The Caymans is fairly a first-choice hub for worldwide administrated private equity, hedge and hybrid funds due to its low taxation rates, flexible structuration options, and its flourishing financial services sector. Also, this overseas territory of the UK is recognized as a beneficial place for investing vehicles due to its combined common law and statute-based legal system based heavily upon English law and absence of political or sovereign issues. Investment funds in the Cayman Islands are highly popular facilities for foreign investors; the jurisdiction is known to house over 75% of the world’s offshore pooled funds and approximately 50% of the industry’s assessed 1.1 trillion USD of assets under administration.
Main peculiarities of Investment Funds
The Caymans is now at the cutting edge of the investment vehicle sector largely due to the organizational and operational benefits it provides, including:
- Stable political and economic environment;
- Reputable service providers;
- Flexible legislation;
- Approachable, innovative, and efficient business environment;
- Cayman is not blacklisted by OECD and has signed tax data exchange negotiations with 19 countries;
- Status of tax-neutral country, meaning that the fund structure does not lead to a duplicative layer of taxes.
Types of investment facilities in the Caymans
The lion’s share of pooled funds domiciled in the Caymans is under the regulation of the MFA. According to this law, there can be formed the below-mentioned funds:
Open-ended/Regulated Funds
Funds that satisfy certain criteria of the law and thus are under the regulation of CIMA; they may be qualified to carry out business in the form of a hedge, licensed collective, registered, administered collective, or master funds.
Closed-ended/Exempted Funds
Another type, close-ended funds, are structures where money is fixed for the entire life of the fund with no possibility to redeem them. Accordingly, such a structure is perfect for contributions that need a prolonged period over which to grow. However, for exempt funds, there is no set regulatory framework in the Caymans. They are a widespread choice among venture capital institutions that operate at a trans-border level.
This class of fund may carry out business without acquiring a license, employing a manager, and submitting any documents to the regulator. Nevertheless, a private fund may choose to be deemed a regulated one.
Forms of Investment Facilities
There are 5 types of facilities that are applied by investors in the Caymans for the structure of exempt funds:
- LLC;
- exempted firms,
- SPC,
- LP, and
- trusts.
The appropriate type, or merge of several of them, for an alternative fund structure, will be defined by some aspects, including the target group and strategies, as well as the possibility to copy the conditions of investments across many forms in the structure.
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