CALEDONIAN


FOR THE FUTURE OF FUNDS


WELL POSITIONED


Despite a global financial climate that continues to pose challenges, Cayman remains an excellent venue for funds. Dave Sims and David Walker of


Caledonian Funds Services tell Cayman Funds how the company is positioning itself for the future.


Caledonian Funds Services has been administering funds in the


Cayman Islands for almost 20 years, which means it is especially well placed to think about what the future might bring. And though there are plenty of alarmists outside the industry who predict that onerous regulation will one day stifle funds in the Islands for good, Caledonian is rather more sanguine.


“While additional regulatory changes to the hedge funds industry


are certainly numerous and widespread, we believe that this is an opportunity for Caledonian to grasp and build on our service excellence to clients,” says Dave Sims, managing director of Caledonian Global Fund Services. “The various regulatory changes affecting the industry around the globe are all in a state of flux and also become effective on a staggered basis over several years, which make it difficult to gauge the exact impact on the industry.”


David Walker, who is managing director for Caledonian Fund


Services (North America), concurs, and points out that “coming from a point where there was virtually no regulation, any regulation seems cataclysmic, but in reality the pace of regulatory change has abated as equilibrium is reached.”


He is confident that “hedge funds as an asset class are here to stay


and the business case for the offshore centres remains strong and compelling.”


That said, it is clear that various initiatives across the world will have


an impact on the business of funds in Cayman. Perhaps chief among these external concerns is the Foreign Account Tax Compliance Act or FATCA, which aims to create a more complex tax compliance process for US citizens with offshore assets, and is predicted to have widespread ramifications for Cayman funds, and especially on US managers who have Cayman-based funds.


Sims is aware of the concerns, but confident that people will still find Cayman a friendly environment in which to do business.


Other US regulations such as the Dodd-Frank act are symptomatic


of a wider impulse across governments concerned that a perception of offshore laissez-faire doesn’t play well in onshore domestic politics. There is a danger, perhaps, that the hedge fund industry will be overrun by regulation. But, Walker says, though there was initially “a lot of hype over master fund regulation ... this has now come into effect and blown over with little or no noticeable impact or adverse criticism.” Often the expectation is worse than the reality.


He continues: “Where global regulators propose regulatory amendments with the genuine intention of protecting investors and the industry and are not merely protecting a country or region, the regulation is positive as it helps guarantee the longevity of the asset class. I see regulatory equilibrium being reached by 2013.”


CAYMAN FUNDS | 2012 73


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