THE ANNUAL CAYMAN FUNDS ROUND TABLE


“The focus on the number is an oversimplification of the sector—it’s as if every fund is the same.” John Ackerley


New opportunities also exist with the convergence of insurance and


asset management products. With Cayman’s expertise in the asset management area there is no reason this couldn’t be a meaningful growth area in the future.


investor. The question is whether the benefits of having this regulation outweigh the cost.


Lock: Cayman has some interesting legislation and legislative changes in the pipeline. These have been pushed down the legislative agenda following last year’s election and change of government. There is the Third Party Rights Bill, the helpful proposed amendments/clarification to the exempt limited partnerships law and there is also a proposal around a Cayman LLC, akin to the Delaware entities that may be very useful to our clients. All of these changes/updates will be very positive.


Dickie: That draft legislation was incredibly well received.


How would you describe the health of the funds industry in


Cayman now? Dickie: There has been a slow shift back towards the managers in terms of the balance of power. There has been more capital entering the market in my view.


Gauk: The number of new launches hasn’t been as high as it was pre-crisis, but in 2013 we issued the most consent letters since the crisis. We are seeing funds getting bigger and offering different products. Organisations that already had infrastructure in place are able to deal with regulations. Returns are also coming back and expectations for growth are good.


Ackerley: I agree that the numbers are not what they were pre-crisis, or even close. However, the launches we have seen recently have been bigger than they have been since the crisis. The start-up market is also seeing some ‘superstar’ managers launching, coming out of existing hedge funds; some are finding it relatively easy to find capital and applying the fee arrangements they wish to apply.


Rogers: Yes, we are not seeing the launch of many $50 million funds now. The regulatory and compliance framework means that $50 million is no longer a sustainable number. From conversations I have had with managers, it seems that $250 million is the minimum now.


Ackerley: You can launch with $50 million but you need to get to $250 million really quickly. That is probably a good break-even number and that’s what we tend to cite for sustainability.


Gauk: It depends on which jurisdiction you’re coming from. For funds coming from Asia their cost of doing business is different; they manage with a lower cost structure.


Ackerley: Certainly we see that the pressure on fees has lessened as performance has improved. For big returns, people will pay 2 & 20.


Lock: There is definite pressure on fees, particularly the management fee, and along with ongoing due-diligence investor scrutiny on the expenses they’re willing to bear, in our experience.


Dickie: We have also seen a wider use of expense caps, especially to manage the expense ratio in the start-up phase. Managers seem more willing to concede this in the current environment.


Windsor: Specifically, we have seen managers looking at ways to reduce the regulatory burden. They outsource some functions to try to reduce the overall costs.


CAYMAN FUNDS | 2014 9


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