By David Christian Woodruff 

From Zedra

AUTHOR: Mairi Whitworth

The Cayman Islands have a solid reputation for being a principal offshore jurisdiction for establishing investment funds. The Cayman Islands Monetary Authority (CIMA) reports more than 10,800 funds – mostly hedge funds – registered with their body so far in 2018. Cayman is also home to a large number of private equity and closed-ended alternative investment funds but these are not obliged to register with CIMA.

What remains clear is the popularity of Cayman. The jurisdiction offers investors a flexible fund regime in a regulatory environment that is both competitive and transparent, and the fund registration process is quick and straightforward. Cayman also holds firm appeal for investors because they can take their pick amongst the highly-qualified and experienced firms and workforce providing accounting, administrative and legal services, and they can work with internationally recognised banks. Another attractive feature is that Cayman doesn’t restrict certain aspects of funds, the jurisdiction is open to varying types of investment objective, trading strategies and diversification limits. As long as the funds operate within the boundaries of the regulatory framework and such commercial matters are disclosed in the fund’s offering document (along with the respective risk factors) it can mean that Cayman isn’t as limiting as other jurisdictions, making it more adaptable – and appealing. Features such as these have also supported Cayman’s reputation as an ideal jurisdiction for wealthy individuals and their families wishing to establish private funds.

‘Cayman funds offer a multitude of appealing characteristics,’ says Ivo Hemelraad, Group Director, Corporate, Funds and Legal. ‘Clients with Cayman funds can profit from our bespoke services and ZEDRA’s ethos that we provide not only a great service but added value: be that through sharing our expertise, our understanding of the global fund industry or simply our ability to offer increasingly complex governance solutions.’

The Cayman fund industry has a reputation for being forward-thinking and pragmatic in the way it approaches its regulations and policies, which adds to its attractiveness for investment funds. ‘This is underlined by elements like the speed with which it’s possible to register and launch a fund – Cayman provides a regulatory and legal environment for funds that is reputable, speedy and not unduly complicated,’ says Ivo.

Cayman is perhaps most strongly associated with hedge funds, but the island is also ideally suited for other fund structures, such as real estate and private equity funds. For whatever the type of fund is being set up, however, the right service providers are essential.

As a fund administrator, it is ZEDRA’s role to oversee the daily operations of the fund, and undertake the accounting work needed to determine the Net Asset Value (NAV) of the fund, typically manage the opening of a bank account, maintain records and gather the appropriate due diligence on the fund’s investors for reporting obligations.

‘Although it isn’t mandatory for Cayman funds to appoint an administrator, there are benefits for both investment managers and investors to work with one,’ adds Ivo. ‘As fund administrators, the work ZEDRA performs is key to all parties as we make sure the fund is running as it should from a governance perspective, and we’re an impartial agent handling NAV calculations.’

For most fund managers, when appointing an administrator, they are most interested in the team’s expertise, skill and service mindset when it comes to preparing the NAV calculations as well as their ability to oversee day-to-day administrative matters. However, other factors are in play, too. ‘In a broader sense, we’re seeing investment managers who want to work with an administrator that understands the complex legal and regulatory fund landscape at a global level, not just within the confines of Cayman,’ says Ivo. ‘With our global outreach and award-winning team, ZEDRA is ideally placed to meet – and exceed such expectations.’

For more on this story go to: https://www.zedra.com/newsletter_article/why-the-cayman-islands-are-a-top-jurisdiction-for-funds/#modal-search