2012 Issue

More of the same

We’ve been here before. This time last year, the major concerns for Cayman funds were onshore regulatory efforts in the US and Europe, a sluggish global economy, and threats from competing hedge fund jurisdictions. Twelve months on, and the major preoccupations of the Cayman hedge fund industry are onshore regulatory efforts in the US and Europe, a sluggish global economy and threats from competing jurisdictions.

In this instance though, continuity is a good thing. The fact that people are still talking about the impact of future regulation on the success of Cayman would tend to suggest that the impact to date has been fairly limited. Of course, this is partly because the AIFM measures, for example, have yet to be finalised and implemented, but it also demonstrates that, while people are concerned about the future, no-one is panicking just yet.

Similarly, conversations about rival jurisdictions such as Ireland tend to focus on where the competition might be in the future, rather than on a clear and present, current threat to the health of the Cayman Islands. And finally, while the economic situation is still not ideal, there are encouraging signs that things are on the mend, not least in the numbers of new funds being incorporated in Cayman.

Unfortunately, the Cayman Islands hedge fund industry needs more than the steady hand of the Cayman Islands Monetary Authority to continue to thrive. It is one thing being attractive to fund managers and investors, but quite another to persuade a sceptical international political class, and even more sceptical public, that there is no reason to be worried. This is, arguably, Cayman’s biggest challenge: how to win the public relations war in the face of negative press and politicians who are happy to wail about the evils of ‘tax havens’ if it looks like winning them a few votes.

Even here, though, Cayman is making strides. International Memorandums of Understanding and Tax Information Exchange Agreements, most notably with the US, give people confidence that Cayman is doing the right thing, while international arbiters such as the Organisation for Economic Development, continue to endorse Cayman’s financial probity. In truth, the next few years will pose challenges for the Islands, but they are challenges that Cayman is well equipped to meet.

View the 2012 Issue Here