The Cayman Islands has for decades been one of the world’s leading banking and financial centers, currently ranking as the fifth largest banking centre worldwide, with over 200 banks, including 40 of the world’s 50 largest banks, and over US$1.5 trillion in assets.
Legislative changes introduced director registration or licensing requirements and new regulations. In addition, law firms started to spin off their administration divisions and private equity and other buyers entered the market.
The American private fund industry is a significant representative of Wall Street’s interests and regulating hedge funds was a politically sensitive undertaking since the inception of the industry
With the global hedge fund industry transitioning into a new era of heightened regulation and stricter fund governance, the Cayman Islands are extremely well placed to respond to the associated challenges.
Institutional investors face an almost unprecedented set of challenges. The post-crisis period has been one of slow economic growth, low or even negative real interest rates, volatile markets and increasing geo-political pressures.
The Cayman director class has not helped its cause as some (but by no means all) of its members resist exercising self-restraint, do not limit the number of directorships they take on, and become rather defensive and secretive when asked about the number of directorships they hold.
Concerns in the U.S. and Europe over security leaks and the debate about access to public versus private information runs in some ways parallel to the discussion regarding the information investors prefer and require to make informed decisions about their investments in Cayman Islands funds.
We have identified certain red flags that we have seen in more than one situation and provide some practical guidance that investors may wish to consider to mitigate the risk of being victims of a fraud.
All investment management firms need to pay very careful attention to a recent paper issued by the UK’s Financial Services Authority (FSA) concerning the management of conflicts of interest between asset management firms and their customers.
In a market traditionally focused on funds and banks, the Cayman Islands Stock Exchange (CSX) has recently expanded its services to support new issues and start-ups. The principal reason for seeking a listing is to raise new funds for establishing or growing a business.
The world has become global and this not only on business and private sides, but also family offices are seeking increasingly to get the most out of this international playing field at their hand.
In the current competitive hedge fund marketplace the use of side letters between investors and funds has become commonplace. Side letters are used by funds and fund managers to draw in investors who jockey for the most favourable terms possible.
The enforcement division of the SEC’s Asset Management Unit has recently brought a number of complaints against various hedge funds and their investment managers.
European regulators will decide early this year whether UCITS funds should be reclassified as “complex” and “non-complex” products in order to improve transparency of information about investment strategies.
Politicians make much of sharing values with their constituents, though they struggle at times to elucidate precisely what those values are and what it is that is of value to both sides of the equation.
The investor due diligence process has evolved with the growth of the hedge fund industry. What was once a short and rather perfunctory process has grown into one which today is highly quantitative and detailed.