Cayman Islands Hedge Funds Group
The Cayman Islands is the principal offshore jurisdiction for hedge funds. It is attractive as a domicile for funds because it is supported by a fully-developed business law, an English-based legal system and a regulatory and professional infrastructure capable of implementing large and complex international business transactions.
In 2017, 822 Cayman Islands open ended funds were registered with the Cayman Islands Monetary Authority. We acted for 308 of these through our worldwide offices, with the managers spread broadly across the globe, with particular concentrations in North America (46%), Europe (25%) and Asia (25%). The funds launched covered a wide range of strategies with Equity Long-Short (42%) and Fixed Income (20%) predominating.
- Our Cayman office focuses primarily on the North American market and also houses our Latin American Group, which provides investment on all aspects of investment funds.
- We have significant expertise in relation to Shariah Law compliant hedge fund products, in particular in our Dubai office.
- Our Hong Kong and Singapore office funds group has particular expertise in hedge fund products preferred by Asian investors, such as unit trusts.
- Our London office primarily services the need of our European based clients. It is at the forefront of developments affecting investment funds under the European Union Alternative Investment Fund Managers Directive.
Setting up a hedge fund in the Cayman Islands offers...
- Speed and simplicity of establishing Cayman Islands entities
- Relatively low cost of doing so, particularly in the context of typical transaction sizes
- Flexible and practical business statutes
- Cayman Islands insolvency law is simple and effective, and hence of great appeal to lenders
- Robust and healthy compliance culture
- English-based legal system, established judiciary and absence of political or sovereign concerns
- Professional infrastructure and reputation. The Cayman Islands is well-known for its established and experienced financial services sector and substantial capacity
- Compliance with international anti-money laundering, anti-terrorist financing and other financial regulatory standards
- Significant number of international tax information exchange agreements and OECD ‘white list’ status
- Tax and exchange control neutrality
- Requirement for a regulated open-ended Cayman Islands fund to have its audit signed off by an accounting firm located in the Cayman Islands. The other service-providers to the fund (investment managers, advisers, brokers, administrator, etc.) may be located anywhere in the world
There are three main hedge fund structures:
Companies. Companies are invariably incorporated with limited liability, with open‑ended investment companies issuing redeemable shares. The limited liability company is widely used for hedge funds.
Unit Trusts. The unit trust has been a popular vehicle for many years and Cayman Islands trust law essentially follows English trust law whereby unit trusts are established under a trust deed giving unit holders undivided beneficial interests in the trust property. Unit trusts are often used (in place of companies) for holding investors in jurisdictions where participation in a unit trust is more acceptable or attractive than shares in a company.
Exempted Limited Partnerships. The exempted limited partnership concept tracks its Delaware equivalent and is therefore very popular with United States promoters and their advisers. Closed-ended/private equity funds are most commonly established in the Cayman Islands as exempted limited partnerships (see Private Equity Funds).
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In 2017 we acted on 37% of all CIMA registered funds. That level of Cayman Islands market experience is unmatched, and we use insights gained for the benefit of our clients.