Private Equity Fund Structure in the Cayman Islands


Looking forward to setup a structured hedge fund in the Cayman Islands? Here’s everything you need to know!

The Cayman Islands are not only known for its impeccable beauty, always considered as one of the best places for offshore funds or the hedge funds. The Cayman Islands are governed by the English law. And it makes sure that the island territory enjoys a stable socio-political and economic environment to encourage the offshore investments. It is also considered as the second largest centre of captive insurance in the world and is also an undisputed leader in structured finance. Looking for a friendly domicile for tax free investments? The Cayman Islands have to be the ideal destination for you!

Everybody wants to save money on their income; hence we all want to get rid of the taxes as much as possible. But is it even possible? Well, Cayman Islands have a neutral tax environment; that means no personal, capital gain or corporate tax will be levied over your equity fund investments. Thus, Cayman Islands hedge fund is a blessing for all the investors who are looking for a tax-free vehicle for investment.

Registering the equity funds:

The Cayman Islands equity fund industry is generally governed by the Cayman Islands Mutual Funds Law which is in turn administered by the Cayman Islands Monetary Authority or the CIMA. According to the mutual fund’s law of the Cayman Islands, any company, unit trust or partnership can issue the equity interests for the purpose of assembling the equity funds. However, the definition of equity interests that is provided in the mutual fund’s law is only applicable for the open-ended hedge funds. So, all the close-ended hedge funds are exempted from the jurisdiction of mutual funds law and they do not offer the investors to trade in their investment.

Registering the private equity Cayman Islands is one of the most important things step in setting up the mutual funds.  But how will you do it? What are the things that you need to know about this registration process? Well, here you go:

Under the jurisdiction of Section 4(4) a, an equity fund can only function in the Cayman Islands if its equity interest is owned by fifteen or fewer investors.

The equity interest of a Fund must have to be listed on a stock exchange in order to function from within the Cayman Islands.

In order to operate from within the Cayman Islands, an equity fund must have a minimum investment of $100,000 as per the obligations of Section 4(3) (a) i of the mutual funds law.

A hedge fund can easily function from or in the Cayman Islands without complying to the above if it has a principal office in the Cayman Islands which must have to be provided by any mutual fund administrator with a proper license.

But who will oversee the fund administration? How will you avail the fund administration services? The mutual fund administrator will be responsible for the Cayman asset management services.

 Plus, these licensed administrators are required to act as the connecting link in between the CIMA and the fund in addition to providing the hedge fund administration service.

For registering the hedge fund, a registration fee of $3,658.54 has to be paid to the CIMA at the time of registration then it will be charged annually.

Setting up a Hedge Fund in the Cayman Islands:

How to launch a Hedge fund in the Cayman Islands? Is this what you want to ask? Well, there are few steps involved! Let us unfold them to you:

Take the aid of an offshore or onshore legal counsel to draft a proposal document with all the terms and conditions of proposals clearly stated in it.

The next step involves the drafting of a memorandum along with the articles of association which will then be used in setting up a company to correspond to the proposal document.

Lastly, register the company with the CIMA under the section 4(3) of Mutual Funds Law (revised 2015).

The Cayman Islands are one of the most convenient places in the world for hedge funding.  Undoubtedly, it is a safe haven for investors around the world. So, follow the steps discussed above, set up a hedge fund and profit more in the neutral tax environment of Cayman Islands.