Jersey could imitate the US state of Connecticut by attracting hedge fund managers seeking the benefits of a more relaxed lifestyle and improved quality of life, according to officials and financial sector practitioners based on the island.

Since the end of last year, Jersey has been looking to attract managers looking for an alternative base to London and the 'home counties' of South-East England by promising to cut the usual red tape involved in obtaining residence and work permits and business licences.

So far three hedge fund managers with assets totalling USD900m have committed themselves to relocating to Jersey, and their principals are expected to make the move over the next few weeks, while another five firms are weighing up a decision.

Last April Zbigniew Hermanaszewski and his three partners in Altis, a USD114m managed futures fund with a four-year track record, announced they would relocate to Jersey in the summer. Hermanaszewski says the decision to quit London was prompted by concern over tax levels and the capital's "creaking infrastructure".

On the positive side, he told delegates at the recent annual conference organised in London by promotional body Jersey Finance, the island "is a well-regarded financial centre, it is offshore but not foreign, it has a simple low-tax regime and good communications. But perhaps most important are intangibles such as quality of life."

According to Jersey Finance chief executive Phil Austin, the organization launched the initiative with the Jersey Funds Association in response to indications that a number of hedge fund managers were no longer happy being based in the UK and were looking at alternatives such as Geneva. "We became aware that a number of hedge fund businesses were looking to move away, predominantly because of personal and corporate taxes, and they wanted to move to another well-regulated jurisdiction," he says. "But ltimately the deciding factor was lifestyle for themselves and their families. We haven't gone out of our way to provide incentives such as tax holidays, we've just made it a lot more welcoming and less bureaucratic."

One cheerleader for the island as a centre for alternative investment management is Ian Cadby, chief executive of Jersey-based Liberty Ermitage. The firm, Europe's 10^th largest fund of hedge funds manager with assets of USD4bn, set up its first hedge fund in Jersey in 1984.

"Connecticut should be the model for Jersey," Cadby says. "It ticks all the same boxes - its proximity to markets and research, the clean tax structure, and the improvement in quality of life over London or

New York."

Richard Boleat of Channel House says there is a tax imperative to move if one or more of a fund manager's principals is not domiciled in the UK. "The tax treatment of earned income of non-domiciled individuals in the UK is significantly less attractive as a result of an Inland Revenue policy change," Boleat says, adding: "There's also a desire for those from an Anglo-Saxon or common law background to remain in a legal environment they understand and are familiar with."

Ogiers' Nick Kershaw believes Jersey could quickly achieve critical mass as a hedge fund community. He says: "If we see a few more people coming to Jersey, that could be the beginning of a snowball effect.  That doesn't necessarily have to be the whole operation - it could be just part of their functions.

By Simon Gray