Are the Cayman Islands gaining or losing interest as a fund domicile?
Interest in the jurisdiction is only growing. With ever-increasing regulation of the industry, generally emanating from European or global bodies and initiatives, the Cayman Islands has singled itself out as a highly trusted jurisdiction that is not only compliant with international standards but, in certain respects, is “gold standard.”
What is the attraction compared with other domiciles?
The Cayman Islands is a highly respected, mature offshore jurisdiction – both sponsors and investors like the fact there is no ‘re-inventing the wheel’ in terms of legal structures when they choose a Cayman Islands fund structure. The Cayman Islands offers a well-trodden path to launching a fund.
What is the fund structure of choice?
The fund vehicle of choice is the Cayman Islands Exempted Limited Partnership, but we have seen increased use of the Cayman LLC (introduced in 2016) for carry vehicles and GPs. There has also been a spike in the use of parallel funds (often established in Luxembourg) in order to most simply and cost-effectively market the same fund strategy to European investors.
Which investors does it appeal to?
While US persons can invest in Cayman Islands vehicles as a matter of Cayman Islands law, onshore tax rules often make Cayman Islands vehicles most attractive to non-US and US tax exempt investors. Institutional investors are very familiar with the jurisdiction and appreciate its maturity, and the fact it is serviced by world-class industry experts and compliant with global regulatory standards.
What is its weakness/downside compared with other domiciles?
Standalone Cayman Islands funds are not appropriate for non-European sponsors looking to actively market their fund in Europe. Instead, they might be better suited to the Cayman-Luxembourg parallel fund structure.