One of my favourite aspects of working in the offshore environment is that we get to speak to fund managers based all over the world about the latest hot and trendy investment opportunities. Over the last few years we have dealt with enquiries about bitcoin, crowd-funding, acquiring a portfolio of oil tankers and real estate opportunities in Puerto Rico to name but a few of the more intriguing conversations. It constantly keeps the team on our (permanently parked under the desk) toes and there is no doubt that recently we have been part of a very regular trickle of Cuba based conversations and how to maximise the gradual opening of the borders.
When Raul Castro took over from his brother as President of Cuba in 2008, he began a long-anticipated process of political and economic reform. As a result of his strategy, the stagnant economy has been gradually coming to life, galvanised by a fledgling private sector. Diplomatic advances have been made, animosities are thawing and, slowly but surely, relations with overseas nations are being restored. With this sea change comes the possibility of direct foreign investment, a prospect historically laden with regulatory obstacles and risks – from both sides.
It is easy to see why there is excitement surrounding Cuba’s development. The tourism industry is set to explode and the relaxation in travel restrictions for Americans opens a previously-untapped market of over 300 million potential visitors. Such a vast influx of people will require utilities, hotels, ports, roads and telecoms; truly massive investment is required to improve the current infrastructure and there is cautious optimism from sponsors eager to participate in the process and Cubans looking forward to the resulting developments.
Indeed, it is the tourism sector that US News largely focused on in the following article as the best way to invest in Cuba as a US citizen:
But rather than related company stock-picking, what about direct foreign investment? Is there a way for US based investors to capitalise directly on some of the infrastructure opportunities for example?
It seems like almost six months since I was in Shanghai to present at the 2nd Annual Hedge Fund China Summit 2016 and to enjoy plenty of the vino tinto at the awards dinner afterwards where my firm, Harneys, picked up the trophy for “Best Offshore Law Firm for Hedge Funds”.
Wait, that’s because it was five months ago.
And what a five months it has been.
Shortly after picking up that award, I was thrilled to hear that my colleagues in our London office had been named Best Offshore Law Firm – Client Service at the HFM European Hedge Fund Services Awards, announced on 21 April 2016.
The HFM Awards are high profile in the global hedge funds industry and the client service award is independently judged based on the relative strength of client testimonials and market feedback. The awards recognise Harneys as having provided leading client service, innovation and expertise to our valued hedge fund clients of all sizes, from start-up hedge funds and emerging managers to global multi-billion dollar investment institutions. That is what we do.
Now, when I say thrilled … what I actually mean is … indignant that my colleagues in London would seek more glory than their far more humble colleagues battling away day and night here in the buzzing hub of economic activity that is Asia.
They’ve been talked about for a while by our bloggers and contributors but the moment has now come for the Cayman LLC, which has been available for registration since 13 July and numerous of which have already been formed. The Cayman LLC was introduced to meet the requirements of North American managers and intermediaries who use Delaware LLCs and want a flexible offshore version, and Cayman lawyers dealing regularly with North American clients are particularly excited about now being able to offer a “Cayman” version. Its introduction also highlights Cayman’s responsiveness to market demand as it continues to maintain its position as the dominant brand in North America for funds structures.
So what makes the Cayman LLC – or limited liability company, to give it its full name – so interesting?
In this guest post, my friend Scott Rosenthal discusses the role of an Outsource CFO and the reasons why fund managers might like to engage one. Do feel free to get in contact with Scott or myself if you would like to discuss any of this further.
There is a growing segment of the hedge fund and private equity fund service provider population called the Outsource CFO. Outsourcing has become very popular in recent years, in regards to back office, middle office, compliance (including outsourcing the investment advisers CCO), trading, and most other areas that a hedge fund needs to operate. What could be considered the final frontier of the service provider population is the Outsource CFO. The Outsource CFO model assists the start-up or smaller fund manager, who may not have the budget or the need for a full time CFO. So, instead of hiring someone who may not have the appropriate experience in order just meet the budgetary restrictions, fund managers can now opt to hire an Outsource CFO.
So why use an Outsource CFO?
Private Equity Funds and Fund of Funds in China, also known as ‘Sunshine Funds’, are growing rapidly. In this guest post, my colleague and Managing Partner of Harneys Shanghai Kristy Calvert explores the reasons behind this trend.
The Asset Management Industry is one of the fastest growing business sectors in China. Privately managed (non-retail) funds in China, often referred to as ‘sunshine funds’ by local practitioners, have traditionally enjoyed a largely unregulated environment – unlike the mutual funds industry, which is heavily regulated by the Chinese Securities Regulatory Commission (CSRC).
It was a packed room at The Lawyer Awards last week – all 1250 of us anxiously hoping our firm would be crowned winner – and with few categories so fiercely contested as Offshore Law Firm of the Year, we were definitely on the edge of our seat.
