Beyond the operational and administrative advantages, sophisticated investors, as well as fund service providers are taking advantage of the premium services and advisory expertise offered by the jurisdiction. Its fund legislation and regulatory regime continually evolve to meet market demand and its appeal as a stable British dependency with a judicial system underpinned by English common law, in addition to its tax-neutral regime, has earned a strong reputation among global investors.
For the last 25 years, the Cayman Islands has continued to be the jurisdiction of choice for the formation of alternative investment funds, with approximately 13,000 regulated open-ended funds and 16,000 regulated closed-ended funds in place to date.
Cayman Islands investment funds – the advantages
Today, with a multitude of structural and operational efficiencies, the Cayman Islands is at the forefront of the global investment funds landscape Indeed, the offshore jurisdiction offers unparalleled advantages for the funds industry, including:
- reputable professional service providers
- political and economic stability
- no exchange controls restrictions
- extensive expertise in the investment fund space
- flexible and commercial legislation
- the Cayman Islands Monetary Authority (CIMA) is recognized as approachable, flexible, innovative and efficient
- a globally competitive fee structure for investment funds, benefitting both investors and managers for fund launch, ongoing operation and continued maintenance
- the Cayman Islands is on the OECD “White List”
- tax neutrality.
Why U.S. funds turn to the Cayman Islands
The Cayman Islands is domicile to approximately 80% of all new offshore fund formations which span a multitude of fund types. The jurisdiction is particularly desirable for U.S. based funds with over 65% of all Cayman-domiciled funds being managed by a U.S. investment manager.
As expanding U.S. funds seek to grow their investor bases and pursue new investment strategies, Cayman Islands-based fund structures can provide access to alternative pools of global capital.
Ease of setup
The Cayman Islands offers regimes that cater to all types of entities, both regulated and unregulated. With a rapidly growing number of global law firms, as well as entities such as Cayman Enterprise City, fund service providers benefit from a straightforward set up process when establishing their businesses in the jurisdiction. Support from the Cayman Islands Department of Immigration coupled with the pragmatic and timely responses of the local regulator, the Cayman Islands Monetary Authority contribute to the ease with which investment management and administration firms establish entities in the Cayman Islands.
Cayman Islands fund platforms
Increasing set up costs, combined with high operational and compliance/governance costs, has resulted in many emerging hedge and digital asset fund investment managers electing to opt for cost efficient alternatives in the form of regulated fund platforms in the Cayman Islands.
Several local service provider firms offer emerging managers the ability to launch investment vehicles using a pre-existing Cayman Islands-regulated fund platform. These platforms provide a pre-authorized set of high-quality services providers, including a local regulated Cayman Islands investment manager, all of whom have been selected to provide the required on-going support to fund managers globally.
The benefits for emerging managers are low set up costs and the ability to outsource their operations to an experienced firm, leaving managers to focus on raising capital and building an audited track record for their fund.
A skilled financial services workforce
The financial services industry in the Cayman Islands has attracted a diverse pool of talent from around the world. Many professionals in the financial sector bring international expertise gained from working in major global financial centers, contributing to the depth of knowledge and experience within the local workforce. Access to high-quality training and education, global networking opportunities, career development and competitive incentives, make this a unique working environment.
Additionally, those professionals working within the remit of the Cayman Islands’ high regulatory standards are trained to meet rigorous compliance and regulatory requirements, fostering a culture of professionalism, accountability, and expertise within its workforce.
Cayman Islands banking solutions for the asset management industry
The Cayman Islands is considered a world leader when it comes to providing banking solutions, ranking globally as the 5th largest financial center. Cayman Islands banks hold approximately US$750Bn in deposits and three-quarters of the world’s hedge funds assets.
Adam Rossiter, COO FundBank, comments, “At FundBank, we have seen a steady increase in funds redomiciling to the Cayman Islands seeking banking solutions as well as an increase in local trust structures. Growing numbers of investment managers and administrators are looking to set up their operations in the Cayman Islands, in order to benefit from its advantageous business environment, particularly within the hedge fund industry. Complemented by well-established legal and audit firms, the Cayman Islands has a long-standing reputation as a dominant finance hub for the funds industry.”