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A five-point primer for investment success in the Cayman Islands

11 November 2022

Daniel Rewalt

Head of Capital Markets, Americas

Daniel Rewalt

Head of Capital Markets, Americas

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The Cayman Islands already acts for around 55% of the world’s hedge funds. Now private capital managers and family offices increasingly focus on it as a structuring jurisdiction.

With its highly regarded financial services sector and well-regulated, tax-neutral business environment, the Cayman Islands remains a leading offshore destination for fund managers worldwide.

Always well-known for banking, these days Cayman focuses its attention firmly on the fund market.

The jurisdiction has developed a financial services sector to support foreign investment, with a multitude of service providers based in the business centre of Grand Cayman.

There are great links with other important financial centres, particularly the US, UK and APAC. Managers that are used to dealing with New York, Hong Kong or London will find a similar style of service here.

1. Stay up-to-date with Cayman Islands regulations

The Cayman Islands has a rigorous legislative and regulatory regime and is a jurisdictional leader for anti-money laundering (AML) policy.

Public and private sectors work closely together to ensure a robust but responsive infrastructure that is fitting for a world-class financial centre.

As a result, legislation and regulation change regularly and managers must ensure their funds and entities remain compliant.

The Cayman Islands Monetary Authority is an internationally recognised regulator.

It works closely with the government, the industry and competent authorities globally to ensure a high level of transparency and reporting disclosure.

2. Make the most of the Cayman Islands’ investment-friendly infrastructure

The Cayman Islands has a longstanding reputation for financial, legal and professional services – its hedge fund industry has been active since the 1970s and its professional resources, infrastructure and legal framework are all well-established.

Although Cayman is generally perceived to be a hedge fund jurisdiction, it is a significant player in private equity, too, while family offices are also increasingly attracted to it.

The government has recently launched several initiatives to attract family offices, adapting local licensing provisions to make it more efficient for people to relocate.

The court system is based on English common law and can handle large litigation, so investors can be confident their money is in capable hands.

3. Understand the Cayman Islands’ tax structure

Cayman is a popular destination for international investors thanks to the ease of aggregating investment from around the world.

There is no corporate or income tax on money earned outside the territory, including interest or dividends earned on investments.

No direct corporate tax is applied if investments are structured through Cayman vehicles. All receipts to investors are gross and taxed in their respective jurisdictions.

4. Be aware of ESG requirements in the Cayman Islands

Another factor of growing importance on the regulatory side is the increasing demands for funds to comply with Environmental, Social and Governance (ESG) standards.

This is fast becoming a global phenomenon, with demands from regulators and investors constantly evolving.

A local partner can keep abreast of all the latest developments. Through our work with clients, we can provide market updates and advice on industry best practices.

5. Consider how to anticipate and manage costs

The costs of establishing and running a fund in the Cayman Islands will depend on the size of the fund, how active the fund manager is and how often the net asset value (NAV) is calculated.

General partners (GPs) and hedge funds should enlist the services of fund administrators whose costs are stable and easy to project. They should be aware of hidden costs that go unmentioned at pitches and clearly scope the requirements upfront.

GPs and hedge fund managers should also consider the economies of scale available through partnering with one service provider that can cover all the required elements end-to-end and offer the benefits of an international network if required.

How Intertrust Group can help in the Cayman Islands

Investors looking to the Cayman Islands may feel overwhelmed by the stringent, constantly evolving regulations.

Our Cayman team ensures clients can keep up with the pace of change in this dynamic jurisdiction through regular briefings.

Intertrust Group’s core service in the Cayman Islands is investment fund services. Our team can support in establishing funds by acting as a registered office and providing regulatory and governance services such as maintaining records, filings, FATCA/CRS reporting, regulatory compliance, AML and directorship services.

Why Intertrust Group?

  • Intertrust Group is a publicly listed company with more than 70 years’ experience providing world-class trust and corporate services to clients around the world.
  • We are experts in management and administration services to operational companies and holding structures across the globe.