The Lawyer kept us entertained while we waited, though. With hours of comedy from Dara Ó Briain, a rocking band and a beautiful River Thames fireworks display, it was a glittering celebration of a year of hard work and success across the legal industry – and judging from the crowd still packed on the dancefloor at 2am, a night that many didn’t want to end.
So, the pound’s tanked, world stock markets are in turmoil, Scotland and Northern Ireland are considering whether to leave the United Kingdom so they can stay within the EU and the Prime Minister has announced his resignation. Last week’s vote to Leave the EU has certainly had a profound (and depressingly predictable for those of us who voted Remain) impact on the UK economy and politics already, with a long period of uncertainty yet to come. The financial services industry in the UK is likely to be significantly affected by Brexit, with various international investment banks having now announced that they’re reviewing their operations here, given the uncertainty over whether they will still be able to passport their financial services and products across Europe from London.
But what impact will Brexit have on Cayman and BVI offshore funds and how they’re marketed into Europe?
Here in the UK the debate is intensifying around the EU referendum on 23 June on whether the UK should remain in or leave the EU. With not long to go to the vote, for obvious reasons a lot of the discussion about the impact of any “Leave” vote has been on the UK economy and UK citizens. Many onshore UK law firms have set out in detail the exit mechanism that would be involved following a vote to Leave and their thoughts on how it could affect the legislative landscape in the UK for financial institutions and investment managers. If the UK votes to remain in the EU, we can expect going back to business as usual in most areas, although quite how the Conservative party will re-unite itself after all the recent mud slinging remains to be seen. However, a Leave vote and subsequent Brexit from the EU could also have a much broader effect around the world, in ways that haven’t necessarily grabbed the headlines so far.
So what impact might any Brexit have on Cayman and BVI offshore funds and how they’re marketed into Europe?
When our global funds partners decided to meet in the Entertainment Capital of the World, there was a great deal of scepticism from the rest of the firm as to how constructive our collective output from the meetings might be.
One of our kindly litigation partners even had the temerity to question whether given the performance of the hedge funds sector in 2016 so far, we would be better suited meeting at a Holiday Inn in Blackpool (for those not familiar with this UK city, try and keep it that way).
As many of you are aware, there is an increased regulatory and investor focus on cybersecurity in the funds space (just last week the Cayman regulator issued this circular). In this guest post, my friend Erik Kellogg discusses one of the key cybersecurity issues that start up and emerging managers should address.
The international press has picked up on many stories during the last twelve months; we’ve seen a bailout of Greece, an American Flag raised in Cuba, Leicester winning the Premier League in England and Beyoncé and Kim Kardashian battling to be the first one to break the internet.
Well we here at the Offshore Funds Blog very much hope they don’t succeed. As our loyal followers will know, we’ve been in existence since May 2015 and to help celebrate our first year, our clever people behind the scenes have pulled together a list of the top five most-read blog posts just in case you missed them first time around.
If you’ve decided that a section 4(3) Cayman fund is the best structure for your fund (see our earlier blog for an Introduction to Cayman Fund Products), you’ll need to register it with the Cayman Islands Monetary Authority (CIMA) before you launch. The process is well established and fairly straightforward, involving your Cayman lawyers filing the following with CIMA via their online registration system.
Hong Kong International Airport is a fine airport to be sure, but after five and a half hours sitting in the airport lounge, waiting for my delayed flight to Shanghai to depart, it was beginning to lose its appeal.
This was only the second time I had headed the two hours or so north from my home base of Hong Kong to the most populous city in the People’s Republic of China, and the first time had run like a military operation. This time certainly didn’t appear to be getting off to such a great start.
April was a good month for our investment funds lawyers with two major award wins. First the London team, led by Sean Scott, brought home the HFM European Hedge Fund Services Awards, Best Offshore Law Firm – Client Service award, recognising Harneys’ commitment to client service. Next our Asia team, including fellow blogger Marc Parrott, was awarded Best Offshore Law Firm for Hedge Funds at the second annual Hedge Fund China Summit in Shanghai, recognising the Asia team’s continued expansion and expertise. It’s always good to win awards but particularly satisfying when they’re based on feedback from happy clients. All in all, a proud month for us Harneys funds lawyers!
AIFMD. Love it or loathe it – and let’s face it, it’s not the most popular law – the Alternative Investment Fund Managers Directive (AIFMD) has changed the way that alternative funds are marketed to investors in Europe. Ultimately this will hopefully allow European and non-European alternative investment funds (AIFs) to be marketed to professional investors in Europe by way of a passport, similar to the way that UCITS funds can be passported round Europe. For now, though, the passport only works for European AIFs marketed by European managers, with non-European AIFs and managers waiting for the European Securities and Markets Authority (ESMA)’s further recommendations on extending the passport to non-European jurisdictions. Your typical Cayman or BVI investment fund isn’t capable of being passported yet and so needs to be marketed using the AIFMD private placement regimes in each country.
So how do the AIFMD rules work for Cayman and BVI AIFs being marketed to professional investors in Europe by non-European managers?