We see new managers having to set aside enough funds to self-fund
for up to two or three years until they can attract the capital that
makes their business sustainable.
Scott: An advantage to Cayman is that we’re very dynamic and
a very efficient connector of users and providers of capital and
financing around the world.
There are some things that we cannot control but we provide the
very best environment for managers to be successful in. One of
the underlying investors into Cayman is private wealth, and from a
jurisdictional perspective, we are attracting more family offices. They
are growing and are keen to be in environments where they can
connect with others and co-invest.
Cook: There’s a growing recognition of that infrastructure; we
deal with such a breadth of funds from around the world and they
feed information back to new entrants or other parties that may be
interested in moving here.
Windsor: Emerging managers are competing on performance, but
also they’re a more risky bet for an investor. So they’re looking to derisk
their offering and relocate to Cayman for all those reasons we
talked about in terms of the judiciary and regulatory framework. They
are also de-risking themselves by partnering with top tier service
providers, administrators, lawyers, directors.
In this environment institutional investors are really pushing for
those brand name service providers and quality jurisdictions, which
helps our industry here in Cayman.
Golding: Returning to the topic of wind-downs, we are sometimes
faced with a scenario where not only an individual fund structure
is shutting down but the actual investment management entity is
closing. As the director you’re sometimes the only one left standing
at the end of the day once the investment manager has closed its
doors and service providers have all resigned.
To make sure that the fund has an orderly wind-down you have to
hold conversations with the manager and all the service providers
early to figure out an orderly plan to get through it. Certain steps
need to happen in the right order or the wind-down can become
unnecessarily complex.
MacKay: The regulatory requirements around a wind-down have
taken a little bit of time to resonate with the management community.
Conceptually it makes perfect sense but you’re balancing the concept
against the cost. Pre-emptive conversations with the manager are
important to make sure you have money set aside and we make sure
we’re going through that process correctly.
Smith: The amendments to the procedure for winding down funds
have been exactly to achieve that. All we want to know is if there’s
anybody left to turn the lights off as the regulator isn’t usually involved
while those conversations are ongoing.
It is worthwhile therefore to include the regulator in the conversation
to ensure that everyone is a part of the discussion and knows exactly
what is happening.
Windsor: It is especially complex when a fund of funds is winding
down in terms of claw-backs on redemptions. There is the potential
for litigation in the future.
Golding: You can also have the challenge on the flipside when more
complex strategies wind down where a fund might have pending
claims waiting to be received. How do you balance the need to wait
for receipt of a claim with the demands of investors who want to be
fully redeemed now?
As a director there has to be a certain element of flexibility to figure
out the right approach to the realisation of future claims, otherwise
you can be faced with an issue a year or two years down the road
when you receive a windfall—who does it go to, has the fund been
liquidated and dissolved?
“In terms of new managers,
one of the strengths of
Cayman has also been the
quality professionals and
advice you’re getting.”
Colin MacKay
CAYMAN FUNDS | 2017