December 2024 | Legal Memoranda
Cayman Islands Mutual Funds
The Cayman Islands is the leading domicile for investment funds, attracting 80% of all new offshore fund formations. Cayman is estimated to house more than 75% of the world's offshore hedge funds and nearly half of the industry's estimated US$1.1 trillion of assets under management.
Conyers has extensive experience, acting as Cayman Islands counsel to several hundred significant asset management groups and investment funds, many of which are complex multi-fund structures, ranging from CIMA-registered hedge funds to private equity and venture capital funds.
Legal Services to Establish your Fund in the Cayman Islands
Working with Conyers’ fund advisers brings a level of service that goes beyond the initial set-up of your fund. We guarantee a personal approach that better understands your business objectives. With a team of fund specialists that combines decades of experience, we provide clients with the highest quality legal advice. Our team acts as offshore legal advisers for international and Cayman-based fund management houses and provides innovative solutions and advice to a variety of fund service providers including banks, administrators, custodians and managers.
Advantages of Cayman Islands Investment Funds
Cayman Islands is at the forefront of the investment funds sector largely because of the structural and operational advantages it offers, including:
- Political and economic stability
- No exchange controls restrictions
- Reputable professional service providers
- Abundance of expertise in the investment fund space
- Flexible legislation
- Cayman regulators are very approachable, flexible, innovative and efficient
- Cayman’s investment fund fee structure is globally competitive, which benefits the manager and the investor with respect to the launch and ongoing operation/ maintenance of the fund.
- Cayman is on the OECD “White List” and has signed tax information exchange agreements (TIEA) with 19 countries
- Tax neutrality
Cayman Investment Funds
The Mutual Funds Act governs the majority of hedge funds domiciled in the Cayman Islands. Our advisers are well-versed in this legislation, as well as the Cayman Islands Companies Act and can guide you through the process and the documentation requirements for establishing your fund in the appropriate category.
Open-ended/Regulated Mutual Funds
Open-ended funds that meet certain criteria of the Mutual Funds Act and are thus subject to regulation under CIMA‘s Investment and Securities Division may qualify to conduct business as a hedge fund, licensed mutual fund, an administered mutual fund, a registered fund or a master fund.
Closed-ended/Exempted Funds
For a closed-ended fund, an investor’s investment is tied-in for the entire life of the fund with no ability for them to redeem. A closed-ended fund is therefore suitable for investments which require a longer timeline over which to mature, such as private equity, venture capital, real estate or infrastructure investments. Closed-ended funds are not regulated in the Cayman Islands. They are a popular choice among private equity and venture capital firms who operate internationally.
Exempted funds are mutual funds that will not be required to be regulated by CIMA where there are no more than 15 investors, the majority of whom are capable of appointing and removing the directors of the fund.
This type of fund may conduct business without obtaining a license under the Mutual Funds Act, without appointing a licensed mutual fund administrator and without filing any papers with CIMA. However, a private mutual fund may elect to be treated as a regulated mutual fund.
Exempted Cayman Islands Investment Funds Vehicles
A Cayman Islands investment fund may follow one of the structures set out below. We can advise you on the most appropriate structure for your situation.
Exempted Limited Partnership (ELP)
A popular structure with private equity funds, the ELP offers a speed-to-market that makes it efficient and effective when establishing in the Cayman Islands. The ELP can consist of one or more general partners and one or more limited partners, as well as a corporation with or without limited liability.
Exempted Company
Formed in accordance with the Cayman Islands Companies Act, an exempted company’s business activities occur primarily outside of the Cayman Islands.
Segregated Portfolio Company (SPC)
A common form of an exempted company, the SPC structure allows a company to separate the assets and liabilities held within one portfolio from those held within another and/or from the general assets of the company not attributable to any particular portfolio.
Cayman Islands Unit Trusts
A unit trust is constituted by a trust instrument in the form of a declaration of trust made by the trustee alone or in the form of a trust deed executed by both the trustee and the manager. A unit trust will typically be registered in Cayman with the Registrar of Trusts as an “exempted” trust pursuant to Section 74 of the Trusts Act and thus obtain a tax undertaking from the Governor in Cabinet pursuant to Section 81 of the Trusts Act.
Cayman Islands Funds Guides
Featured Resource
Guide to Establishing Private Equity, Venture Capital and Real Estate Funds in the Cayman Islands
There’s a reason that the Cayman Islands is one of the world’s biggest and most attractive hubs for offshore financial businesses. Not only does it provide a stable, tax-neutral platform but also offers a sound legislative and judicial system, confidentiality, a leading banking sector and legal and financial professional and support services.
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Guide to Establishing Hedge Funds in the Cayman Islands
The Cayman Islands is a world leader in the establishment of offshore hedge funds. Its tax-neutral platform, stable economy, sophisticated banking sector, confidentiality and professional financial service industry are just some of the reasons the location is attractive to hedge fund managers the world over.
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