The Cayman Islands: A Guide for Hedge Fund Managers - .PDF file.
The Cayman Islands continue to be the preeminent offshore jurisdiction for hedge funds. Around 85% of the world’s hedge funds are domiciled in the Cayman Islands, enabling the jurisdiction to outrank competing offshore centres (BVI, Bermuda and Jersey among them) as the top spot for hedge funds. This paper explains the attractions of the Cayman Islands as a destination for managers wanting to establish hedge funds offshore, and examines the commercial, legal and regulatory considerations that combine to make Cayman their preferred jurisdiction.
Hedge funds established in the Cayman Islands will typically take the form of a company, a limited partnership or (less commonly) a unit trust. If statutory segregation between assets and liabilities of sub-portfolios is desired, the SPC model will be attractive. Each of these vehicles can be used as a stand-alone fund, a fund of funds or as part of a master-feeder structure. Their managers need not be domiciled in the Cayman Islands. Generally, all open-ended funds established in Cayman will need to be registered with CIMA. A fund will be deemed open-ended if it issues “equity interests” (shares, partnership interests or units) that participate in the fund’s profits and gains, and which are redeemable (or otherwise capable of being repurchased) at the investor’s option. The reference to equity interests is important, because this excludes debt instruments (including warrants, convertibles and sukuk instruments); funds issuing such instruments will not be required to be registered with CIMA…
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