Cayman Funds - Structuring and launching a Cayman Investment Fund

The Cayman Islands is the leading domicile for investment funds, attracting 80% of all new offshore fund formations. Cayman is estimated to house more than 75% of the world’s offshore hedge funds and nearly half of the industry’s estimated US$1.1 trillion of assets under management.

Bell Rock works with fund managers around the world to set up, structure and register hedge funds (including many crypto funds), venture capital and private equity funds.

Advantages of Cayman Islands as a Jurisdiction

Cayman Islands is at the forefront of the investment funds sector largely because of the structural and operational advantages it offers, including:

• Political and economic stability

• No exchange controls restrictions

• Reputable professional service providers

• Abundance of expertise in the investment fund space

• Flexible legislation

• Cayman regulators is very approachable, flexible, innovative and efficient

• Cayman’s investment fund fee structure is globally competitive, which benefits the manager and the investor with respect to the launch and ongoing operation/ maintenance of the fund.

• Tax neutrality

Open-ended/Regulated Mutual Funds

Open-ended funds that meet certain criteria of the Mutual Funds Act and are thus subject to regulation under CIMA’s Investment and Securities Division may qualify to conduct business as a hedge fund, licensed mutual fund, an administered mutual fund, a registered fund or a master fund.

Closed-ended/Exempted Funds

For a closed-ended fund, an investor’s investment is tied-in for the entire life of the fund with no ability for them to redeem. A closed-ended fund is therefore suitable for investments which require a longer timeline over which to mature, such as private equity, venture capital, real estate or infrastructure investments. Closed-ended funds are not regulated in the Cayman Islands. They are a popular choice among private equity and venture capital firms who operate internationally.

Fund Structures

1. Stand-alone Cayman Fund

2. Master-Feeder Fund

3. Mini-Master Fund

4. Segregated Portfolio Company (Umbrella Fund)

Service Providers to appoint

1. Law Firm

2. Company Manager to Incorporate the Fund Entity and Register the Fund with CIMA

3. Fund Administrator

4. Auditor

5. FACTA/CRS Reporting

6. AML Compliance Officers

7. Bank

8. Directors of the Board. Most Cayman funds will appoint independent directors.

Questions to Consider as a Fund Manager

1. What type of investors will the Fund target?

2. Any US investors?

3. LP structure with a GP or a limited company issuing shares to investors?

4. What is the planned launch date?

5. Will the Fund be open-ended or closed-ended?

6. What will the investment strategy be?

7. What assets will the fund invest in?

8. What will be the frequency of subscriptions and redemptions?

9. Any lock-up period for investors?

10. If a lock-up will it be a hard lock-up or a soft lock up with an early redemption penalty?

11. Will the initial investment amount per investor be US$100,000 (or equivalent in other currencies)?

Next Steps

We routinely advise on all aspects of setting up a Cayman fund including the appointment of suitable service providers. Feel free to contact us: info@bellrockgroup.com