ROUNDTABLE


we see a lot of our bigger managers continuing to form funds—we see some start-up work, it is better quality, but there’s still very much a flight to the quality managers at the moment.


Choppy waters PS: What are the major threats to the continued success of the industry?


GT: In the start-ups that we see it is cost burden. Unfortunately


we just recently had someone taking the view that “we’ll reassess in the next 12 months, and then consider re-domiciling to the British Virgin Islands”. Cayman costs in terms of the service providers here, regulation, and everything else is just becoming prohibitive for setting up.


JA: I still think that there’s a premium on Cayman. No-one sets up


$20 million to stay a $20 million fund. They’re saying: “Next year I’m going to be a $100 million fund, therefore I need to be in Cayman,” but that premium may be at a tipping point now, where that value of thinking: “I’m going to get bigger in the future” versus the initial cost of setting up in your jurisdiction is now a point to be considered.


PS: Is cost the main driver of external competition? JS: I think it’s trying to find a balance between being an over-


regulated jurisdiction versus having the right amount of regulation. I think Cayman over the years has balanced that appropriately relative to some of our competitors.


GT: I still think that the vast majority of funds that are being invested


into from an institutional perspective are Cayman funds versus other offshore jurisdictions.


So it’s what investors expect to see, and that plays a lot into the


decision process for managers—they would like to have Cayman products. But there is that inflection point at which they say “the cost is prohibitive”, and we can talk around the BVI structure and the BVI legislation and whether we’ve decided to take that option. But to go to Cayman perhaps would prevent us from going into business in the first place due to costs.


The danger there of course is that today’s $20 million manager is


tomorrow’s institutional manager, and we really need to capture those managers because we need to perpetuate industry through the interaction with the manager, not just today but tomorrow.


PS: How do we do that? TB: Perhaps this is just reflective of the managers that we act for,


but we don’t actually see a lot of arbitrage of BVI against Cayman on a cost basis at all. What we see is a developing uncertainty about Cayman itself, particularly in institutional investors.


From time to time, and more often recently, our bigger managers


ask us what are the other options? Should they be looking at Bermuda and the Bahamas? What they are looking for is consistency and certainty from the jurisdiction, and not rushed or disruptive regulation of legislation. It is that certainty and stability with which they sell the jurisdiction to their investors.


We see a real concern among our bigger institutional investors at the


moment that Cayman’s perceived stability and desirability as a home for institutional money is under threat more because of things Cayman has done, and not because of things in the outside world. All things being equal, we’re still the right choice, but we don’t want to be doing things that cause managers to think again on that.


Perhaps there is a level of manager that does play the arbitrage, but


not like we used to see back in 2006 or 2007. I think the biggest threat that we see is what Cayman may be doing to harm its reputation as a solid, stable place to have a hedge fund.


Geoff Ruddick, IMS Fund Services


Ian Dillon, Campbells


John Ackerley, Carne Group


PS: What are the specifics of the problematic things that it is doing?


TB: When you talk about the institutional managers, for example,


they want quality service providers in their own time zone. For those managers, it’s not a question of whether they choose to have to work outside their working hours to get things done by service providers based in Cayman; they will just look for a jurisdiction to get things done in their time zone, and that’s a concern. We don’t want to be doing things that make it harder for them to go about their business.


I think, without being political here, that anything we’ve done in the


last 12 months or so to make us look less stable is a negative. What I can see from our perspective is we have had a lot more enquiries recently from our big institutional clients as to what is going on, what is the outcome, what are the other jurisdictions they should look at?


ID: I agree with Tim on that pretty much 100 percent. I think the stability is what our clients are after.


It’s not even the big institutional ones, we see a lot of $20+ million managers who have issues with costs and they’re certainly concerned about that, but their biggest question is “why do I keep seeing you in the press and why is it negative?” It’s not a good thing for us, it just isn’t. And whether we’re the ones making the noise because we’re upset about unexpected and often unnecessary change without proper consultation, or whether it’s coming from external sources, the noise around Cayman is not good, you don’t hear that about the other jurisdictions.


I think we still have that top position but we just have to be careful


not to let the gap close between us and the people behind us. The lack of stability sometimes does that.


CAYMAN FUNDS | 2013 3


Peter Scott, Cayman Funds magazine


Jeffrey Short, Ernst & Young


Monette Windsor UBS Fund Services


Rafael Elias, Trident Fund Services


Glen Trenouth, BDO


Tim Buckley, Walkers


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