With about 1,230 new CIMA fund registrations in 2016, the Cayman Islands remain the undisputed leader in offshore funds. A closer look at the numbers reveal that 2016 has seen an interesting shift in geographical regions for Cayman fund launches. For example, the numbers from Europe are down but they increased a lot from Asia to the point where Asia now represents almost half of the new launches Cayman's PwC unit is taking on as audit clients.
This growth is coming from two sides. With the creation of new wealth in China as an overriding mega trend, many of the new rich are looking for partners to manage money in different asset classes. New launches are also on the rise from Hong Kong as assets continue to go through Hong Kong and a lot of managers on the ground there collect capital from Mainland China. Historically an early adopter of alternative investments, Japan is the other region with high demand for Cayman products. Particularly large institutions sponsor preferably Cayman fund products for distribution in Japan. This area has not slowed down for some years, and their AUM is considerable.
With investors in the driver's seat, customization is key.
Investors are really in the driver's seat now more than ever, and investment managers have to find new and innovative ways to differentiate themselves. More and more funds of one are created, typically in the $50-100 million range, but also as low as $10 million and as large as over one billion. There is also an increased use of side letters in commingled vehicles and fee pressure across all service providers.
Creative fee schedules in particular on incentive fees are agreed on as managers seek to retain and attract capital. Whereas you can't prevent investors from withdrawing capital in an open-ended structure, managers will offer alternative arrangements such as redemption replacement arrangements whereby an existing or incoming investor can step into the shoes of a departing investor as if it were receiving a transfer of the departing investor's interest in the fund. Along with any such customization, investors are still getting a full institutional quality product (pages 9-11).
The Opalesque 2017 Cayman Islands Roundtable took place in George Town, Cayman Islands, with:
- Ingrid Pierce, Global Managing Partner, Walkers
- Craig Smith, Partner, PwC
- Christopher Bodden, Director, The Harbour Trust Co.
The group also discussed:
- At which point consider investors entering into passive vehicles?
- Success model: New Cayman LLC adopted by many institutional US managers, mostly as carry vehicles
- Why more professional conferences are coming to Cayman
- How will Cayman's AIFMD equivalent regulatory framework look like?
- Where does Brexit leave Cayman?
- Why is the adoption rate of governance standards is much slower in PE?
- Around 80% of all new regulated funds now have a split board: Meaningful improvement or a fad?
- How will Cayman benefit from the global infrastructure boom?
- How Cayman assists startup managers in launching their products
- How is Cayman participating in the global FinTech boom?
- Why will digital identities play a role in alternative investments?
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