Monette Windsor: Communication and education are important


factors not just with the investment managers but also with large institutional shareholders. I spend a tremendous amount of time on the road meeting with these institutional investors who are conducting due diligence. Just being there in order to answer questions they have about the jurisdiction and the services that we provide gives people comfort.


“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.”


I’m not dismissing cost as an issue—for a lot of the smaller managers


that is still a massive issue for them. We’ve had guys walk away from the project as a whole, not even tried to go to another jurisdiction because Cayman is where they wanted to have the fund but they say “you know what, we just can’t do it ...”.


GR: We can’t be complacent; we need to continue to be innovative.


From a cost perspective, if someone’s launching with $20 million, and they’re expecting subscriptions to flow in quickly and be at $100 million shortly, I think they’re less concerned about costs.


Their greater concern is explaining to investors why they did not go


to Cayman. We are considered the best and at the top of our class, so I think the explanatory aspect of them having to explain that they decided to go to another jurisdiction due to a few thousand dollars is of greater concern if they were anticipating becoming the next $1 billion manager.


For smaller managers who come out of the gates and do not


expect to get to size quickly, the increased costs are certainly more of a concern. Therefore, as a jurisdiction, it’s critical that we are innovative and that we’re not complacent. Stability is critical as well— economically, politically, etc—we’ve had a number of mishaps, for lack of a better word, in the last few years.


TB: We simply don’t need to score any own goals.


PS: Is there anything that the industry can do to mitigate what isn’t obviously an industry problem, or do you just have to hope for the best?


TB: Well I’d be interested to know the last time the industry, the


regulators or anybody from Cayman put something positive out in terms of creating that stability. You look at the Bahamas for example, or Bermuda to some degree, there’s a lot of effort and endeavour by their regulators at the moment to advertise that they are stable, well- serviced jurisdictions that are open for business—I just wonder when the last time was that Cayman put that message out.


GT: Cayman Finance does a good job. TB: I agree they do a good job, but lately everything seems reactive


to every article that comes out of the US. We’re reacting to every article that comes out, many of which are poorly informed and simply incorrect. Recently, there have been some dreadfully scathing articles written about Cayman, which are factually incorrect. What we seem to be doing is responding to criticism rather than trying to create some kind of perception that all is well in Cayman, that the regulation is stable, the system is stable and we’re not going to do anything to change that. In my mind that’s the greatest threat to the industry.


4 CAYMAN FUNDS | 2013


PS: We hear a lot in the UK about various developments, particularly the Alternative Investment Fund Managers Directive (AIFMD). How much do these regulations actually have an impact on Cayman specifically, as opposed to on the industry generally?


MW: A few clients have approached me about this, even though


the regulations aren’t final. They’re now considering launching a Luxembourg product or an Irish-regulated product, where in the past they’ve always launched Cayman funds. To meet the demand of their European investors they’re now looking at other jurisdictions. We have offices in Ireland and Luxembourg, so we can provide our clients with a global offering with the same systems and service. I think that we won’t necessarily see a decrease in the number of funds that are in Cayman, but we might have managers who will be opening up European-domiciled funds as well.


Ian Dillon: We would agree with that. AIFMD is a funny one


because if the own-country rules remain, it’s not necessarily going to automatically negatively impact Cayman funds by what it does. What it’s more likely to do is provide opportunities for managers to use within Europe. It’s quite a useful tool if you are a European manager or you want to market to Europe, if you don’t have an Irish fund or a Luxembourg fund and the right European structures then you can’t use the tool, so it’s not that it’s going to prevent managers without those structures from getting access to European markets, but we just have the same local marketing rules as currently apply and they can’t avail themselves of the advantages.


Some other managers we’ve been talking to have been saying “I


don’t want to get rid of the Cayman fund, I want to keep it but I’m not going to sell it to the Europeans—I’ve got a different product for that.”


It could get worse than that of course, because if they do manage to


get their act together and come up with rules against outside funds, or make it difficult for Cayman funds, then it may get worse. But at the moment I think, that’s as bad as it’s going to be—which isn’t great but it’s still okay.


PS: Is there a feeling that this is something that has been designed to target, or to compete against, Cayman and those sort of jurisdictions?


ID: That’s the job of European regulators: to protect citizens from the


outside world to some degree. I think you can’t fault that that’s what it’s aimed at doing, at protecting these things. I think the idea is that European investors will say: “Let’s just go with stuff that’s regulated in Europe and leave the offshore stuff out.” How practical that would be in the end I don’t know, but I think that’s probably the overall aim.


PS: And what about on the US side, with Dodd-Frank and FATCA? MW: FATCA (the Foreign Account Tax Compliance Act) is currently


one of the biggest issues our clients are looking at this year. It’s on the top of their lists, not because they are concerned that they have investors who are US tax evaders, but because FATCA will impose a large operational cost on their back office. FATCA compliance is one area in particular that they’re looking to us as a third party administrator to do the heavy lifting for them; to help them with the gathering of information, assessing the information and doing the reporting. It’s something that we will be spending a lot of time working on with clients this year and for years to come.


TB: I would say that from a Cayman perspective, we reacted very


quickly to that two years ago at least. From a legal perspective it’s very easy, the documents are straightforward.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10