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The most popular location for an offshore fund, by dollar size, is Cayman Islands. This Island has been aggressive in seeking Monetary Services businesses and has a strong world-wide reputation. Over 80% of the world’s hedge funds have divisions in Cayman, with 7,192 registered funds and $200B in assets through 2006. In Cayman, a fund with fewer than 15 investors is not regulated. There are two options in Cayman:
Note: A fund with fewer than 15 investors is not regulated. To set up a Cayman licensed fund, one would first form a Cayman company, open a Cayman office or hire a local registered office, and then file an application with the Monetary Authority. In order to be approved, the manager must have a net worth of at least US$500,000 and prove himself competent based on past work experience. This application process can take 3 to 6 months.
Please note that CI funds must be audited and their financials are public record. However, there is no limitation as to what the fund can invest in and it is possible to set up a Cayman fund and take that fund public on the Cayman stock market.
If the transparency and oversight in Cayman is overbearing, then another jurisdiction, such as Nevis, might be in order. In Nevis, corporate capital of US$500,000 is required for an investment license and the fund manager must demonstrate proficiency and expertise in investment services.
- A licensed fund, involving a rigorous investigation by the Monetary Authority of the fund documentation and promoters (about 10% of Cayman funds) or,
- A registered fund, which requires only a form setting out the particulars of the fund, together with a copy of the offering document and consent letters from the Cayman licensed auditor and Cayman licensed administrator. This is available to funds that require a minimum initial investment per investor of US$100,000. This accounts for about 90% of the funds in Cayman and the more common investment requirement is $250,000+.
Note: A fund with fewer than 15 investors is not regulated. To set up a Cayman licensed fund, one would first form a Cayman company, open a Cayman office or hire a local registered office, and then file an application with the Monetary Authority. In order to be approved, the manager must have a net worth of at least US$500,000 and prove himself competent based on past work experience. This application process can take 3 to 6 months.
Please note that CI funds must be audited and their financials are public record. However, there is no limitation as to what the fund can invest in and it is possible to set up a Cayman fund and take that fund public on the Cayman stock market.
If the transparency and oversight in Cayman is overbearing, then another jurisdiction, such as Nevis, might be in order. In Nevis, corporate capital of US$500,000 is required for an investment license and the fund manager must demonstrate proficiency and expertise in investment services.