The offshore mutual fund industry will continue to grow even though it is under attack from other jurisdictions, speakers at a conference said yesterday.

Paul Schreiber, a partner at New York-based Shearman & Sterling, said while tax relief still remained as a reason for mutual funds to locate in offshore jurisdictions like Bermuda, less regulation and confidentiality remained important factors helping growth.

He was speaking at the opening session of one-day The MAR Annual Conference on Offshore Funds being held at the Southampton Princess.

Mr. Schreiber contended that in fact many mutual funds were set up offshore because they were not regulated so closely as they are in the US and Europe.

The US, for example, imposes limits on how much leverage a fund can use as part of its strategy.

"In the offshore world you can leverage as much as you want in terms of how much the banks will allow you to borrow,'' he said.

The main concern among speakers, was not so much the greater scrutiny being put on the offshore industry by onshore governments, but the downturn in the world's stock markets.

Fund managers are concerned that many investors will pull out of their investments in a panic, leaving them with the prospect of failure.

"There is an increased possibility of investor redemption,'' Mr. Schreiber said.

Jerry Harris, senior vice president of California-based Welton Investment Corp., said the downturn has meant many investors are waiting to see what will happen before putting money into the markets. Capital has dried up.

"The big sucking sound is capital vaporising from a lot of the investment allocations,'' he said. "The other shoe is about to fall at the end of the year when investors start giving notices of redemptions.'' He said managers would have to give investors more information on how their mutual funds are being run, offer more liquidity and give them lower prices in terms of fees. "We need to provide more service and to be proactive in providing education and maintenance,'' he said.

BUSINESS BUC