of each domicile, it was a foregone conclusion in many hedge fund circles that Cayman would be the choice.Tony Stocks, a managing partner with Tennyson Capital Advisors LLP in London, said: ?Bermuda never quite managed to grasp the crown that should have gone to it.?

He described the Island as ?delightful? in comparison to Cayman as a ?mosquito-infested swamp with lovely people on it?.

David Sims, director and founder of BVI fund administrator Beacon Fund Advisors Ltd. said lawyers were driving the Cayman incorporations.

?Basically it has been the path of least resistance. Lawyers want to know [the incorporation details] are taken care of, and they don?t want resistance.?