NETHERLANDS - A "considerable" number of hedge funds and other investment funds mare considering a move to the Netherlands, in order to benefit from the new tax-free investment vehicle VBI, suggest industry experts.

Ate Veenstra, of legal, fiscal and regulatory advisors Clifford Chance told IPE: "Based on the cases we are working on, informal information from competitors and other market players, between 15 and 20 hedge funds are planning to move at least their legal base to the Netherlands. It could double the present numbers in the country," he said.

Veenstra is predicting the VBI will also raise interest from institutional asset pools, as well as investment funds for which taxation at source is not important, such as fixed income funds.

According to Veenstra, institutions said to have the most concrete plans represent assets worth billons of euros.

"Of course, time will tell how popular the VBI will become. But I am already noting that many clients prefer a ‘real country', instead of a special purpose offshore jurisdiction, if they have a choice," he added.

In Veenstra's opinion, using a VBI is more attractive than registering as a Luxembourg SICAV because it does not require a permit or regulatory supervision if the deposit is more than £50,000 and if it applies to the rules for exemption.

"Moreover, the VBI has no rules for mandatory use of national services, such as management and fiduciary services," he explained.

A pooled fund of international development banks will be the first financial vehicle next month to gain VBI status. At least 15 banks will hedge their assets - in approximately 20 African currencies - against currency risks, said Maria Verheij, spokeswoman for Dutch bank FMO, which is leading the initiative.

According toVerheij, US$300m has been raised so far for the currency fund but its ultimate target is US$500m.

Sylvia Dikmans, fiscal adviser at Loyens & Loeff, said she is also negotiating with Dutch banks and institutional investors to set up feeder funds for investment in foreign property funds, as a VBI.

"Luxembourg would have been the base for this kind of business," Dikmans stated. "Although it isn't likely that the Dutch institutions are pulling back all their foreign funds, it seems the exodus has been stopped," she added.

Dutch parliament recently approved the VBI, which is meant to improve the Netherlands' attractiveness as a base for investment institutions, by making them exempt from profit-related taxes, such as corporate income tax and dividend withholding tax.

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