Cayman funds gain access to German investors

Unlike some other popular private equity domiciles, funds based in Cayman can now use Germany’s private placement regime.

Cayman Island officials signed a cooperation agreement with Germany’s securities regulator permitting fund managers domiciled on the island to continue marketing in Germany via its private placement regime.

The agreement, signed on Thursday, comes in the wake of the Alternative Investment Fund Managers Directive (AIFMD), which requires non-EU jurisdictions to adopt certain provisions or apply regulatory measures equivalent to the directive or risk barring their local GPs from accessing EU investors.

The agreement comes in the form of a memorandum of understanding (MoU). The content of the MoU was agreed with pan-European securities regulator the European Securities and Markets Authority (ESMA) back in May.

The MoUs will give both EU and non-EU regulators permission to supervise fund managers that operate on a cross-border basis both within and outside the EU. National regulators will also share information, conduct on-site visits and assist one another in enforcing securities laws.

The Cayman Islands has now signed agreements with 27 EU member states but is still waiting to sign MoUs with Italy, Slovenia and Spain.

Two other major private equity domiciles, Bermuda and the British Virgin Islands, have yet to sign an MoU with Germany, meaning funds domiciled in these jurisdictions are unable to market to German investors via the private placement route.