Last weekend, I read an interesting article in the Wall Street Journal entitled A Global Economy Needs an Offshore Industry.
The article focuses on the important (but commonly overlooked) role that the industry plays in enabling global economic development. As the article states:
“If you believe globalization is a driving force behind economic growth, then it’s worth understanding how this system is enabled. Offshore structures and services perform crucial functions, including reducing cross-border “friction-costs” and facilitating the flow of capital. To put it simply, the offshore industry serves as the wiring of our modern, integrated economies.”
This is clearly not the easiest of messages for our politicians to deliver. However, in an era of stalling economies and politicians seeking ideas for renewed growth, it would perhaps be reckless to dismiss the benefits that the industry can deliver.
As always, please do let us know what you think.
One of the reasons why Cayman Islands investment funds are so popular is the flexibility of the fund products available. The Cayman Islands Monetary Authority (CIMA) supervises regulated investment funds via the Mutual Funds Law, which regulates open-ended funds such as the classic Cayman hedge fund. Closed-ended funds by contrast are not regulated under the Mutual Funds Law, although they can choose to be.
For funds where the investor is able to choose whether to redeem (ie cash-in) their investment on a regular basis, the Mutual Funds Law offers 3 types of regulated funds and a useful exemption in certain circumstances where there are 15 or fewer investors.
For many managers, having a fund which is regulated and subject to overreaching powers of a regulator (whether the British Virgin Islands Financial Services Commission (FSC) or The Cayman Islands Monetary Authority (CIMA)) can be advantageous or essential when attracting investors. On the other hand, a manager seeking to establish a track record whose investors comprise only friends and family, may see advantages in having an unregulated fund, without any of the ongoing obligations that would apply if it were regulated.
Whichever camp you fall into, you will want to know how to structure your fund to ensure the appropriate level of regulation for your purposes. Continue reading
Lewis and I poolside in Las Vegas last week.
The cabana village which we co-hosted with other leading firms in the investment funds industry.
Lewis and I have just returned from networking around SALT, a premier thought leadership forum in the global investment management industry, held in Las Vegas. It was a fantastic opportunity to catch up with many of our contacts and also to make some great new connections. Even living in the BVI, it’s not often we get to spend our working day around a pool. Here’s a picture of the cabana village that we co-hosted with some other leading firms in the alternative investment funds industry. As you can see, the dress code ranged all the way from bikini to business suit. You’ll be pleased to know Lewis and I played it safe with office casual.
More seriously, we heard a number of people talking about Assistant US Attorney General John Carlin’s presentation on the danger of fund managers not preparing for cyber attacks. His remarks have also been reported by a number of mainstream press, including USA Today. With ever increasing third party costs and red tape, this is likely to be something that smaller managers can do without right now. However, given the potential damage to managers and their funds from such cyber-attacks, both financially and from a reputational standpoint, we believe that this is something that should be towards the top of every manager’s agenda.
One of the first things in my inbox this morning was an interesting new paper Financing the Economy: The role of alternative asset managers in the non-bank lending environment published today by AIMA, the Alternative Investment Management Association.
The paper looks at the use of financing from hedge funds in sectors such as social housing, health, renewable energy and shipbuilding, as well as the more traditional support the hedge fund industry provides small and medium-sized enterprises who badly need access to capital to grow but have found it increasingly difficult to obtain since the banking crisis.
Well done for tracking us down and thanks for checking us out.
We are a diverse group of funds lawyers that have come from far and wide and now happen to be all under the global roof of one of the leading offshore law firms, Harney Westwood & Riegels. This blog was born from wanting to try and address everyday questions we receive from our clients such as “Why do I need an offshore fund?”, “How do I go about setting one up?” and “Why are you lawyers so damn expensive?” (a common misconception).
Wanting to be good Samaritans (and hopefully remove the common misconception), Lewis Chong and I started looking around online and were surprised to see that there was not a lot of helpful information for people with these types of questions. So, after a couple of cold Heinekens one evening, we decided to create this blog.
The term “offshore” is colloquially used in a very wide ranging number of sectors, including the mining industry, the sailing community and more frequently in the increasing hunt for renewable energy. But in relation to the world of funds, where exactly are we referring to when we say “offshore” and why are funds established there?
Where is “offshore”
The funds industry uses the term “Offshore” to mean a tax-neutral jurisdiction with a sophisticated financial services infrastructure which provides a wide ranging number of products and services to non-residents. The majority of the established offshore jurisdictions globally are either British Crown Dependencies (Jersey, Guernsey and the Isle of Man) or British Overseas Territories (such as the British Virgin Islands, Cayman Islands and Bermuda). Our focus in this blog is on the two leading offshore fund jurisdictions, the British Virgin Islands and the Cayman Islands.