We’re also seeing some of our larger managers creating their own PE
structures because their investors are demanding a different structure.
In terms of the global competition, Luxembourg is actively targeting
Cayman funds and they’re going after the markets that we have
previously been very strong in. That said, everyone we meet thinks
that Cayman has a better professional structure. You’re able to get a
director, you’re able get an audit firm, and CIMA’s very responsive to
queries. In other jurisdictions it takes longer to get the entire structure
up and running.
Gwen McLaughlin: The PE business is the growing side of our
business as well. I don’t think CIMA has any statistics on PE because
they don’t have to be licensed. But it is definitely a really big area of
growth that we will see in the next few years because a lot of them
are self-administered.
Rossiter: In the early days, in the hedge fund world, they didn’t see
the value of the fund administrator either, but institutional investors
want that in PE structures too. They will say if they are going to be
involved, they want that kind of mutual oversight structure, they want
someone in there to make sure that what the fund is doing is correct
and accurate.
They want everything put in place properly and they will understand
that administrators are able to add value, especially in terms of
systems, so hopefully we’re seeing that it will be a bump in the
amount of business that we’re doing here as these mutual oversight
structures become the norm in PE too.
Ronan Guilfoyle: We had a call from a UK-based PE manager who
mentioned that a potential US pension fund investor insisted that they
have an independent board of directors before they would invest.
We can see more of that not only on the fund administration side
but also the governance side more generally. It should be a great
opportunity to show how we excel at the services we provide
because that’s our big differentiator here: we’ve got fantastic service
providers and a regulator who’s responsive.
That’s where we push Cayman as a jurisdiction and say, look we’re
a proven quantity, with tried and tested products that people trust.
While we do face pressure from jurisdictions such as Dublin and
Luxembourg, the majority of our business still comes from North
America, it is growing in Latin America, and Asia has been growing
consistently over the last few years. They continue to see Cayman as
the jurisdiction of choice, we just have to ensure that we continue
to provide the quality services and fight off a lot of the other threats
from regulators and other jurisdictions.
Smith: CIMA is seeing a lot more PE funds wanting to be regulated,
as well as seeing the appointment of independent directors to such
funds. We could query as to why there’s a need to subject yourself
to regulation; often it is because they have large pension funds as
investors who want the additional comfort of knowing that the fund is
subject to regulatory oversight.
We also get the same feedback from our administrators that a lot of
their increase in business is coming from the PE space.
Ingrid Pierce: We have always seen a lot of PE business on Cayman
so that is not hugely new but it is interesting that they want the
structure and formalisation of what they’re doing. There’s been a bit
of migration from the traditional hedge fund managers into PE, that’s
where some of the increase is coming from.
Those managers are very used to the governance structure,
they understand the need to have independent oversight, to have
independent administrators so that’s nothing new for them. If it
becomes the norm to have governance or to have administrators
they’ll do that as well.
Certainly with our institutional PE clients, we see that they’re actually
not seeking regulation, they are quite happy to stay outside that net
but they do want to demonstrate that they have great governance
internally. The way they are structured and the way they are set up is
exactly what their investors want.
The other thing we have seen is that the reason they continue to
use Cayman is because of the flexibility of our jurisdiction, the speed
to market and all the other things that go with it. We’ve got to work
really hard to protect that because not only do we have competition
from other jurisdictions that are trying to emulate what we do but we
also have a lot of people coming into the industry that are trying to
shift the balance of power, whether that’s from external regulators,
pressures from the EU, or other forces.
If we don’t continue to recruit the best people, train them, and
ensure we have a good public-private partnership with the financial
services industry and with government and with CIMA, then we’re
going to find ourselves under threat.
Smith: In terms of competition from other jurisdictions, I would
agree we should not be complacent. Looking at the numbers from
the jurisdictions that we track, including Bahamas, Bermuda, BVI and
Dublin, Jersey, Guernsey and of course Cayman, as of September
2018 Jersey was slightly down, about 7.6 percent, Cayman was up
at that point, Bermuda was down and BVI showed a slight increase.
We should never rest on our laurels, but we’re far ahead in terms
of overall totals.
Pierce: There is also a threat from onshore: several are trying to
emulate Cayman. The UK is going to produce its own funds regime
and Singapore and Hong Kong are doing the same. Those are the
jurisdictions that are going to be competitors for us.
“Everyone involved in the
industry has a genuine
vested interest in making
sure that everything runs
smoothly.” Mark Cook
CAYMAN FUNDS | 2019