When considering offshore fund domiciles, the Cayman Islands consistently stands out as a premier choice, offering unparalleled regulatory expertise, a wealth of experienced service providers, and a long-standing reputation as the global leader in the investment funds industry.
For decades, comparisons have been drawn between Cayman and the British Virgin Islands as leading offshore fund jurisdictions. In this article, we explore the key distinctions between the two, highlighting why Cayman remains the jurisdiction of choice for many fund managers.
The case for the BVI
There could be a number of reasons why the BVI would be the right jurisdiction for the manager to domicile their offshore fund and over 5,000 funds have their home in the BVI. Like the Cayman Islands, the BVI is a tax neutral jurisdiction. Both have no direct personal, corporate or property taxes. BVI law and Cayman Islands law are derived from English common law and supplemented by local legislation, ensuring that both BVI and Cayman Is lands funds are structured as widely accepted vehicles on the international stage. The two primary reasons we see managers elect to use the BVI are firstly the fact that it is slightly more cost-effective to establish a BVI fund than Cayman and secondly that there are slightly fewer regulatory requirements; with BVI registered funds not needing a local audit sign-off or director registration requirement, for example. While this remains appealing to our long-standing institutional managers, it is also attractive to start-up and emerging managers who are looking to find reasonable cost savings and flexibility in every aspect of their launches to allow them to grow their asset base as quickly as possible.
The case for Cayman
As of 4 September, Cayman reached a financial milestone as a global leading investment funds centre by reaching a record of 30,000 registered funds. According to the Cayman Islands Monetary Authority (CIMA), there were 30,038 registered investment funds in Cayman, of this,17,080 were private funds and 12,958 were mutual funds.
The financial services industry in the Cayman Islands is highly competitive and there is a deep bench from which managers can choose their Cayman service providers. As such, Cayman is the undisputed global jurisdiction of choice for investment funds. With over 30 years of servicing the funds industry, the Cayman Islands have grown through innovation and forward-looking policies which have served as models in other jurisdictions. CIMA promotes a pragmatic regulatory environment for investment funds and the courts of the Cayman Islands have a specific financial services division, which allows for much quicker resolution of fund disputes than some notable on shore centres. A robust and quick launch and registration process for investment funds allows managers to get their offshore fund up and running quickly to take advantage of market opportunities.