Photo: Andres Nordgreen Fierro
The Cayman Islands—a long time haven for many financial firms because of its lax tax codes—has recently made some news as a hub where presidential hopeful Mitt Romney has invested millions of his personal funds. The area has long been known as an offshore financial centre. As of 2008, there were over 10,000 hedge funds registered there.
So what’s made these three Caribbean islands so popular among hedge funders? It’s an eclectic mix of its policies and its culture.
To set up a fund, most firms must register with the Cayman Islands Monetary Authority. But it only takes about 3 to 5 days to register with CIMA and get your fund set up.
There are also no laws limiting investment policy, issue of equity interests, prime brokers and custodians.
Source: Hedge Fund Law Blog
The Cayman Islands are known for their beautiful beaches, which have been cited as some of the best in Caribbean. The most famous among them is Seven-Mile Beach, located on Grand Cayman. The beach, which is actually only about 5.5 miles long, is just north of George Town, the capital of the Cayman Islands. The beaches are a popular recreation spot, and are light on restrictions--grilling and pets are allowed. snorkelling is also a popular activity along the beaches because of the clear waters.
There is no income tax, corporation tax or capital gains tax in the Cayman Islands.
Individuals who get investment returns from funds in the Cayman, but may not live in the islands, are still subjected to taxation in their country of residence. But there are some loopholes--investments like pension funds and retirement funds may not be subject to any taxes even when retired to the individual investor--this is currently the issue being disputed with Mitt Romney as he vies for the Republican presidential nomination.
Because of possible tax loopholes, everyone wants to invest in funds in the Cayman Islands. Not just individual investors, but also state pension funds--the Massaschusetts state pension system has millions invested in funds int he Cayman Islands. So hedge funds should have no problem attracting new investors.
Bombshell tennis star Anna Kournikova participated in an advertisement for the Cayman Island's Ritz Carlton hotel in 2006. No word on whether the promotional material helped attract any hedge funders to move their firms to the islands, but she looks very convincing.
Source: Anna Kournikova Forever
There's already $1.4 trillion in assets under management in the Cayman Islands. It's also the fifth largest banking centre in the world, considered an 'offshore financial centre.'
A survey by Hedge Funds Review found that the Cayman Islands was the most preferred domicile among industry professionals.
The Cayman Islands are located about 400 miles directly south of the tip of Florida, and makes for convenient travel.
It's less than a 4-hour flight from America's financial centre, New York. In addition, there's no time difference! Perfect for one or two day business trips.
It's called the Cayman Cookout and is a three-day event in January full of cooking demonstrations and food/drink tastings. Chefs make use of the island location to cook fresh seafood too.
The 2012 cookout just ended, and famous chefs such as Anthony Bourdain and José Andrés were spotted there.
The Cayman Islands is part of the United Kingdom, which can have several benefits. It's easy to travel in and out of the Cayman Islands (no visa required for stays less than 30 days), everyone speaks English, and there's a stable legal structure in case something bad does happen.
Source: Hedge Fund Law Blog