Cayman Islands – Best Hedge Fund Services Jurisdiction

When it comes to representing the offshore hedge fund industry, the Cayman Islands remains the clear choice among practitioners and fund managers of all varieties. Its funds industry continues to do well. In 2013, for example, Cayman recorded a historical high of 11,379 funds. 

Crucially, despite fears over regulation in markets such as Europe such as AIFMD, and what impact this could have on offshore markets, last year the jurisdiction closed the year with 11,010 funds which still represented one of the highest year-end numbers historically.

“We expect that in tandem with the current growth of the global hedge funds sector, and barring any negative developments within the sector globally, that the Cayman Islands, as the lead player in that sector, will also continue to demonstrate similar growth going forward,” comments Jude Scott (pictured), CEO of Cayman Finance.

No offshore jurisdiction can afford to rest on its laurels. As Scott states, Cayman will continue to be guided by the needs of its clients, which are, naturally, determined in part by developments in the global financial markets. “The jurisdiction has always been flexible in terms of ensuring that our professional services infrastructure remains innovative and stands ready to service our clients,” he comments. “It is also key to continue to monitor the regulatory landscape and adjust our regime accordingly.”

A good example of how Cayman is taking a proactive stance to make the jurisdiction robust and in line with global regulatory standards is the decision by its financial regulator, the Cayman Islands Monetary Authority (CIMA) to introduce the Statement of Guidance for Regulated Mutual Funds (‘SoG-MF’).

In essence, the SoG-MF codifies and sets guidance on the minimum corporate governance standards required by operators of regulated mutual funds (directors, general partners) and gives the operators a clear understanding of their primary duties.

One of Cayman’s main attractions continues to be its professional infrastructure, being the high calibre of accountants, lawyers, fund administrators, non-executive directors and other professionals across a wide range of industry sectors.

Another main attraction, in Scott’s view, is the jurisdiction’s political and economic stability, “which is something that cannot be taken for granted in today’s global era. Finally, the success of our jurisdiction would not be possible if we didn’t strike the appropriate regulatory balance which ensures that we adhere to very high global regulatory standards to manage our risk, while maintaining commercial success,” he says.

One issue that managers continue to seek assurances on is how well placed offshore jurisdictions are to support their fund marketing activities in markets such as Europe. This is a critical issue now that the AIFM Directive is up and running.

“The Cayman Islands continues to prepare for the implementation of the AIFMD by passing legislation to facilitate the marketing of Cayman hedge funds across the European Union. For example, legislative amendments in recent years have enabled CIMA to enter into memoranda of understanding with its EU counterparts,” explains Scott.

On winning this year’s award, Scott says: “Cayman’s recognition as the best hedge fund services jurisdiction is proof that industry stakeholders continue to regard our model as best in class in respect of the global funds industry. We believe that this demonstrates that the jurisdiction continues its client-centric focus and that ultimately quality of service, backed by a well regarded professional infrastructure and a balanced approach to legislation and regulation, always wins.”