Cayman Hedge Fund Services Report

Published: HedgeWeek
January 13, 2011

There's no doubt the global financial meltdown has resulted in a fundamentally changed set of financial and regulatory circumstances and a more hostile political environment. Yet it is perverse that the Cayman Islands has been the focus of numerous public relations attacks from G20 countries which themselves have suffered badly at the hands of the global meltdown. The Cayman Islands regulatory system ensured that no financial institution failed, its Aa3 Moody’s rating is superior to that of Ireland and its budget, despite ludicrous headlines from a transparently briefed popular press, is now balanced. Whilst we continue to identify and analyse the issues facing us with a view to realigning our financial services industry we do so without taking overmuch note of blame deflecting politicians labelling us as implicated in tax avoidance that arises from flawed domestic legislation or as having an inadequate regulatory system. In the light of the blindingly evident tax and regulatory transparency, this type of mischaracterisation can no longer be taken seriously. Nor can EU regulation that has more to do with seeking to constrain hedge funds from pricing European Sovereign debt at its true market value than any attempt to prevent a repetition of the financial crisis. The fact that Cayman continues to register over 100 new funds a month is some evidence that the market place endorses the Cayman approach.

We believe that the Cayman Islands has four central issues that need to be tackled in response to the changed global environment.

Firstly, to ensure substantial presence and a viable local economy that provides sufficient job opportunities for Caymanians we must implement immediately the suggested changes to immigration policy to provide 25-year security of tenure for financial professionals wishing to establish operations in Cayman.

Secondly, we must continue to refute through our public relations campaign the nonsensical suggestions of the truth deniers concerning tax evasion and tax haven status or indeed money laundering. What we do in Cayman is lawful, proper and transparently so and we must continue to say so.

Thirdly, we continue to reject the suggestion from certain non elected European bureaucrats that we introduce direct taxation. It can hardly be said that their economies are a ringing endorsement of the concept and our tax neutrality is now superior to any other.

Fourthly and lastly, we maintain appropriate regulation recognising that Cayman entities, funds or otherwise, that elect to trade in onshore jurisdictions are subject to the laws and regulation of those jurisdictions in any event. The real question given the constraints of the EU Directive is how many now will chose to do so in the EU.

With these policies in place as the statistics now establish we do not doubt that Cayman will remain at the forefront of the offshore financial centres and indeed its position as such will be enhanced.