Cayman Islands: Domiciling Private Equity Funds

HFMWeek (HFM): What factors have made Cayman such a popular domicile for private equity funds?

Piers Alexander (PA): As with other offshore financial centres, the Cayman Islands attracts a high level of non-resident financial services business. The globalisation of business, enhanced mobility of individuals and sophistication of the offshore world have all increased the attraction of offshore financial centres. Some of the onshore factors influencing the growth in demand of the Cayman Islands include high taxation, overly complex laws, significant regulation and political and/or economic uncertainty.

Growth of the Cayman Islands is driven in part by the onshore need to conduct business on a stable, sophisticated, tax-neutral platform. Some of the characteristics of the Cayman Islands that contribute to its success in attracting investment fund business include its political and economic stability, legislative and judicial soundness, favourable tax regime, quick set up and low maintenance, active banking sector and high quality professional and support services.

A fund structure might not be capable of being suitable for everyone but, in the context of a global offering, considerations generally favour a neutral location, acceptable to the widest range of potential investors. Fund sponsors will therefore typically look to the reputation of a jurisdiction in determining where to establish the fund.

HFM: What is the jurisdiction currently doing to strengthen the sector and maintain a global advantage?

PA: As well as embracing the new requirements imposed by international standards, the Cayman Islands was an early adopter of the Common Reporting Standard. Together with US Fatca, Cayman has ensured it is at the forefront of its international obligations regarding information exchange.

The Cayman Islands enacted legislation in 2016 to provide for the formation of limited liability companies (LLCs) in order to ensure it continued to provide suitable options applicable to the needs of users of offshore funds. A LLC combines many of the features of a company with the operational flexibility of a partnership. It is a body corporate with a separate legal personality and so can enter into contracts, sue and be sued in its own name. A LLC may be formed by a single member (unlike a Cayman Islands exempted limited partnership which must have a general partner and at least one limited partner). Members receive 'LLC Interests', so that each member has one LLC Interest, being the member's share of profits and losses, right to receive dividends and voting and other rights, benefits and obligations of the member. A LLC may be managed by its members or one or more managers appointed for that purpose. For investment funds, it is envisaged that the LLC will be managed both in terms of investment decisions and as to the day-to-day operations of the LLC by a manager. The members may, if they choose, retain decision-making powers in relation to specific aspects of the business of the LLC. Within the private equity context, such powers may relate to the circumstances of winding up the LLC, appointing managers, handling conflicts of interest and so on.

The Cayman Islands is poised to implement the regulatory regime for Cayman Islands funds managed or marketed in the EU, which will allow them to opt into additional regulations consistent with the relevant requirements of the Alternative Investment Fund Managers Directive (AIFMD). These 'EU connected funds' can be either open-ended or closed-ended. The AIFMD opt-in regime will come into effect once the Cayman Islands has been assigned to the European Securities and Markets Authority's approved list of 'third countries' suitable for the AIFMD passport. This will benefit Cayman private equity funds seeking to raise capital from EU investors, and who do not intend to rely upon compliance with the individual private placement regimes of the specific EU countries in which the marketing is taking place or upon "reverse-solicitation".

HFM: What new players have you recently seen entering Asia for private equity funds, and have you experienced any changes in the application of the vehicle structures available in the Cayman Islands?

PA: In Asia, the Chinese insurance companies and state-owned enterprises in particular have been increasingly involved in private equity investment. This has meant additional competition for traditional private equity funds in their search for quality deals. While the exempted limited partnership is the go-to vehicle for Cayman Islands private equity funds, some managers are seeing the advantages of Cayman Islands segregated portfolio companies as an alternative, where it is possible to segregate assets and liabilities into distinct pools without the expense of incorporating separate entities. The segregated portfolio companies have had limited application to date in the private equity context, but as this framework allows for different classes of investors and/or different pools of assets, they may prove attractive, as such structuring variables are difficult to achieve through a limited partnership.

It is not clear yet what practical effect China's "Belt and Road" initiative will have on private equity, but with infrastructure investment across Asia and Europe through the Silk Road Economic Belt, and to Africa, through the Maritime Silk Road expected to increase, it is anticipated there will be opportunities for private equity firms to expand their networks as these geographic and economic pathways open up.

HFM: How is the private equity fund space in Asia set to develop in the future?

PA: Price mismatch has been a major issue affecting the ability of private equity managers to invest.

This, together with the existing "dry powder" already available in the market and the newer entrants in the form of insurance companies and sovereign wealth funds, will likely mean a slowdown in capital raising for Asian-focused private equity. While China outbound investment grew in 2016, the Chinese government's policies, implemented in 2017, that restrict capital outflow have been affecting both the raising and deployment of capital.

Certain "mid-shore" jurisdictions, such as Hong Kong and Singapore, are developing corporate investment vehicles which are intended to provide an alternative to the offshore offering. While such mid-shore vehicles are aimed more at the hedge funds industry, the Singapore variable capital company can be structured as a closed-ended fund. However, the framework entity is just one aspect of a successful funds regime. Indeed, a factor that has made the Cayman Islands so attractive to private equity funds is the recognition that a comprehensive blend of elements must be available in order to create a favourable environment for the establishment of structures that balance the interests of investors, managers and the wider community.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions