It is a globally recognized fact that Cayman Islands is one of the world’s most attractive hubs for offshore financial businesses and also the largest domicile for private equity funds outside of the US. At the end of June 2022 the total number of private funds was 15,337 (source: Investment Funds Statistics issued by Cayman Islands Monetary Authority) confirming that the local fund industry has grown not only thanks to a stable and tax-neutral platform but also to a robust legislative and judicial system, confidentiality, a leading banking sector and a legal and financial support offered by a number of high skilled services providers. One of the key factors attributable to the success of the jurisdiction was surely based on the sophistication of the legal regime which has consistently evolved to keep pace with the global regulatory environment and the demands of its key stakeholders: for this reason, the Cayman Islands put itself on the international scenario as a competitive fund domicile for establishing private equity, venture capital and real estate funds.
In such contest –as well as for the onshore jurisdictions- the fund managers may opt for both open-ended funds (that allow periodic redemptions by the investors and represent a good choice for vehicles with liquid investment strategies such as hedge funds) and closed-ended structures that are suitable for those that require more time for their investments to mature.
In 2020 the Cayman Islands has introduced the Private Funds Act (the PF Act), a regulatory regime for closed-ended private funds which seeks to further strengthen investor confidence and to ensure it remains the leading jurisdiction for fund set up. The PF Act requires private fund vehicles to register with the local regulator (the Cayman Islands Monetary Authority - CIMA) within 21 days of accepting capital commitments from investors. A 'private equity fund' generally refers to a non-retail fund investing in illiquid assets and it covers a range of funds including real estate funds, venture capital funds, infrastructure funds, debt funds and funds of funds: private equity/closed-ended funds established in the Cayman Islands usually can be structured with 3 different options briefly summarized as follows:
- Exempted Limited Partnership (ELP) – this is the most popular vehicle for private equity, venture capital and real estate funds and the Exempted Limited Partnership Law (“ELPL”) governs the creation of these kinds of partnerships. To be registered under the ELPL, such partnerships must have a general partner and at least one limited partner: the general partner is typically incorporated as a Cayman Islands exempted company. An ELP does not have a separate legal personality and the general partner is responsible for the management of the partnership business. Contracts and other documents with third parties need to be entered into by the general partner on behalf of the partnership.
- Segregated Portfolio Companies (SPC) – this is a less commonly used structure for private equity funds: however, SPCs are attractive because they can achieve separation between assets and liabilities within one vehicle and so avoid the expense of incorporating separate companies in order to obtain the same effect. SPCs can be used to establish a number of single investor portfolios designed to meet an investor’s specific needs and without having to disclose the details of such portfolios to other investors in the SPC.
- Limited Liability Companies (LLC) – a LLC combines many of the features of a company with the flexibility of a partnership. Unlike a partnership, a LLC may be formed by a single member. Members receive one LLC interest, representing, for example, a share of profits and losses, voting rights and the right to receive dividends.
The above mentioned vehicles benefit of the various advantages offered by the local offshore framework but in the meantime it is important to highlight that a private equity fund domiciled in Cayman can be also administrated by a service provider based in an onshore jurisdiction.
CC Fund Services (CCFS) is an independent company (part of the CC Finance Group established in 1971) specialized in fund administration services and fully authorized by both the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg and the Malta Financial Services Authority (MFSA) in Malta. Today the company presents itself to the international fund managers as ideal partner for back office services that a Cayman Island investment vehicle needs, assuring to the clients a full satisfaction based on the triple combination of factors: a high professionalism due to the consolidated experience in the funds industry sector, an ongoing updated state-of-the-art technology and a very competitive pricing framework.
The full package of services needed to run a Cayman Private Equity fund efficiently include accounting, evaluation, calculation of the NAV, registrar and transfer agency services: such services are offered by CCFS for all private investment schemes available in Cayman covering every asset class and different type of investment strategies.
The real and concrete added value that represents the foundations of the approach adopted with every single customer and that allows CCFS to distinguish itself from the standardization offered by the wide range of service providers available on the market is a tailor-made service modeled on the specific needs of the customer. In this regard, the administration of the fund is so accompanied in its entire evolutionary path by identifying and adapting prompt, effective and bespoke solutions in relation to the specific queries to be handled.
For more information on how CC Fund Services can help you contact Simone Meneghini, Head International Business Development at [email protected]