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Cost creep clouds Cayman’s position as jurisdiction of choice for Funds

29 March 2016

With some 11,000 funds registered in the Cayman Islands they have long been the jurisdiction of choice against which other jurisdictions such as Jersey compete.

Frustration is however building over the growing cost and regulation associated with launching a Cayman Fund, reports Cayman News Service.

Although the numbers involved are quite modest, industry insiders remain concerned that cost and regulatory creep in Cayman could lead to a tipping point where the conversation starts to become easier for managers to select other jurisdictions instead.

“We are the jurisdiction of choice and usually people will suck up Cayman’s additional costs because of all our other strengths and at the moment they would still have a lot of explaining to do if they wanted to choose a domicile other than Cayman, but there is going to be a breaking point as people are really cost conscious and we have heard of a couple of things going elsewhere,” said one hedge fund director, who preferred not to be named.

A succession of fee increases and additional layers of regulation have been imposed on the sector and CIMA’s Statement of Guidance for investment funds was seen as too prescriptive, being introduced without sufficient industry consultation, with meetings being held for the sake of having meetings, the director noted.

The Directors Registration and Licensing Law has added another layer of cost and oversight, he said, while other jurisdictions are taking the approach of reducing fees and introducing more efficient products. 

“Cayman is still the destination of choice for many fund and asset managers but people are becoming more aware of the other options and they are certainly having discussions about them and being marketed to,” the anonymous director said. “Clearly, certain people are starting to use them and if you get five or ten good groups in there and one person tells their good news to ten people, then you start to build up that level of comfort, so I think we have to be cautious.”

 

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