Everything to know about Cayman Islands Investment Fund
The Cayman Islands is a top-most domicile for investment funds, drawing more than 80% of all brand-new fund development in the islands. On top of that, Cayman is home to the industry’s estimated US$1.1 trillion of assets under management and 75% of foreign hedge funds.
Legal service providers in the Cayman Islands have extensive experience to manage multiple investment funds within complex multi-fund structures from venture capital funds, private equity, and CIMA-registered hedge funds. In this write-up, we are going to discuss the benefits and types of investment funds in the Cayman Islands.
Benefits of Cayman Islands Investment Funds
The Cayman Islands is the first choice of investors due to its operational and structural advantages. Let’s learn more about its benefits;
- Economic and political stability
- No restrictions on exchange controls
- Reliable Service Providers
- Expertise in the investment sector
- Flexible Legislation
- Tax Neutrality
- Cayman Regulators are Innovation, flexible, and approachable
- Cayman’s investment fund fee structure is competitive
- The Cayman Islands is on the OECD “White List” and registered with tax information exchange agreements (TIEA) with 19 countries
Investment Funds of the Cayman Islands
The Mutual Funds Act dictates the majority of the hedge funds that are accommodated in the Cayman Islands. You can find advisers with years of experience in the legislation and the Cayman Islands Companies Act. They will guide you through the entire process, including the documentation for establishing your fund in the right category.
Types of Cayman Investment Funds
- Regulated/Open-ended Mutual Funds
Regulated funds meet various criteria of the Mutual Funds Act. They are subject to regulation under CIMA’s Investment, and Securities Division to conduct business as a licensed mutual fund, hedge fund, administered mutual fund, a master, or a registered fund.
2. Exempted Funds/ Closed-ended
For closed-ended funds, an investor’s investment is financed for a life with no convenience of redemption. Therefore a closed-ended fund is suitable for investments that require a more extended timeline to mature. This may include venture capital, private equity, infrastructure investments, and real estate. Moreover, closed-ended funds are not regulated in the Cayman Islands. They are a popular investment choice among venture capital and private equity firms operating in foreign countries.
Exempted funds are generally mutual funds that will not be expected to be governed by CIMA. Here, there are no more than 15 investors, the majority of which are proficient in dismissing or appointing the fund’s directors. This type of fund may administer business without obtaining a license under the Mutual Fund Act, without filing any paper with CIMA, or without appointing a licensed mutual fund administrator. Despite this, a private mutual fund is considered to be a regulated mutual fund.
Exempted Cayman Islands Investment Funds Vehicles
An investment fund may follow one of the structures given below. You can choose the most appropriate structure as per your circumstances.
Cayman Islands Exempted Company
Developed as per the Cayman Islands Companies Act, an exempted company runs its business primarily outside the Cayman Islands.
Cayman Islands Exempted Limited Partnership (ELP)
Being a famous structure with private equity funds, the ELP provides a speed-to-market that makes it practical and efficient while settling in the Cayman Islands. The ELP include one or more general partners with one or limited partners and corporation with or without limited liability.
Cayman Islands Segregated Portfolio Company (SPC)
SPC is considered a common form of an exempted company. The structure of SPC permits the company to separate its assets and liabilities retained within one portfolio from another portfolio or from the company’s general assets imputable to any definite portfolio.
Cayman Islands Unit Trusts
A unit trust is developed by a trust instrument in the form of a statement of trust created by the trustee or in the form of a trust deed performed by both manager and the trustee. A unit trust will typically be registered with the Registrar of Trusts as an exempted trust under Section 74 of the Trusts Act and thus receive a tax undertaking from the Governor in Cabinet following Section 81 of the Trusts Act.
Cayman Islands Investment Fund Advisors
Take advice from a professional adviser of a law firm in the Cayman Islands on fund formation and development in the Cayman Islands. They will also assist you in matters relating to contractual and constitutional documentation, registered office, administration services, restructuring liquidation, winding up of funds, and insolvency.
