Alternative Investment

Offshore Fund Vehicles: Answering Your Questions to Maximize Your Fund’s Potential

It has been done many times: A US-based manager initially establishes a domestic fund to attract US taxable investors. As performance heads in the right direction, this manager now is thinking of US tax-exempt investors.

In 2020, the Legislation from the Cayman Islands Ministry of Financial Services and Home Affairs has officially passed and promises to change the way financial professionals do business there. While the legislation brings the Caymans more in line with the rest of the financial world and will ultimately result in greater investor—and regulatory—confidence and transparency, it significantly changes many familiar standard operating procedures. More than ever, the topic of establishing an offshore fund in the Cayman Islands or BVI is crucial in order for managers to understand the differences and similarities before moving forward. We worked with Harney’s after the legislation was passed to explain the differences here.

Our friends at Harney’s recently published a great breakdown of why a manager in this position would need an offshore vehicle, covering topics including:

• Why do I need one of these?
• What is a master-feeder?
• What is a mini-master?
• Where to set it up and the best option
• Minimizing costs
• Foreign investor potential

While there are many other options available to a US manager, this article should give you a solid platform to begin your thought process around taking the next step. If you have any questions, please contact Steve Vlasak, Business Development Partner in the Alternative Investments practice. Our team can help funds utilizing many different strategies of any size, including those establishing a fund in the Cayman Islands or BVI.