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Cayman Funds 2016

MAINTAINING AN ISLAND OF EXCELLENCE IN A SEA OF CHANGE Ramona Bowry of Maples Fiduciary and Michael Richardson and Anna Goubault of Maples and Calder in the Cayman Islands describe the current regulatory backdrop and how the Maples group’s bespoke fund solutions can provide a smooth passage. The Cayman Islands remains the offshore jurisdiction of choice for the formation of international investment funds. A cornerstone of the success of the Cayman Islands’ financial services sector is its strong legal and regulatory system, which has proved beneficial to both managers and investors. Despite a dramatically changing regulatory landscape, Cayman structures have retained their popularity. This has largely been due to efforts by the Cayman Islands government to implement and refine the rules regulating Cayman funds and managers to ensure funds are structured and operate in a manner that meets international standards. Furthermore, the strong partnership between the Cayman Islands government and the private sector has fostered a thriving service provider industry with many of the large banks, auditors, administrators and other financial and fiduciary service providers recognising the opportunities regulatory developments present. Trends in fund structuring and formations The number of hedge funds regulated in the Cayman Islands remains healthy, with 10,940 funds as of December 31, 2015 according to the Cayman Islands Monetary Authority. Anecdotal evidence suggests both managed account and closed-ended fund activity has increased in recent years although this is more difficult to quantify as the structures generally fall outside the regulatory regime in the Cayman Islands. The most useful indicator of closed-ended fund (typically private equity funds) activity is the level of registrations of new Cayman Islands exempted limited partnerships (ELPs) which were at an all-time high of 3,370 in 2015 compared with 2,893 in 2014, resulting in a total of almost 18,000 ELPs. With Maples and Calder advising on a significant proportion of Cayman Islands hedge fund and private equity funds, the firm has unrivalled insight into developments in the alternative investment community. Exempted companies remain the most commonly used vehicle for open-ended feeders into Cayman hedge funds largely due to investors’ comfort with the share as a form of security and the welldeveloped reporting of fluctuating investment values on a net asset value per share basis. However, recent figures indicate that ELPs now constitute a majority of new master funds. This is due, in large part, to the ease with which an incentive allocation or carried interest can be built into the limited partnership agreement. The vast majority of closed-ended private equity funds established in the Cayman Islands are structured as ELPs, which replicate to a significant degree the Delaware equivalent. While exempted companies are extremely flexible in the extent to which voting and economic rights 54 CAYMAN FUNDS | 2016


Cayman Funds 2016
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